Economic Reforms in Latin America

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Part A: Economic Reforms in Latin America
With respect to economic factors in Latin America, describe export dependence, import-substitution, debt crisis, and the impact of free trade agreements such as NAFTA.
Export dependence
A country is considered to be export-dependent when its commodities constitute the predominant share of its exports. This means that exports generate a large percentage of a country's gross product. Latin America's economy is export-based. Latin America's main exports include agricultural products and natural resources such as copper, iron, and petroleum. Latin America initially focused on the export of commodities and diversified its exports over the years (Reyes & Sawyer, 2019). Other exports from Latin America include soybeans and soybean oil. In addition, Latin America exports its products mainly to China, United States, and the European Union. As a result, Latin America has greatly benefitted economically from export dependence.
Import Substitution
Import substitution is a trade and economic policy suggesting that blocking imports of manufactured goods boosts a country's economy by increasing the demand for locally manufactured products. Import substitution aims to reduce a country's foreign dependency through promoting the use of locally produced products. Latin America adopted import substitution in the 1950s and 1960s as its primary method to achieve economic growth and socio-economic modernization (Reyes & Sawyer, 2019). Through import substitution, Latin America aimed to establish domestic production facilities, which locally manufactured goods formally imported.
Debt Crisis
The debt crisis in Latin America began in the early 1980s. It resulted from Latin American countries borrowing huge sums of money from international creditors for industrialization, mainly infrastructure programs (Frieden, 2019). Latin America borrowed loans against future oil revenues, and their debts were valued in US dollars. However, the global economic recession in the 1970s and 1980s increased oil prices, making Latin American countries borrow even more money to cover the high oil prices. Consequently, debt payments also increased, making it challenging for Latin American countries to pay their creditors. The debt crisis started when international capital markets realized Latin America's incapability to service their foreign debt, totaling $80 billion (Frieden, 2019). Henceforth, many banks stopped overseas lending, which plunged many Latin American countries into a deep recession. The US organized an international lender of last resort to restructuring its debt by lending them sufficient funds to pay interest. In return, Latin America would make structural economic reforms to increase exports to raise their income and pay their external debts.
Impact of Free Trade Agreements such as NAFTA
Free trade describes a structure of management whereby governments get involved in the economy to defend the rights of companies (Villareal & Fergusson, 2017). The terms of such free trade agreements have a long impact on the associated countries' economic, political, and social struc...