The Poorest Countries of Latin America and the Caribbean
The three poorest countries of Latin America are spread throughout the region. Read the following
excerpts from the CIA Factbook. Write an essay summarizing the reasons these countries are so poor.
Include appropriate physical factors.
Haiti (pcGDP = $1050): “The native Taino Amerindians - who inhabited the island of Hispaniola when it
was discovered by COLUMBUS in 1492 - were virtually annihilated by Spanish settlers within 25 years. In
the early 17th century, the French established a presence on Hispaniola. In 1697, Spain ceded to the
French the western third of the island, which later became Haiti. The French colony, based on forestry
and sugar-related industries, became one of the wealthiest in the Caribbean but only through the heavy
importation of African slaves and considerable environmental degradation. In the late 18th century,
Haiti's nearly half million slaves revolted under Toussaint L'OUVERTURE. After a prolonged struggle, Haiti
became the first black republic to declare independence in 1804. The poorest country in the Western
Hemisphere, Haiti has been plagued by political violence for most of its history. After an armed rebellion
led to the forced resignation and exile of President Jean-Bertrand ARISTIDE in February 2004, an interim
government took office to organize new elections under the auspices of the United Nations Stabilization
Mission in Haiti (MINUSTAH). Continued violence and technical delays prompted repeated
postponements, but Haiti finally did inaugurate a democratically elected president and parliament in
May of 2006.”
“Haiti is the poorest country in the Western Hemisphere with 80% of the population living under
the poverty line and 54% in abject poverty. Two-thirds of all Haitians depend on the agricultural sector,
mainly small-scale subsistence farming, and remain vulnerable to damage from frequent natural
disasters, exacerbated by the country's widespread deforestation. While the economy has recovered in
recent years, registering positive growth since 2005, four tropical storms in 2008 severely damaged the
transportation infrastructure and agricultural sector. US economic engagement under the Haitian
Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, passed in December 2006,
has boosted apparel exports and investment by providing tariff-free access to the US. HOPE II, passed in
October 2008, has further improved the export environment for the apparel sector by extending
preferences to 2018; the apparel sector accounts for two-thirds of Haitian exports and nearly one-tenth
of GDP. Remittances are the primary source of foreign exchange, equaling nearly a quarter of GDP and
more than twice the earnings from exports. Haiti suffers from high inflation, a lack of investment
because of insecurity and limited infrastructure, and a severe trade deficit. In 2005, Haiti paid its arrears
to the World Bank, paving the way for reengagement with the Bank. Haiti is expected to receive debt
forgiveness for about $525 million of its debt through the Highly-Indebted Poor Country (HIPC) initiative
by mid-2009. The government relies on formal international economic assistance for fiscal
sustainability” (CIA Factbook).
Nicaragua (pcGDP = $2080): “The Pacific coast of Nicaragua was settled as a Spanish colony from
Panama in the early 16th century. Independence from Spain was declared in 1821 and the country
became an independent republic in 1838. Britain occupied the Caribbean Coast in the first half of the
19th century, but gradually ceded control of the region in subsequent decades. Violent opposition to
governmental manipulation and corruption spread to all classes by 1978 and resulted in a short-lived
civil war that brought the Marxist Sandinista guerrillas to power in 1979. Nicaraguan aid to leftist rebels
in El Salvador caused the US to sponsor anti-Sandinista contra guerrillas through much of the 1980s.
Free elections in 1990, 1996, and 2001, saw the Sandinistas defeated, but voting in 2006 announced the
return of former Sandinista President Daniel ORTEGA Saavedra. The 2008 municipal elections were
characterized by widespread irregularities. Nicaragua's infrastructure and economy - hard hit by the
earlier civil war and by Hurricane Mitch in 1998 - are slowly being rebuilt, but democratic institutions
face new challenges under the ORTEGA administration.”
“Nicaragua has widespread underemployment and the second lowest per capita income in the
Western Hemisphere. The US-Central America Free Trade Agreement (CAFTA) has been in effect since
April 2006 and has expanded export opportunities for many agricultural and manufactured goods.
Textiles and apparel account for nearly 60% of Nicaragua's exports, but recent increases in the minimum
wage will likely erode its comparative advantage in this industry. Nicaragua relies on international
economic assistance to meet internal- and external-debt financing obligations. In early 2004, Nicaragua
secured some $4.5 billion in foreign debt reduction under the Heavily Indebted Poor Countries (HIPC)
initiative, and in October 2007, the IMF approved a new poverty reduction and growth facility (PRGF)
program. However, severe budget shortfalls resulting from the suspension of large amounts of direct
budget support from foreign donors concerned with recent political developments has caused a
slowdown in PRGF disbursements. Similarly, private sector concerns surrounding ORTEGA's handling of
economic issues have dampened investment. Economic growth has slowed in 2009, due to decreased
export demand from the US and Central American markets, lower commodity prices for key agricultural
exports, and low remittance growth - remittances are equivalent to almost 15% of GDP” (CIA FActbook).
Guyana (pcGDP=$2600): “Originally a Dutch colony in the 17th century, by 1815 Guyana had become a
British possession. The abolition of slavery led to black settlement of urban areas and the importation of
indentured servants from India to work the sugar plantations. This ethnocultural divide has persisted
and has led to turbulent politics. Guyana achieved independence from the UK in 1966, and since then it
has been ruled mostly by socialist-oriented governments. In 1992, Cheddi JAGAN was elected president
in what is considered the country's first free and fair election since independence. After his death five
years later, his wife, Janet JAGAN, became president but resigned in 1999 due to poor health. Her
successor, Bharrat JAGDEO, was reelected in 2001 and again in 2006.”
