Transcript GD in Latin America

Effects of GD in Canada - Review
• Instead of bellwork today, we are going to review
the causes/effects of the GD in Canada.
• Get out your packet and be ready to discuss!
• Also……
– Analyze the role of religion in the Great
depression
– Compare Canadian vs. US culture during the
GD.
The Great Depression in Latin
America
A case study of Brazil & Argentina
LA Economy prior to Great Depression
• Agriculturally-based
• After industrialization, LA commodities became more
valuable
– Europe and US focused on production & manufacturing =
needed to import goods for their growing populations
– Created an export economy in LA
– Beef, wheat, tropical fruits, minerals (copper), and natural
resources
• Strong trade relations form
– 2/3 of investment & trade came from UK, US, Fr, & Germany
LA Economy prior to Great Depression
• Since they focused on exports, LA countries were slow to
develop their own industries.
• For finished goods, LA relied on imports
• Set up a system of dual reliance on the export-import trade: LA
depended on export of resources for income, but also relied on
foreign imports for industrial goods.
• During WWI, European economic problems caused a decline in
export-import trade
– supply > demand
– Exports reached peak value in 1927
Onset of the GD in Latin America
• Initial effects of the Depression were similar to US and
Canada
• ↓ demand of LA goods = ↓ flow of capital
• ↓ value of currency
• ↓ employment
• ↓ foreign investment
• LA countries in debt to foreign banks
• Due to foreign tariffs, LA goods become unaffordable
• The difference???
– Gov. intervention in LA economy became the norm
– Huge political effects = military takeovers & coup d'états
Three main solutions
1. Government regulation
– Goal was to stabilize economy by setting prices & levels of
production
2. Import Substitution Industrialization (ISI)
– Goal was to encourage the creation of homegrown
industries to replace LA dependence on foreign goods
3. Keep international markets open
– Trade agreements with industrialized countries
• Rapid Recovery
– Mining/agriculture were not hit as hard
– Close relationship between gov. & banks
– Social/racial hierarchies strengthened by economy
Case study: Brazil vs. Argentina
• To make an effective
comparison of two
countries with striking
similarities and also
significant differences,
we will now focus on
Brazil and Argentina
Brazil: The Coffee Economy
• Coffee exports were the source of 70% of Brazil’s
revenue
• In order to prevent overproduction and maintain
profits, the São Paulo Institute for Permanent Defense
of Coffee implemented valorization in 1925.
– To keep coffee prices high, the institute purchased and
withheld coffee from the world market
• Manufactured goods came from overseas, so most
profits from exports (coffee) were spent on imports =
outflow of capital; no profits
Failure of the Coffee Industry
• Brazil’s foreign debt was $900 million
– $175 million/year, paid by coffee exports
• 1929 - ↓ coffee prices, ↓ demand
• Other LA countries increase coffee output  coffee
surplus  Failure of valorization and coffee economy
• Foreign lenders ↓ credit to Brazil
• Brazilian banks ↓ credit to coffee farmers
• Instead of intervention in the coffee industry, President
Washington Luis focused on developing industry
President Washington Luis
Effects of the Crash
• 40% decline in sales
• ↓ Imports & trade
• People became resentful of President Luis, who saw
the decline as temporary and was unwilling to aide
• Presidential election of 1930:
• Getúlio Vargas vs. Julio Prestes (handpicked
successor of Luis)
• Prestes won and immediately extended credit to state
of São Paulo instead of paying debts, buying coffee
surplus & stabilizing prices
1930
Election
Vargas vs.
Prestes
Effects of the Crash
• Most Brazilian rural workers
were landless laborers that
planters could no longer
afford to pay
• Migration to cities
• Increased unemployment
• Uprisings
– Already deep-seated political
issues, but economic crisis
made it worse
Vargas comes to power
• In October 1930, Vargas led
a number of revolts,
overthrew Prestes, and was
installed as provisional
president.
• Ruled from 1930-1945;
1951-1954
• Political dominance and
charismatic personality
created political stability and
allowed for a change in
economic policies
• “Father of the poor”
Vargas’ Policies
• Economic nationalism
• Support the coffee industry while attempting to wean Brazil off
it’s dependence on this crop
– ↓ tree planting, ↓surplus so demand increases
• Diversify the economy (livestock & cotton)
• Import Substitution Industrialization (ISI)
– Replace foreign imports with domestic production of industrialized goods
• National Corporations created – steel, iron, aircraft, railroads,
road construction
– Government reserved the right to intervene in all corporations
• Constitution of 1934: nationalization of mines, mineral deposits,
sources of energy, and industries essential to economic/military
defense of the country
Review
• List three problems with the Brazilian
economy prior to the Great Depression.
• What did the Great Depressions in Brazil,
U.S., and Canada have in common?
• How did Vargas come to power?
• List five policies implemented by Vargas.
• Why do you think Vargas was effective?
