1. Latin American Economic Systems
Cuba
Brazil

2. Review . . . Types of Economies
TYPES OF ECONOMIC SYSTEMS
Definition
Key Terms
Countries
1) Market economy
An economic system in which individuals own and operate the factors of production.
Free enterprise Capitalism
2) Command economy
An economic system in which the government owns and operates the factors of production.
Socialism Communism
Cuba China
3) Mixed economy
An economic system that has features of both market and command economies.
United States Great Britain Japan
4) Traditional economy
An economic system based upon customs and traditions. Economy is based upon agriculture and hunting.
Non-Industrialized Agrarian societies
Aborigines
(Australia)

3. Economic Continuum No system has a pure command or market economy.
All economies combine aspects of both of the command and market economic systems – to different degrees.
USA has some government owned businesses – schools, public colleges, postal services – in addition to the privately owned businesses.

4. What’s Your Economy? Cuba – command economy
Government owns all resources
Government decides what and how much is to be produced
Struggled since the breakup of the USSR
Brazil – mixed economy
Strong agricultural, mining, manufacturing & service industries
Strongest economy in South America
Government controls health care and postal services

5. Specialization & Opportunity Cost
Focus on producing one or two goods really well
Advantages
Produce goods in less time
Produce goods for less money
Opportunity Cost
Value of what is given up when a choice is made
Example
Country X makes chocolate
Country Y makes cars
Country Y needs to import chocolate
Opportunity cost is the money Country Y could have made if they made their own chocolate

6. Trade Barriers Tariff – tax Embargo Quota
A trade barrier that is used to discourage trade with foreign companies
This type of barrier would restrict trade
Created to increase the prices of imported goods and protect a country’s own industries from foreign competition
Embargo
Forbidden trade with another country
This type of barrier would STOP the importing of an item
Can be put in place for safety reasons Unsanitary conditions – lead paint
Also used for political reasons Countries that violate human rights
Quota
Restrictions on the amount of a good that can be imported into a country
This type of barrier can create shortages and an increase in price.
EU placed a quota on Chinese imports of clothing when France and Italy, with strong textile industries, complained about cheap import prices.

7. NAFTA (North American Free Trade Agreement)
3 countries involved
USA, Mexico, Canada
Purpose
Increase trade between member nations by creating a large free-trade zone (remove trade barriers)
Key Functions – between member nations
Eliminate tariffs on goods shipped
Remove restrictions on investment
Remove custom barriers at border crossings
(make it easier for trucks to pass into Mexico)
Establish tough standards for environmental, health and safety regulations in industries
Improve working conditions

8. Economic Growth 4 factors for economic growth
Entrepreneurship
Ideas, innovation and risk involved in starting a business
Land
Capital - Factories, machines, etc.
Labor - Human capital
How is economic growth measured?
Gross Domestic Product (GDP)
Total market value of the goods and services produced by a country’s economy in a specific year.
Used to determine the health of a country’s economy and compare it to other countries.
Strongest in Latin America – Brazil and Mexico
Weakest in Latin America – Haiti and Bolivia

9. How does a country raise its GDP?
Invest in human capital
Education and skills training
Smarter people leads to a more productive workforce
Increase economic growth.
Literacy rate is used to determine the educational level of people . . .
Higher the literacy rate. . . Higher the GDP
Widespread poverty and lack of education in Latin America
Many students have to work instead of go to school.
Invest in capital resources
Provides workers with the most current and updated tools.
New factories, computers, roads
Increases productivity and economic growth

10. What role does natural resource play in the success of a country’s economy?
Fuel for a country’s industries.
Source of income when exported.
Brazil
Rich mineral resources like iron ore (makes steel)
Fertile soil, plentiful forests, rivers
Mexico and Venezuela
Oil deposits
Have more than they need – sell to other countries

11. What role do entrepreneurs play in the success of a country’s economy?
Generate new ideas
Invest in human, capital and natural resources
Willing to take risks
Help countries adapt to changing trends
In Latin America . . .
Unemployment is high among young adults
Developing classes to develop entrepreneurship
A lot of “red-tape” months to start a business in Venezuela
Starting a business is viewed as a way to get out of poverty!