Economics Economics

Economics Economics



Whatis the progress of the Latin America and the Caribbean’s economicactivity?

Whatare the main challenges to the Latin America and the Caribbean’seconomic growth?

TheLatin America and the Caribbean (LAC) economic activity is expectedto remain subdued in the year 2014. The LAC’s GDP growth moderatedextensively in the year 2013 to 2percent.This was down from 3 percent in the year 2012 as well as 4percent in the year 2011. This indicates that the GDP of the LatinAmerica and the Caribbean is deteriorating year after year. Thearticle attributes this deterioration to supply constraints invarious cases, tightening financial conditions, weaker domesticdemand and low commodity prices. Mexico, for example, reflected lowpublic spending as well as construction activity and weak demand fromUSA.

InBrazil, activities were to remain subdued also. This is because ofweak business confidence on its private investment. Venezuela andArgentina are faced with substantial external and fiscal imbalances.These imbalances prompted various controls on exchange rates, tradesand prices which eventually hamper activity. In the rest parts ofLatin America growth is anticipated to remain close to potential.This is because of strong external demand from advanced economiesoffset by softer commodity prices and financing conditions. InCaribbean, however, long-standing competitiveness and high debtlevels will continue to constrain activity although tourism flowsrecovery might provide a positive impulse.

Allthe Latin American countries growth is projected to deteriorate.Brazil, Columbia and Peru are among the countries whose economies areexpected to fall. Mexico’s growth was, however, expected to improveas from the year 2014. The main aspects which will facilitateimprovement of Mexico’s economy are picking up of demand of theirproducts as well as recovery in the construction activity. In thesecountries labor markets have remained very tight in their economiesand their unemployment levels are at low levels. Their currencieshave continued to weaken hence creating an inflationary impulse. Thecontinued deterioration of the economy of these nations has been weakgrowth in the export volumes.

Interms of policy priorities the financially integrated economies havetwo main policy challenges. One of them is the sentiment of theinvestor toward the emerging markets is very fragile. The marketturbulence can further drive up the funding costs with the negativeknock-on growth effects. The second one is that secular commodityprice boom has petered out and the activity has been constrained bythe supply-side bottlenecks. This has made the economic growth tosettle below high rates. However, the flexibility of exchange rateshas been used to help countries adjust to market turbulence.

Theentire development has stagnated by the policies developed.Developments of the five biggest commodity exporters in the LatinAmerica revealed differences in the domestic policies. Venezuela, forinstance, suffered a great economic slowdown, steep inflation rise aswell as intensification of foodstuff shortages and other consumergoods. These were as a result of highly expansionary policies whichfacilitate the improvement of social indicators. This eventuallycauses large macroeconomic imbalances. The extensive price controlimposition has worsened the economic distortions. If the economicpolicies will not change, these countries’ economy is likely tostagnate. In three of these countries, growth has been strong.Bolivia, for example recorded a 7% economic expansion. This wassupported by high hydrocarbon exports, strong private consumption andthe biggest of all is accommodative macroeconomic policies. Thearticle was arguing that development of these countries was beinghindered by the economic policies they had put in place.

Itis evident that the Latin American and Caribbean economic status isdeteriorating. The article has elaborated it very well. Thedeterioration of the economy in these regions has been attributed tosupply constraints, weak domestic demand and tightened financialconditions among others. These factors have potential of affectingthe economy of this region as the article indicates.

Whatis offshoring?

Howhas offshoring developed since its development?

Thearticle by David Ricardo concentrates on the international trade. Hebegins by noting that communication between Portugal and England wasnot as faster and less costly as shipping cloth or wine from one ofthe nations to the other. The international trade goes hand in handwith offshoring. Offshoring is the facilitator of development ofinternational trade. This was taking place in the year 1817 (Grossman&amp Esteban, 2006). The article also records that two centurieslater the international trade theory has continued to be dominated bythinking about exchange and production of complete goods. Theunderstanding about effects of the international integration onproduction patterns, prices and factor income comes from the analysisof models which goods which serve as raw materials as well as finalconsumption goods are produced in one place.

Thearticle records that the information technology has however,facilitated production process breaks up. Although countries likePortugal and England are still producing goods from their start tothe final stage, they still participate in the in global supplychains whereby many tasks are required in manufacturing complexindustrial goods. This whole issue can be well understood throughstudying international trade using a new paradigm. This paradigmemphasizes both the exchange of complete goods and the trade inparticular tasks (Grossman &amp Esteban, 2006). This is termed asoffshoring. A perfect example of offshoring is doll’smanufacturing.

