Latin American economy

The Latin American economy is built around exporting goods and resources from many countries in North America, Central America, South America, and the Caribbean. During the time when Spain and Portugal ruled the area, patterns of wealth and work were set. Many places had lots of valuable metals like silver, or perfect conditions for growing sugar.

Map of Latin America showing modern political divisions

After these countries became independent in the early 1800s, some economies struggled at first. But later, they became important parts of the world economy by selling things like crops and minerals. Today, Latin America has over 656 million people and its total economy was worth about US$5.1 trillion in 2019.

Latin America is known for growing many different foods and having lots of important minerals such as copper, iron, and petroleum. Even though the economy faced some tough times recently, experts think it will grow again. The biggest economies in the region are Brazil, Argentina, Colombia, Mexico, and Chile. Because of its natural resources, Latin America continues to attract investment from other countries like the United States and Europe.

History

Main article: Economic history of Latin America

The economies of Latin America grew during the time when Spain and Portugal ruled the area. These countries controlled Latin America until the early 1800s, when the region gained its independence. During this time, the economies were strong and developed in ways that helped the people living there.

Economic sectors

Main trading partners

Country	Leading export market	Leading import source
Argentina	Brazil	Brazil
Bolivia	Brazil	China
Brazil	China	European Union
Chile	China	China
Colombia	United States	United States
Costa Rica	United States	United States
Cuba	Russia	China
Dominican Republic	United States	United States
Ecuador	United States	United States
El Salvador	United States	United States
Guatemala	United States	United States
Honduras	United States	United States
Mexico	United States	United States
Nicaragua	United States	United States
Panama	European Union	United States
Paraguay	Brazil	China
Peru	China	China
Uruguay	Brazil	China
Venezuela	United States	United States

Sectors by industry

Agriculture is a big part of most Latin American economies. Countries that rely a lot on farming as part of their total economy tend to be less developed than those with strong industry. There is often an uneven share of land among farmers, going back to old times when the region was ruled by other countries. Many small farmers work hard but don’t grow enough to sell, and they don’t export much. Farming can also be less productive, which can make incomes lower compared to industry and services.

Latin America grows and sells many different farm products like coffee, cacao, bananas, soya, and beef. But most countries focus on just one or two of these exports. Latin America provides about 16% of the world’s food and farm products. Brazil and Argentina are leaders in this area because they export a lot of grains, seeds, and animal products. The way farming is done varies a lot. In Brazil and Argentina, large farms do most of the commercial farming, but in many parts of Latin America, farming is done on small farms.

The world’s need for farm products is growing because there are more people and better incomes. By 2050, there will likely be 9 billion people, and we will need 60% more food than we did in 2014. Land for farming in Latin America is shared very unevenly, with Brazil and Argentina having the most extra land available.

Some reports say Latin American farming is better than the world average, but how well each country does can be very different. Big farms can grow more by using new technology, and small farms can also grow by getting better tools and information.

The countries with the strongest farming in South America are Brazil, Argentina, Chile and Colombia. Right now:

Brazil is the world’s biggest maker of sugarcane, soy, coffee, orange, guaraná, açaí and Brazil nut; it is also among the top 5 makers of maize, papaya, tobacco, pineapple, banana, cotton, beans, coconut, watermelon, lemon and yerba mate; and among the top 10 makers of cocoa, cashew, avocado, tangerine, persimmon, mango, guava, rice, oat, sorghum and tomato; and among the top 15 makers of grape, apple, melon, peanut, fig, peach, onion, palm oil and natural rubber;
Argentina is the world’s biggest maker of yerba mate; it is among the 5 biggest makers of soy, maize, sunflower seed, lemon and pear, one of the 10 biggest makers of barley, grape, artichoke, tobacco and cotton, and one of the 15 biggest makers of wheat, oat, chickpea, sugarcane, sorghum and grapefruit;
Chile is among the 5 biggest world makers of cherry and cranberry, and among the 10 biggest makers of grape, apple, kiwi, peach, plum and hazelnut, focusing on selling high-value fruits;
Colombia is among the 5 biggest makers of coffee, avocado and palm oil, and among the 10 biggest makers of sugarcane, banana, pineapple and cocoa;
Peru is the world’s biggest maker of quinoa; it is among the 5 biggest makers of avocado, blueberry, artichoke and asparagus; one of the 10 biggest makers of coffee and cocoa; one of the 15 biggest makers of potato and pineapple, and also makes a lot of grape, sugarcane, rice, banana, maize and cassava; its farming is quite varied;
Paraguay’s farming is growing, and it is now the 6th biggest maker of soy in the world and is becoming one of the 20 biggest makers of maize and sugarcane.

