1. Unit 5: Latin America: Past Shapes the Present
SS6E1 Analyze different economic systems
c. Compare and contrast the basic types of economic systems found in Mexico, Cuba, and Brazil

2. What to produce? 2. How to produce?
Latin America Economies
Economic Systems
In Latin America (and everywhere else in the world, no country has every productive resource it needs in unlimited quantity. Countries have to decide how to use those scarce resources in the smartest way possible. The questions they must answer are:
What to produce? 2. How to produce?
3. for whom to produce?

3. The way a country answers these questions determines its economic system. The three basic economic systems are:
Traditional (based on long-standing customs and values)
Market (based on what customers want to buy and producers want to sell)
Command (dictated by government controls and regulations)

4. The Middle Ground
In Latin America and elsewhere, few countries have an economy that is run entirely by government rules or entirely by what the marketplace says. Instead, most countries have a mixed economy. They operate somewhere on a continuum between a pure command economy at one end and a pure market economy at the other end.

5. Mixed Economies (A, B, & C)
Pure Command
Pure Market
100% government control
0% market economics
75% government control
25% market economics
50% government control
50% market economics
25% government control
75% market economics
0% government
control
100% market economics

6. Classify Information
Identify each feature as a market element (ME) or a command element (CE).
____ 1. The national government owns some of the country’s key natural resources.
____ 2. Private individuals and companies own the country’s land and factories.
____ 3. Individuals and businesses are required to pay high taxes to the government.
____ 4. Low taxes allow individuals and businesses to have greater economic freedom.

7. Latin America’s Approach
Most Latin American countries have mixed economies. But a number of their economies tilt more toward command elements than do the mixed economies of Europe and the United States. Take a closer look at the economies of Mexico, Brazil, and Cuba.

8. Mexico’s Economic System
Mexico’s mixed economy is about 65% free and 35% controlled. It is the second-largest economy in Latin America. As in all market-based economies, businesses in Mexico decide what to produce based on supply and demand in the market. Much of the nation’s land, factories, and businesses are privately owned. People are generally free to make most economic decisions for themselves.

9. However, Mexico’s government does play an active role in the economy
However, Mexico’s government does play an active role in the economy. It makes many laws to regulate and control production and the price of goods. High taxes and heavy regulations sometimes make it difficult for Mexican businesses to succeed. In addition, the government owns the nation’s oil industry, which is a leading source of income for Mexico.

10. Nationalized Oil
Mexico’s oil industry became nationalized in That means the government owns the nation’s oil reserves as well as the many enormous oil rigs used to drill and extract the oil. Mexican workers in the oil industry are government employees. Some of the oil is sold in Mexico, but a large percentage is exported to other nations.

11. Brazil’s Economic System
Brazil’s mixed economy is about 53% free and 47% controlled. It has a high level of government involvement. It is the largest economy in Latin America. While people are allowed to own private property, start businesses, and make their own economic decisions, government regulations on business are numerous. Brazil’s government collects high taxes and controls important industries like electricity, oil, mining, water, and telecommunications.

12. However, the government is showing signs of pulling back a bit on control. It is responding to low confidence in the economy due to political controversies, high inflation, and budget deficits. The government has turned some state-run industries over to private businesses and deregulated others.

13. Brazilian Steel
Brazil is among the world’s largest producers of steel, which is made possible by abundant iron ore in the country. Steel is also one of Brazil’s leading exports to other countries. When the Brazilian industry was created in the 1920’s and 1930’s, the government controlled production. But the government decided to privatize in the 1990’s, and today Brazil’s nearly 30 steel mills are run by private companies.

14. Cuba’s Economic System
Cuba has been a Communist country since Under Communist rule, Cuba has a strong command economy with only a few market elements. It is only 33% free and 67% command. The government owns most of the country’s resources, including land, factories, and businesses. It plans the economy by deciding what goods and services to produce and what prices to charge. Most of Cuba’s workforce (more than 70%) is employed by the government!

15. Under such strict control, very few Cubans own private businesses
Under such strict control, very few Cubans own private businesses. Without much competition among businesses, there is little innovation and fewer choices for consumers. Many Cubans lack access to modern conveniences, such as air conditioning, cell phones, new cars, and the internet.

16. Black Market Trade
Despite strict government control, Cuba has an active black market (an illegal market). Smugglers carry goods in and out of the country without the approval of the government. Citizens risk punishment by buying and selling these goods in secret. Prices in this market are based on supply and demand, making Cuba’s black market the closest thing Cuba has to a market economy!

17. Compare and Contrast
Complete the chart to compare the economies of Mexico, Brazil, and Cuba
Country
What do citizens and businesses decide?
What does the government control?
Mexico
Brazil
Cuba

18. Charts and Graphs
Identify where the economies of Mexico, Brazil, and Cuba lie on the continuum. Write each country’s name on the correct line.
Pure
Command A B C
Pure
Market