Exam 1 - Economic Geography

Question 1

Curse of Wealth

Answer 1

Controlled the terms of trade and held the vast colonial economies of Latin America in place and provided
immense financial wealth to the European powers
 The Spanish system was more efficient/strict than the Portuguese
 Trade was strictly controlled by the Crown – the colonies were only allowed to trade with Spain (Captive Markets)
 Precious metals were needed to purchase goods from Europe that were prohibited to manufacture/cultivate in the
colonies: iron, steel, fine textiles, wine, olives

Question 2

 Mercantilism – methods of control; problems for independent economies

Answer 2

 To enforce their control of trade in the colonies, Spain:
 Limited the number of ports through which goods could move – Cadiz in Spain; four ports in the Americas: Veracruz, Cartegena, Colon (transit point to Lima), Havana; Acapulco – link with Philippines
 Employed a system that was efficient for extracting taxes for the Crown and profits for colonial merchants, but was economically inefficient
 Example: all goods had to cross over the Andes to Lima before being shipped back to Spain until the creation of the La Plata Viceroyalty under the Bourbon Reforms
 Licensing of all trading companies – either over a specific area or for a specific product
 Unlicensed trading and smuggling were common features – Colonia, Uruguay was center of smuggling in 17th & 18th centuries until La Plata was created.
 Introduction of production technologies or agricultural products was prohibited
 Example: honey bees were prohibited for nearly 200 years – so Spain could maintain monopoly
on production of sacramental candles
 Taxes – levies on mining and trade provided greatest revenues – as much as 40% of colonial revenue came from
gold and silver
 Types of products traded – raw materials from colonies (gold, silver, sugar, cacao, indigo) and manufactured goods from Iberia (firearms, steel weapons, paper, fine
textiles, books, soap, wine, olive oil)

Question 3

 Captive markets

Answer 3

Trade was strictly controlled by the Crown – the colonies were only allowed to trade with Spain (Captive Markets)

Question 4

 Commodity Trade

Answer 4

 The production of primary products (raw materials) for export
 Natural resources: oil, copper, bauxite
 Agricultural products: coffee, sugar, bananas, timber
 Commodity trade model continued after independence –
exchange of commodities for manufactured goods – boom
period from 1870s – 1930s

Question 5

 Monoculture/commodity trade – problems

Answer 5

 Monoculture refers to the dependence of an economy on only a few (often one main one) commodities
 100 years after independence, a single commodity accounted for over 50% of exports in at least 10 Latin American states
 Venezuela 52% & Brazil 62% (coffee), Ecuador 64% (cacao), Bolivia 72% (tin), Chile 71 % (nitrates)

Question 6

 Boom-bust cycles – causes and problems

Answer 6

Boom-bust cycles of commodities led to economic
instability – these price fluctuation make it problematic for
state planning and can cause a collapse of the economy
 Competition – new producers added to the market; Africa & Asia also produce coffee, cacao
 Substitution – a new substance is found or invented
making a commodity obsolete
 Example: Guano in Peru (1840-70) replaced by Nitrate from Atacama Desert in Chile replaced by synthetic fertilizers developed in Europe
 War of the Pacific (1879-1883) – Chile fought Bolivia, Peru for control of the Atacama after nitrates, silver, copper found there
 Depletion – gold and silver or other mined substances (Minas Gerais, Brazil)
 Flexibility of production – commodities do not often lend themselves to increased production to take advantage of booms – overproduction during booms leads to severe busts

Question 7

 Banana Republics

Answer 7

 Banana Republics – in many Central America states, banana plantations and banana exports figured so prominently and the foreign companies that owned them
were so dominant in national politics that this term was coined to describe those states – Honduras, Costa Rica, Panama

Question 8

 Neocolonialism

Answer 8

Great Britain replaced Spain and Portugal as dominant power but through indirect means
 Loans to governments, investment in export activities, construction of basic infrastructure (communication and
transportation), trade concessions
 Military force always hung in the background to get the results GB desired – this type of situation is referred to as
“neocolonialism”
 By the early 20th century, the US had supplanted GB as the new neocolonial power in Latin America

Question 9

 Culture and economy after independence

Answer 9

 Followed by most Latin American countries after independence
 Some social sectors (usually elites – owners of mines/plantations/etc.) and some geographic regions did benefit
 Overall Latin American economies showed negligible economic growth and in some countries living standards actually declined
 Limited growth and narrowly focused benefits did little to stimulate internal demand – therefore not encouraging local
manufacturing and industry
 When you have a tiny elite and small middle class there are very few people to make up an internal market (not enough people to buy things)

Question 10

 Capital flight after independence

Answer 10

 Capital flight resulted because elites failed to invest in local economies (continuation of commodity trade economic model)
 Consumer goods from Europe were desired
 Tended to invest in European enterprises instead of local initiatives
 Preferred to continue selling raw materials and hold onto privilege rather than building up all of society