Sugarcane plantation in São Paulo. In 2018, Brazil was the world's largest producer, with 746 million tons. Latin America produces more than half of the world's sugarcane.

In Central America, these countries stand out:

Guatemala, one of the 10 biggest makers in the world of coffee, sugar cane, melon and natural rubber, and one of the world’s 15 biggest makers of banana and palm oil;
Honduras, which is among the 5 biggest makers of coffee in the world, and one of the 10 biggest makers of palm oil;
Costa Rica, which is the world’s biggest maker of pineapple;
Dominican Republic, which is among the world’s top 5 makers of papaya and avocado, and one of the 10 biggest makers of cocoa.

Mexico is the world’s biggest maker of avocado, one of the world’s top 5 makers of chili, lemon, orange, mango, papaya, strawberry, grapefruit, pumpkin and asparagus, and one of the world’s 10 biggest makers of sugar cane, maize, sorghum, bean, tomato, coconut, pineapple, melon and blueberry.

Brazil is the world’s biggest seller of chicken meat: 3.77 million tons in 2019. The country also has the second biggest group of cattle in the world, at 22.2% of all cattle. Brazil was the second biggest maker of beef in 2019, making up 15.4% of all beef made worldwide. It was also the third biggest maker of milk in 2018. That year, the country made 35.1 billion liters. In 2019, Brazil was the fourth biggest maker of pork in the world, with almost 4 million tons.

In 2018, Argentina was the fourth biggest maker of beef in the world, making 3 million tons (after only the USA, Brazil and China). Uruguay is also a big beef maker. In 2018, it made 589 thousand tons of beef.

In making chicken meat, Mexico is among the 10 biggest makers in the world, Argentina among the 15 biggest and Peru and Colombia among the 20 biggest. In making beef, Mexico is one of the 10 biggest makers in the world and Colombia is one of the 20 biggest makers. In making pork, Mexico is among the 15 biggest makers in the world. In making honey, Argentina is among the 5 biggest makers in the world, Mexico among the 10 biggest and Brazil among the 15 biggest. For cow's milk production, Mexico is among the 15 biggest makers in the world and Argentina among the 20.

Soy plantation in Mato Grosso. In 2020, Brazil was the world's largest producer, with 130 million tons. Latin America produces half of the world's soybeans.

Coffee in Minas Gerais. In 2018, Brazil was the world's largest producer, with 3.5 million tons. Latin America produces half of the world's coffee.

Mining for valuable metals started in Latin America long ago and was very important during the time when the region was ruled by other countries. Today, mining and getting oil are very important for some countries’ economies, especially Venezuela, Mexico, Chile, and Bolivia. In the past, mining used simple tools and had less effect on the environment, but now big machines are used, which can harm the land. These mining projects need a lot of money. Sometimes, people in places like the Amazon river dig for gold using harmful chemicals, which can pollute the water.

Recently, finding lithium in places like Argentina and Bolivia has become very important because lithium is used in batteries for things like phones, cars, and electricity grids. Argentina now mines its lithium with help from companies from Australia, Japan, and Argentina itself. Chile has been a big producer of lithium for many years, from a place called the Atacama salt flat.

Latin America makes 45% of the world’s copper, 50% of its silver, 26% of its molybdenum, and 21% of its zinc.

Half of the people in a survey about mining in Latin America think that unsure rules and politics will slow down mining in 2017. But some countries have made changes that could help mining companies in 2017. Costs for things like workers, energy, and supplies have gone up for mining companies in Latin America. So, many companies are trying to cut costs and work more efficiently to grow. Some companies are joining together, using machines more, or running mines themselves to deal with rising costs.

