Economic Problem in Latin America - Essay Example

Introduction The article under discussion in this assignment is “Inequality, The Achilles Heel of Latin America’s Economy” written by Raul Pierri (Pierri). The article talks about the inequality that exists in the South American economies and how it can prove to be a major disaster in the future if it is not taken care of. It mentions the actions that can be taken to stop this situation from worsening and get the economy on track towards true development of the economies and societies of the Latin America.

The South American economies have shown real promise in the recent past and have gone from strength to strength, but most of the economies have experienced growing financial gaps between the classes in the continent. Rich people have become richer but poor people have become poorer, and even if people have not become poorer, then most of the society has not benefitted at the same level as some of the classes have benefitted. This issue will be critically analyzed in this assignment along with the presentation of recommendations.

Summary The article states that the entire region of Latin American economies have progressed and gone from strength to strength. They are now stable enough to defend themselves from financial shocks throughout the world. Even if another economic recession strikes the United States, South America will be affected only to a limited extent. China’s economy is showing some signs that the economic growth may not be to that level as it used to be in the past. Still, the South American economies are now strong enough to bear some shocks as said by Uruguayan Economy Minister Fernando Lorenzo.

Even after this development, the Latin American economies have a potentially devastating problem which cannot be ignored. This problem is regarding the inequality that exists in the South American societies and which needs to be addressed sooner rather than later. The problem of inequality has been prevalent in the Latin American society since a long time and this is a problem which cannot be ignored due to its potentially serious consequences. This inequality has also given rise to law and order issues with rising crime rates in the region.

Economic inequality is considered a major stumbling block in the true development of an economy and the society is said to be truly progressing if all, or at least most of the society is given a fair chance to progress. This unfortunately has not been the case in the Latin American economies in the past and thus despite the progress of the economies in term of gross domestic product, it cannot be stated as true development. So according to the Uruguayan Economy Minister, the main problem that exists in the region is the inequality and once that problem is addressed, then regional economy will be on its way to development and growth on all fronts.

Evaluation Raul Pierri, the author of this article has highlighted one of the most crucial issues that the Latin American economies have faced since the 1980’s. The International Monetary Fund estimated that the gross domestic product (GDP) growth rate of Latin American economies is around 3.7% in January (Woods). This is a good economic growth rate considering the fact that the Latin American economies usually are influenced by North American economies which have not performed nicely in the recent past.

The author has highlighted that the major concern in these economies is the inequality of distribution of wealth among the population. There exist some social classes who are considered as the billionaires while in the same countries, most people do not have the money even to feed their families. With this inequality, an economy cannot be considered as truly developed because most people cannot benefit from it. The connection made by the author of inequality with rise in crime rates is also a reality as we have several examples that show that when injustice prevails in the society and everyone is not a fair and equal chance, then crime rates start to grow up.

The author has proposed the solution to this problem of inequality that is by fiscal policies which are fiscal policies including taxation policies are a major tool of redistribution of wealth. Therefore, the author has suggested the right solutions to this issue and thus overall it is a well explained and well written article. Personal Reflection I think that the author has been capable of highlighting one of the really deep rooted problems in the Latin American economies. This problem has usually been ignored by different economists and on several forums, where the focus has been on the GDP of the economies without taking into consideration if this GDP growth is benefitting the society on a whole or just a minority part of it.

The problem of inequality is usually not given much consideration although it cannot be denied that this problem can create a lot of social unrest if it starts to be expressed. Spain has experienced inequality levels and this has resulted in social unrest throughout Spain where voices have been raised upon the wealth distribution and people have gone as far as demanding a whole new country. (López and Mitchell) The recommendation presented by the author has particularly been impressive as he has nicely pointed out that the most effective way of distributing wealth and income is through the fiscal policies.

The government should apply progressive tax rates so that the wealthy have to pay more taxes and this increased tax revenue can be spent by the government on poorer people resulting in an effective transfer of wealth from the rich to the poor. The author, in my opinion, has however shown short sightedness when he discusses and links the increasing crime rates with the inequality of distribution of wealth in the society. It is true inequality is a factor in increasing crime rates but this is not necessarily the main reason.

Usually the main reason of increasing crime rates is the absence of justice in the society and weakness of law enforcement agencies. Therefore, leaving this discussion of rising crime rates, the overall essay is good as it has successfully managed to raise the issues and possible solutions. Conclusion After years of trial and error from the economists and governments of the Latin American countries, the economies of these countries have managed to come to level with the rest of the world. The gross domestic product growth rates in South America have reached on a par with the truly developing nations.

However everything comes at a cost and seldom is the case when everything turns out to be in one’s favor. In the case of these economies, this cost has been the growing wealth gap which has made the already rich people even richer, while the poor people even poorer. The economists and governments have to take measures to improve the situation and it is better for them to do it sooner rather than later. This is precisely what has been stated by the Uruguayan Economy Minister Fernando Lorenzo who has termed this economic issue to be solved at a high priority level before it becomes too late.

This article has therefore highlighted the key problem that the Latin American economies face and some possible solutions that can be applied to improve this state because an economy can only be said to be truly developed if every person in the economy is given a fair chance to develop, which unfortunately has not been the case in South America. Bibliography López, Alejandro and Paul Mitchell. Spain: Inequality soars to record levels. . Pierri, Raúl. Inequality, The Achilles Heel Of Latin America’S Economies.

20 March 2012. . Woods, Randall. IMF Warns of Hot Money as Latin America Growth Forecast Climbs. .