MIDDLE AMERICA II(CHAPTER 4: 216-235)

NaturalResources

MAQUILADORASTijuana

NogalesCiudadJuarez

Matamoros

Reynosa

Monterrey

Chihuahua

GDP PER CAPITA ALONG THE US-MEXICAN BORDER

• Initiated in the 1960s as coupon houses

• Assembly plants that pioneered the migration of industries in the 1970s

• Today

– >4,000 maquiladoras

– >1 million employees

MAQUILADORAS

• Modern industrial plants

• Assemble imported, duty-free components/raw materials

• Export the finished products

• Mostly foreign-owned (U.S., Japan)

• 80% of goods reexported to U.S.

• Tariffs limited to value added during assembly

MAQUILADORAS

• Maquiladora products

MAQUILADORAS

• Electronic equipment• Electric appliances• Auto parts• Clothing• Furniture

• ADVANTAGES

– Mexico gains jobs.

– Foreign owners benefit from cheaper labor costs.

• EFFECTS

– Regional development

– Development of an international growth corridor between Monterrey and Dallas - Fort Worth

MAQUILADORAS

NAFTA

• Effective 1 January 1994 • Established a trade agreement between

Mexico, Canada and the US, which:

–Reduced and regulated trade tariffs, barriers, and quotas between members

–Standardized finance & service exchanges

NAFTA

How has Mexico benefited from NAFTA?

MEXICO AND NAFTA

• Foremost, it promises a higher standard of living.

• NAFTA creates more jobs for Mexicans as US companies begin to invest more heavily in the Mexican market.

• Mexican exporters increase their sales to the US and Canada.

• Is that the entire story?

WAGE RATES COMPARED

Assemblers Skilled Labor

$1.55

$17.38

$2.87

$20.21

$0

$5

$10

$15

$20

$25

MexicoU.S.

U.S. TRADE WITH CANADA & MEXICO

• Canada remains as the United States’ largest export market.

• Since 1977, Mexico has moved into second place (displacing Japan).

• 85% of all Mexican exports now go to the United States.

• 75% of Mexico’s imports originate in the United States.

ECONOMIC TRENDS (Central America & the Caribbean)

• Agriculture

• Industry

• Services– Tourism

• Environmental Issues– Deforestation

POST COLONIAL DEPENDENCY

• Neocolonialism

–Policies of developed states that enable them to dominate economies of former colonies• Disjunctive Development

• Investments

• Loans

• El Salvador– Agriculture accounts for 24% of GDP and 40%

of the labor force and contributes to 60% of exports.

– Economic losses because of guerrilla sabotage total $2 billion since 1979.

• Honduras– Agriculture accounts for more than 25% of

GDP, employs 62% of the labor force, and produces two-thirds of exports.

– Economic loss because of natural disaster

PRIMARY SECTOR DEPENDENCE

PRIMARY SECTOR DEPENDENCE

• Dominican Republic (49% Agriculture)

– Sugarcane, coffee, cotton, cocoa, and tobacco

• Jamaica (22.5% Agriculture)

– Sugar, bananas, and rum (Hurricane Gilbert -1988)

• Cuba (20% Agriculture)

– Sugar, tobacco, citrus, and coffee

ALTITUDINAL ZONATIONMiddle & South America’s Vertical Climate Zones

ALTITUDINAL ZONATION

SeaLevel

SeaLevel

2500’ 750 m

TIERRA CALIENTE(Hot Land)

Bananas, Cocoa, Sugar, Rice

Middle & South America’s Vertical Climate Zones

6,000’ 1800 m

ALTITUDINAL ZONATION

SeaLevel

2000’ 600 m

SeaLevel

TIERRA TEMPLADA (Temperate Land)

Coffee, Rice, Corn, Sugar

ALTITUDINAL ZONATION

SeaLevel

6,000’

2000’

2,000 m

600 m

SeaLevel

12,000’ 3,600 m

TIERRA FRIA(Cold Land)

Corn, Wheat, Potato

12,000’ 3,600 m

ALTITUDINAL ZONATION

SeaLevel

6,000’

2000’

2,000 m

600 m

SeaLevel

TIERRA HELADA(Frost Land)

Middle & South America’s Vertical Climate Zones

THE TOURISM OPTION• Antigua and Barbuda

– Direct contribution of 13% to GDP and affects growth in other sectors

• The Bahamas– Tourism alone provides 50% of GDP and

directly or indirectly employs 40% of the population.

• Cuba– Growing industry

ENVIRONMENTAL CONCERNS

• Tropical Deforestation

• 3.5 million acres of woodland in Central America disappear each year!

What are the causes of tropical deforestation?

CAUSES OF TROPICAL DEFORESTATION

• Clearing of rural lands to accommodate meat production and export

• Rapid logging of tropical woodlands to meet global demands for new housing, paper, and furniture

• Population explosion: forests are cut to provide crop-raising space and firewood

THE PUERTO RICAN MODEL

• One of the most dynamic economies in the Caribbean region

• Industry has surpassed agriculture as the dominant sector of economic activity.

• Encouraged by duty free access to the US by tax incentives (US firms have heavily invested in Puerto Rico since the 1950s)

MIDDLE AMERICA II(CHAPTER 4: 216-235)