Latin America's export-driven economies in the 19th century shaped its global role. Countries focused on producing single commodities like coffee or bananas, becoming dependent on foreign markets and vulnerable to price fluctuations.

Foreign investment, especially from Britain and the US, fueled this export-oriented growth. While it financed infrastructure like railroads and ports, it also led to economic dependency and limited domestic development, setting the stage for future challenges.

Export-Oriented Economies

Monoculture Economies Driven by Export-Led Growth

• Export-led growth strategies focused on producing and exporting a single commodity or a few commodities to drive economic development
• Monoculture economies emerged where a single crop or resource dominated the economy and exports (coffee, bananas, guano)
• Coffee economy developed in many Latin American countries in the 19th century as global demand for coffee soared
  • Coffee plantations expanded rapidly, especially in Brazil, Colombia, and Central America
  • Coffee became the primary export and source of foreign exchange for these countries
• Banana republics arose in Central America and the Caribbean as U.S. fruit companies established vast banana plantations
  • Term "banana republic" refers to countries politically and economically dominated by foreign fruit companies (United Fruit Company)
  • Economies of countries like Honduras, Guatemala, and Costa Rica became heavily dependent on banana exports

Economic Dependency and Vulnerability

• Monoculture economies and export-led growth led to economic dependency on foreign markets and investment
  • Latin American economies became dependent on demand and prices for their primary export commodities
  • Fluctuations in global commodity markets could lead to economic instability and crises
• Dependence on a single export crop or resource made economies vulnerable to price shocks, weather events, and plant diseases
  • Coffee rust fungus devastated coffee crops in the late 19th century, causing economic crises in coffee-dependent countries
• Economic dependency on foreign powers and markets limited economic diversification and domestic development
  • Profits from exports often flowed to foreign investors and companies rather than being reinvested in the domestic economy
  • Import of manufactured goods from abroad hindered development of domestic industries

Foreign Influence and Investment

Foreign Direct Investment Fuels Export Economies

• Foreign direct investment played a key role in the development of export-oriented economies in Latin America
  • Foreign capital financed the expansion of plantations, mines, and infrastructure to support export industries
  • British investment was especially significant in the 19th century, financing railroads, ports, and other projects
• British imperialism and informal empire extended British economic influence in Latin America
  • Britain used its economic and naval power to secure favorable trade agreements and concessions
  • British loans to Latin American governments often came with strings attached, such as control over customs revenues
• U.S. investment increased in the late 19th and early 20th centuries, especially in Central America and the Caribbean
  • U.S. companies established vast banana plantations and dominated the region's banana trade (United Fruit Company)
  • U.S. government intervened militarily to protect American economic interests (Panama, Nicaragua)

Infrastructure Expansion Facilitates Trade

• Railroad expansion was a major focus of foreign investment and government spending in the late 19th century
  • Railroads facilitated the transport of export commodities from the interior to ports
  • British companies financed and built many of the region's railroads (Argentina, Brazil, Mexico)
• Port facilities were expanded and modernized to handle the increased volume of exports
  • Major ports like Buenos Aires, Rio de Janeiro, and Valparaiso became hubs of international trade
• Telegraph lines and steamship routes improved communication and transportation links with global markets
  • Enabled faster transmission of market information and orders between Latin America and Europe/North America
  • Reduced travel times and shipping costs, making Latin American exports more competitive

Resource Booms

Guano Boom in Peru

• Guano, accumulated excrement of seabirds, became a valuable export commodity in the mid-19th century
  • Guano was prized as a fertilizer for its high concentration of nitrogen and phosphates
  • Peru had vast deposits of guano on its coastal islands and cliffs
• Guano boom began in the 1840s as global demand for fertilizer soared
  • Peru's guano exports increased from 1,700 tons in 1841 to over 500,000 tons by the 1860s
  • Guano exports accounted for a majority of Peru's export earnings and government revenue during the boom years
• Peruvian government granted concessions to foreign companies to extract and export guano
  • British and American companies dominated the guano trade, reaping huge profits
  • Corruption and mismanagement plagued the guano industry, with much of the wealth siphoned off by foreign interests and Peruvian elites
• Guano boom ended in the 1870s as deposits were exhausted and alternative fertilizers became available
  • Collapse of the guano trade contributed to Peru's defeat in the War of the Pacific (1879-1883) and loss of nitrate-rich territories to Chile
• Peru's experience with the guano boom illustrates the opportunities and pitfalls of resource-based development
  • Guano wealth financed some infrastructure and modernization projects, but did not lead to sustainable economic development
  • Dependence on a single export commodity left Peru vulnerable to boom-bust cycles and foreign exploitation