In mining, Brazil leads in digging up iron ore (it is the second biggest seller in the world), copper, gold, bauxite (one of the 5 biggest makers in the world), manganese (one of the 5 biggest makers in the world), tin (one of the biggest makers in the world), niobium (it holds 98% of the world’s known reserves) and nickel. For precious stones, Brazil is the world’s biggest maker of amethyst, topaz, agate and one of the main makers of tourmaline, emerald, aquamarine and garnet. Chile makes about a third of the world’s copper. In 2018, Peru was the second biggest maker of silver and copper in the world, and the sixth biggest maker of gold (these three metals are worth the most), and also the third biggest maker of zinc and tin and the fourth biggest maker of lead. Bolivia is the fifth biggest maker of tin, the seventh biggest maker of silver, and the eighth biggest maker of zinc. Mexico is the biggest maker of silver in the world, making almost 23% of all silver in 2019, with more than 200 million ounces. It also makes a lot of copper and zinc and a good amount of gold.

For oil, Brazil was the tenth biggest maker in the world in 2019, producing 2.8 million barrels each day. Mexico was twelfth, with 2.1 million barrels a day, Colombia was twentieth with 886 thousand barrels a day, Venezuela was twenty-first with 877 thousand barrels a day, Ecuador was twenty-eighth with 531 thousand barrels a day, and Argentina was twenty-ninth with 507 thousand barrels a day. Since Venezuela and Ecuador don’t use much oil themselves and sell most of what they make, they are part of OPEC. Venezuela’s oil making dropped a lot after 2015 (when it made 2.5 million barrels a day), to 2.2 million in 2016, 2 million in 2017, 1.4 million in 2018 and 877 thousand in 2019, because they didn’t spend money to keep it going.

For natural gas, in 2018, Argentina made 1,524 billion cubic feet, Mexico made 999, Venezuela made 946, Brazil made 877, Bolivia made 617, Peru made 451, and Colombia made 379.

Orange in São Paulo. In 2018, Brazil was the world's largest producer, with 17 million tons. Latin America produces 30% of the world's orange.

Even though farming and mining are big parts of Latin America, many countries also make things. Argentina, Brazil, Chile, and Mexico have been the most industrial, making up 75% of the region’s industry. Sometimes, these countries made their own rules to stop buying things from other places and to help their own factories grow. Latin America has become good at making cars, with big companies opening factories in Brazil, Mexico, and other places. In Mexico, for example, the Ford Motor Company opened a factory in 1925, and now most big car companies have factories there. Places called maquiladoras or maquilas, where parts made in other countries are put together and sold, have grown a lot along the border between the U.S. and Mexico. Brazil’s car industry helped the country grow, and in 1969, the company Embraer started, making small planes.

The World Bank lists the countries with the most valuable industry each year. In 2019, Mexico had the twelfth most valuable industry in the world (worth US$217.8 billion), Brazil had the thirteenth (US$173.6 billion), Venezuela had the thirtieth (US$58.2 billion, but this depends on oil), Argentina had the thirty-first (US$57.7 billion), Colombia had the forty-sixth (US$35.4 billion), Peru had the fiftieth (US$28.7 billion) and Chile had the fifty-first (US$28.3 billion).

In Latin America, only a few countries are big in industry: Brazil, Argentina, Mexico and, to a smaller extent, Chile. These countries started industrializing later, but World War II helped a lot because countries at war couldn’t buy things from other places, so Latin American countries made more of their own products. With lots of raw materials, low wages, and skills from people who moved there, countries like Brazil, Mexico, Argentina, Venezuela, Chile, Colombia and Peru built big industrial areas. In general, these countries have factories that don’t need much money or complex tools, like food and textile factories. Basic factories like steel also do well, as well as metal and machine factories.

But the industrial areas in Brazil, Mexico, Argentina and Chile are more advanced, making high-technology products. In other Latin American countries, especially in Central America, most factories change raw materials into things to sell.

