South American Problems

When we close the US borders to the poor, they will need to go back home and begin to pull themselves out of poverty.

South America has had a history of banana republics, unstable governments and poverty forever. The history of South America includes early civilizations, European conquest, colonialism, independence and chaos that keeps resurfacing. The absence of property rights assured a large impoverished population in most of these countries. Governments have spent their money in the cities where the wealthy live, but have no policies to allow their rural areas to develop an economy.  Most voted for socialism and that always collapses under its own weight and creates a disaster.

The economic food chain in South America is measured by GDP. But to turn the corner, they have to reduce theory poverty rate.  Brazil and Chile win the prize.

Brazil’s GDP is $2.14 trillion. Poverty 8.5%

Mexico’s GDP is $1.15 trillion. Poverty 42%

Argentina’s GDP is $639 billion, Poverty 28.6%

Chile’s GDP is $325 billion. Poverty 11.7%

Colombia’s GDP is $307.5 billion. Poverty.27.8%

Other countries in Central and South America continue to have problems with their economies.  The poverty rate remains between 30% and 50%, even in large countries like Mexico, Argentina and Colombia.  The US poverty rate ranges between 11% and 15%. In Chile it is 15%. Like elsewhere, poverty is more common in rural areas. In South America it’s a jungle out there.

Many of the governments of poor countries cling to their cash cows, even if this is a poor short-term strategy. Many politicians in these poor countries have won office with the backing of special interests who support their national economy at the expense of the population. These governments need to reduce regulations to allow their citizens to engage in commerce and provide them with private property rights.

Capitalism is actually the answer for these countries.  But these countries are often Socialist or Communist, where this unsustainable ideology is the law. In other countries, instability and corruption come from warring factions.

Poor countries need capital, but their poverty does not attract capital. The harvesting of needed raw material does attract companies engaged in mining, oil drilling, tree harvesting and some agricultural products. These are often the only industries you will find in many poor countries.

China and other Asian countries with poor populations have benefitted from having cheap labor with no regulations. This worked for China, Vietnam and others, but off-shoring for cheaper labor costs is damaging to national economies. US Tariffs designed to restore US manufacturing has caused companies to rethink their supply chains.

Off-shoring US manufacturing has reduced quality along with product costs. US corporate tax reduction should enable companies to return manufacturing operations back to the US. Automation assisted manufacturing holds close tolerances required for parts and ensures quality in finally assembled products.

Our US Corporate Tax Cuts, Tariffs and Border Wall plans are not good news for countries in South America. US manufacturing is headed gradually back to the US. But this is an opportunity for reform of the governments and economies of these countries. If they can clean up their act, they will attract legitimate investors to provide capital to drive their GDP.

South American agriculture needs to be family owned, but highly mechanized and technically competent.  Countries need to develop “national brands” of durable goods to expand their own manufacturing. Their products need to be developed, patented and marketed. Countries need to raise their “ease of doing business” scores and remove unnecessary barriers from their laws and regulations.  Countries need to de-bureaucratize and encourage free market expansion in the private economy. South American countries need to solve their drug, crime and corruption problems. Cronies and special interests need to go.

Norb Leahy, Dunwoody GA Tea Party Leader