Getulio
Vargas
Vargas’ Policies
• “This program is to crisscross the
nation with railroads, highways, and
airlines; to increase production; to
provide for the laborer and to
encourage agricultural credit; to
expand exports; to prepare the
armed forces so that they are
always ready to face any
eventuality; to organize public
opinion so that there is, body and
soul, one Brazilian thought.”
• Vargas speech; 1938
• “The State does
not recognize the
rights of the
individual against
the collective.
Individuals do not
have rights; they
have duties. Rights
belong to the
collective!”
Success of Vargas’ Policies
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•
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Due to ISI, industrial output grew by 6%
Creation of 44,000 new plants
Creation of 944,000 new jobs
New industries helped diversify economy
Economic growth was not spread evenly – most of
Brazil’s population (40 million) was still dependent
upon cash crops
• Five states employed 75% of factory workers and
owned 80% of all wealth
End of Vargas’ rule
• After attempted communist overthrow in 1937, he created the
Estado Novo which gave him authoritarian powers
• Recognized threat of labor unions, so puts them all under
government control
• Minimum wage & maximum work week
• Not supported by wealthy elites
• Post-WWII, Vargas tried to impose greater economic
nationalism, but revolts spread (people demanded democracy)
• After an assassination attempt, the military tried to force Vargas
to resign
• Instead, Vargas committed suicide in 1954
• Each drop of my blood will be an immortal flame in your
conscience and will uphold the sacred will to resist. To hatred I
reply with pardon, and to those who think they have defeated
me, I reply with my victory. I was a slave to the Brazilian
people, and today I am freeing myself for eternal life. But this
people, whose slave I was, will no longer be slave to anyone.
My sacrifice will remain forever in their souls and my blood will
be the price for their ransom. I fought against the exploitation of
Brazil. I fought against the exploitation of her people. I have
fought with my whole heart. Hatred, infamy and slander have
not conquered my spirit. I have given you my life. Now I offer
you my death. I fear nothing. Serenely, I take my first step
towards eternity and leave life to enter history.
• Vargas, suicide note; August 24, 1954
Review
• Successes and Failures of Vargas
• Compare/Contrast with U.S.
• Compare/Contrast with Canada
Argentina: from Democracy to Dictatorship
• Between 1860-1930, Argentina’s annual growth was 6.3%
– Strongest in South America
• Income came from export of beef & wheat
• Economic system was based on foreign investment (UK)
– Most meat exported to UK, and imported British coal and
oil
– British investors built and owned bus/railways
• Period of modernization that created new local industries and
social changes that threatened the traditional landowning
Creole elites
Argentina’s Economy
• Far more diversified than Brazil
• Other industries developed from agricultural sector: food
processing, meat packing, flour milling and leather tanning
• Gradually became a domestic economy
– ↓ foreign investments
• After their first democratic elections in 1916, Hipolito Yrigoyen
was elected
• He wanted to decrease dependence on British oil so created
state-run oil company (Fiscal Petroleum Fields – YPF)
• In the 1920’s, Argentina had one of the largest amounts of cars
per capita.
Political/Economic Effects of the Crash
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Immediate effect on demand for exports
Due to tariffs, value in cash crops ↓ 43%
High unemployment
People blamed Radicals for the economy
In September 1930, Yrigoyen was overthrown and a military
junta was established
• In 1932, General Agustin Justo became president
• Relied on the Concordancia – coalition of anti-Yrigoyen
Radicals, Conservatives & socialists who maintained power
through electoral fraud and corruption.
Rule of the Concordancia
• Implemented policies not meant to change the economy, but to
increase traditional areas of interest and income – livestock and
agriculture
• Established agricultural regulatory boards
• Restore positive trade with the UK
– Roca-Runciman Pact: British markets for Argentinean goods would be
preserved if Argentina promised to give preference to British
manufactured goods
• Import Substitution Industrialization
– Helped create jobs & new industries
• Public works projects: centered on developing infrastructure –
highways, railroads
Economic Recovery
• Due to protection of exports and ISI, Argentina
recovered relatively quickly.
• Accelerated industry
• Decreased dependence on England
• Radicalization of the working class
• Renewed military intervention in government affairs
• In 1943, another military coup, led by United Officers
Group (GOU), established another military dictatorship
– Dictatorships ruled until the 1980’s
Political Changes in Latin America
• Economic effects are often overshadowed by the political
changes
• Although countries recovered relatively quickly, it was under
newly-established military dictatorships that controlled the
economy
• Agricultural products continued to dominate
• ISI used by Brazil and Argentina became a model for
developing countries to escape from economic dependence on
the Western, industrialized economies
• New urban elite emerged with ISI – social inequalities
continued
• Political systems shifted towards authoritarianism, and from this
point forward, military leadership was dominant in the region.
Review
• Compare/Contrast with Brazil
• For the test, be able to compare & contrast countries
within the region, with regards to….
– Economic growth/unsound economy
– Causes of the Great Depression
– Effects of the Great Depression (culture, social, political,
economic, religious)
– Government responses to the GD
(policies/plan/effectiveness of Hoover, FDR, Mackenzie
King, Bennett, Vargas, Concordancia)