In the food industry, in 2019, Brazil was the world’s second biggest seller of processed foods. In 2016, the country was also the second biggest maker of pulp and the eighth biggest maker of paper. In footwear industry, in 2019, Brazil was fourth among world makers. In 2019, the country was also the eighth biggest maker of vehicles and the ninth biggest maker of steel. In 2018, Brazil’s chemical industry was eighth in the world. In textile industry, Brazil was among the five biggest makers in 2013, but it doesn’t trade much with the world. In airplane making, Brazil has Embraer, the third biggest airplane maker in the world, after Boeing and Airbus.

Infrastructure

In Latin America, infrastructure is not very good, and this is one of the main reasons the region's economy does not grow as fast as it could. The International Monetary Fund says that better infrastructure helps people and businesses make more money. However, Latin American countries usually spend less on infrastructure than countries with similar incomes, which makes their economies weaker.

Governments in Latin America try to improve infrastructure, but they often do not have enough money or good plans. The region spends about 3% of its total money (GDP) on infrastructure, but it needs to spend at least 6% to make big improvements. Getting help from businesses can make this easier. Some Latin American countries, like Panama, have made progress. Panama finished making its Panama Canal bigger so it can handle larger ships. It also built a new airport and special trading areas to help businesses.

China has big plans for infrastructure in Latin America, like railways connecting different countries, but many of these plans are still not finished. There are also important roads and highways that connect countries like Brazil and Peru. Brazil has many roads, airports, and ports, and it is a leader in making energy from water, wind, and the sun.

Energy

Brazil

Main articles: Energy policy of Brazil and Renewable energy in Brazil

Brazil works hard to use less oil from other countries. It makes its own oil now and was the 10th biggest oil maker in the world in 2019. Brazil is also very good at making energy from water. In 2019, most of Brazil’s electricity came from big dams that make hydroelectric power.

Brazil also uses wind to make electricity. By July 2022, it had 22 GW of wind power, which made up 9% of the country’s electricity in 2019. Solar power is growing too, with 21 GW of solar panels by October 2022. Brazil also makes energy from plants and waste, called biomass, and was the second biggest in the world at this in 2020.

Other countries

After Brazil, Mexico is next in making energy in Latin America. In 2020, Mexico was the 14th biggest oil maker in the world. Colombia is also important, especially in making coal. Venezuela used to make a lot of oil but has had trouble recently. Argentina makes a lot of natural gas but needs more help to use its big shale oil and gas areas. Chile has lots of sun and could make lots of solar power in the future. Paraguay makes a lot of hydroelectric power from its big dam. Trinidad and Tobago and Bolivia make a lot of natural gas. Ecuador makes oil and is part of a group of oil countries called OPEC.

Main economies in the current era

Foreign investment

The European Investment Bank has supported Latin America since 1993, helping 150 projects in 15 countries with more than €13 billion.

In 2020, the European Investment Bank gave €516 million to Latin America and the Caribbean to help with sustainable growth, fairness, and climate action. All loans went to public sector groups, mostly national development banks.

Brazil gets a lot of foreign investment because of its big market, easy access to raw materials, and good location. Even though Brazil had some problems, it is still the top place in Latin America for foreign money.

Argentina has natural resources and skilled workers, but has had rules that made foreign investment harder in farming.

Bogotá in Colombia has become a big business center because of better safety and more foreign money, especially in mining and energy.

Mexico is a top place for foreign investment but faces challenges from crime and government issues. The European Investment Bank helped Mexican small businesses with a loan during the COVID-19 pandemic.

Chile has seen foreign investment grow each year because of its stability, security, and natural resources.

Regional risks

Over the past few years, people who invest using U.S. dollars in Latin America have lost money because local currencies have become weaker. Looking ahead to 2017, several factors suggest that this might change and bring good news for these investors.

Latin American currencies seem to be worth less than they should be, meaning goods and services there are cheaper. This can help make these currencies stronger. Also, because these currencies are weaker, people in Latin America buy fewer things from other countries and buy more from Latin America, which helps local businesses. Additionally, prices for things like oil and metals are going up, which is good for countries that sell these items. Finally, interest rates in Latin America have been raised to keep prices stable, making these currencies more attractive to investors.