“The Guyanese economy exhibited moderate economic growth in recent years and is based
largely on agriculture and extractive industries. The economy is heavily dependent upon the export of
six commodities - sugar, gold, bauxite, shrimp, timber, and rice - which represent nearly 60% of the
country's GDP and are highly susceptible to adverse weather conditions and fluctuations in commodity
prices. Economic recovery since the 2005 flood-related contraction has been buoyed by increases in
remittances and foreign direct investment in the sugar and rice industries as well as the mining sector.
The bauxite mining sector should benefit in the near term from restructuring and partial privatization,
and the state-owned sugar industry will conduct efficiency increasing modernizations. Export earnings
from agriculture and mining have remained flat as rising commodity prices have offset declining
production, while the import bill has risen, driven by higher energy costs. Chronic problems include a
shortage of skilled labor and a deficient infrastructure. The government is juggling a sizable external
debt against the urgent need for expanded public investment. In March 2007, the Inter-American
Development Bank, Guyana's principal donor, canceled Guyana's nearly $470 million debt, equivalent to
nearly 48% of GDP, which along with other Highly Indebted Poor Country (HIPC) debt forgiveness
brought the debt-to-GDP ratio down from 183% in 2006 to 120% in 2007. Guyana became heavily
indebted as a result of the inward-looking, state-led development model pursued in the 1970s and
1980s. Guyana's entrance into the Caricom Single Market and Economy (CSME) in January 2006 has
broadened the country's export market, primarily in the raw materials sector” (CIA Factbook).
The three richest countries of Latin America and the Caribbean all lie in the Caribbean subregion. Read
the following excerpts from the CIA Factbook. Write an essay summarizing the reasons for these
countries’ relative prosperity. Be sure to include physical factors where appropriate.
Bahamas (pcGDP=$21,600): “Lucayan Indians inhabited the islands when Christopher COLUMBUS first
set foot in the New World on San Salvador in 1492. British settlement of the islands began in 1647; the
islands became a colony in 1783. Since attaining independence from the UK in 1973, The Bahamas have
prospered through tourism and international banking and investment management. Because of its
geography, the country is a major transshipment point for illegal drugs, particularly shipments to the US
and Europe, and its territory is used for smuggling illegal migrants into the US.”
“The Bahamas is one of the wealthiest Caribbean countries with an economy heavily dependent
on tourism and offshore banking. Tourism together with tourism-driven construction and manufacturing
accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago's labor
force. Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and
residences had led to solid GDP growth in recent years, but tourist arrivals have been on the decline
since 2006 and will likely drop even further in 2009. Tourism, in turn, depends on growth in the US, the
source of more than 80% of the visitors. To help offset the effect of the global economic downturn,
particularly on employment, the INGRAHAM administration plans to engage in infrastructure projects.
Financial services constitute the second-most important sector of the Bahamian economy and, when
combined with business services, account for about 36% of GDP. However, since December 2000, when
the government enacted new regulations on the financial sector, many international businesses have
left The Bahamas. Manufacturing and agriculture combined contribute approximately a tenth of GDP
and show little growth, despite government incentives aimed at those sectors. Overall growth prospects
in the short run rest heavily on the fortunes of the tourism sector” (CIA Factbook).
Puerto Rico (pcGDP=$17,800): “During the 17th century, the archipelago was divided into two territorial
units, one English and the other Danish. Sugarcane, produced by slave labor, drove the islands' economy
during the 18th and early 19th centuries. In 1917, the US purchased the Danish portion, which had been
in economic decline since the abolition of slavery in 1848.”
“Tourism is the primary economic activity, accounting for 80% of GDP and employment. The
islands hosted 2.6 million visitors in 2005. The manufacturing sector consists of petroleum refining, rum
distilling, textiles, electronics, pharmaceuticals, and watch assembly. One of the world's largest
petroleum refineries is at Saint Croix. The agricultural sector is small, with most food being imported.
International business and financial services are small but growing components of the economy. The
islands are vulnerable to substantial damage from storms. The government is working to improve fiscal
discipline, to support construction projects in the private sector, to expand tourist facilities, to reduce
crime, and to protect the environment” (CIA Factbook).
Note: Puerto Rico is a territory of the United States that toys with the idea of becoming our 51st
state from time to time.
Netherlands Antilles (pcGDP=$16,000): “Once the center of the Caribbean slave trade, the island of
Curacao was hard hit by the abolition of slavery in 1863. Its prosperity (and that of neighboring Aruba)
was restored in the early 20th century with the construction of oil refineries to service newly discovered
Venezuelan oil fields. The island of Saint Martin is shared with France; its southern portion is named Sint
Maarten and is part of the Netherlands Antilles; its northern portion, called Saint Martin, is an overseas
collectivity of France.”
“Tourism, petroleum refining, and offshore finance are the mainstays of this small economy,
which is closely tied to the outside world. Although GDP has declined or grown slightly in each of the
past eight years, the islands enjoy a high per capita income and a well-developed infrastructure
compared with other countries in the region. Most of the oil Netherlands Antilles imports for its
refineries come from Venezuela. Almost all consumer and capital goods are imported, the US, Italy, and
Mexico being the major suppliers. Poor soils and inadequate water supplies hamper the development of
agriculture. Budgetary problems hamper reform of the health and pension systems of an aging
population. The Netherlands provides financial aid to support the economy” (CIA Factbook).