InTaiwan, oil is refined to produce ethylene and plastic pellets whichare used in producing doll’s body. The manufacture of Barbie’snylon hair is done in Japan while china is the producer of the doll’scotton cloth. The United States produces both the molds for makingthe dolls, the paint pigments used in decorating dolls and thepackaging cardboard. Assembly is then done in Malaysia and Indonesiawhile in California the doll’s quality is tested and marketed fromthere to all parts of the world (Grossman &amp Esteban, 2006).Offshoring has also advanced from products to various services. It isvery common nowadays to find companies in India answering customerservice calls, developing software, read x-rays, prepare tax formsand also conduct heart surgery on the American patients.

Previouslycountries used to produce complete products which they traded andconsumed with other countries. The producers would take the advantageof the productivity gains which would derive from derive workerspecialization through dividing the production process in varioustasks. These tasks had to be done in close proximity as a result ofcommunication and transportation costs which prevailed at that time.Drastic reductions in the communication and transport costs havefacilitated these tasks’ direct trade (Grossman &amp Esteban,2006). This has generated a worldwide production process in anextensive spectrum of industries.

Tounderstand offshoring, every individual has to shift his or herattention from the traditional trade approaches whereby peoplebelieved that only goods could be internationally exchanged and moveto the contemporary paradigm. In the new paradigm task trade takesthe center stage. The new paradigm reveals what the offshoring reallyis as well as its effects to factors such factor prices. Ifparticular tasks can be traded easily than others, the tasks’offshoring produced with a certain factor happens to be equivalent totechnological progress. The article has employed an analysis inanalyzing international trade in terms of the stages it has employedin its development. This has helped in bringing out offshoringclearly what it is and its role in facilitating international trade(Grossman &amp Esteban, 2006).

Itis a well-structured article. It analyzes offshoring in acomprehensive manner. This has been done in terms of the way it hasdeveloped as well as the way it is manifested practically. Theauthors addressed the whole issue analytically and comprehensively.

Isentrepreneurship driver of development?

Whatfacilitates entrepreneurship to be the driver of development?

Thearticle “Latin American entrepreneurs-entrepreneurship is a driverof development” tries to answer to the question whether and howentrepreneurship is the development’s driver. The article starts byindicating that entrepreneurs are individuals who transform ideas toprofitable commercial enterprises. The process, however, requiresspecial talents such ability to innovate, explore new markets andintroduce new markets. The policy makers of any given country shouldhave great care about the entrepreneurs who seem to be better in thepopulation. This is because entrepreneurship is an ultimate driver ofgrowth as well as development. Entrepreneurship facilitatesdevelopment in various ways.

Oneof them is contribution to the growth of the nation’s GDP.Secondly, when self-employment is transformed to wage employmentdevelopment is an automatic aspect. Wage employment is very essentialin enhancing development of the entire country. Reduction ofunemployment in the nation contributes to an automatic development ofthat nation. However, for entrepreneurship to achieve these resultsinnovation has to be part and parcel of the entrepreneurs. Creativeentrepreneurs are behind the most productive and dynamic firms. Theseare the firms which innovate, expand their production and eventuallygenerate jobs at a rapid pace. Such firms create both employmentopportunities as well as better employment.

Thisindicates that irrespective of the entrepreneurship beingdevelopment’s driver they can fail in producing this development orfacilitate it at a very slow rate. LAC has been characterized a veryslow development of firms. This eventually facilitates slow economicdevelopment. The main reason for slow development is lack ofinnovation. In the world of the business entry is just a beginning ofa challenging and a big journey. For the enterprise to survive andeven grow, continuous innovation has to be in place. Businesses inthe LAC region score poorly in this area. The LAC firms do notintroduce new products frequently.

Itis worth noting that even the multinational corporations in the LACregion are not sufficiently innovative. Under the correct businessenvironment as well as contractual conditions the multinationalcorporations can be of great assistance for local economy. They aremore productive when they use latest technology. When they engagewith and also support the local suppliers they can transfer theknowledge as well as better technologies to local economy. This helpsin raising quality of inputs as well as firms’ productivity. Theycan also have adverse effects on the businesses in the local market.This means that the lack of innovation of the local companies canmake them to be victims of stiff competition and hence developmentwill be automatically retarded.

Thereare however, policies that would enhance innovation and consequentlymake entrepreneurship a driver to innovation. The first aspect thepolicies should address is competition. Competition is inevitable inthe world of business. Competition as well as innovation needs tofollow the inverted U-shape. Too much competition has potential ofweakening the innovative incentives of firms without basiccapabilities and is very far from technological frontier. Policieswhich need to be developed that will enable fair competition andhence give room for innovation. It is evident from the article thatentrepreneurship is development’s driver. However, innovation hasto be an integral part of entrepreneurship if development is to berealized and at a substantial pace.

Accordingto this article, entrepreneurship is the development’s driver. Thishas been addressed clearly in this article. However, for the drivingaspect to be in place, innovation has to be in place according to thedocument. In deed it was a well-structured and informative article.


Grossman,M., &amp Esteban, R., (2006). TheRise of Offshoring: It’s Not Wine for Cloth Anymore. PrincetonUniversity