Underdevelopment and Inequality

The region’s exports of natural resources dominate Latin America’s place in the world economy. Most of the mineral, energy, and agricultural commodities produced in the region are still exported in relatively raw forms to other parts of the world, where they are made into more finished and valuable goods. This is called “commodity dependence,” and has long been linked with countries that are underdeveloped. More than half the countries in Latin America, especially the 12 major countries in South America, are commodity dependent. Because Latin America depends so much on exports of raw materials, and not on finished goods, its share of world trade is only between 5 and 6%.

Latin America has more economic inequality than any other region of the world. This is a legacy of colonial rule that created vast wealth and power differences between a small number of owners and the rest of the population. Of the 20 countries in the world with the most inequality—where a small number of people hold the wealth and most people live in relative poverty—ten are in Latin America: Haiti, Honduras, Colombia, Brazil, Guatemala, Panama, Chile, Costa Rica, Mexico, and Paraguay. Since gaining independence, Latin America has struggled to overcome this legacy.

Although several pockets of prosperity exist, Latin America is still a developing region. Its average Gross Domestic Product (GDP) per person per year of $11,100 is low compared with almost $93,000 in the United States.  Of the major economies in the region, Chile, Mexico, Argentina and Brazil have a per capita GDP of over $10,000 compared with less than $3,100 in Haiti, Venezuela, and Nicaragua. 

 The Mexican businessman Carlos Slim Helú is one of the richest people in the world. With his wealth, he has built a world-class collection of art now exhibited at the architecturally significant Museo Soumaya he created in Mexico City. Photo by Torresigner.

The favelas (shantytowns) in Rio de Janeiro are home to hundreds of thousands of disadvantaged Brazilians. Poverty, drugs, and crime plague these settlements that are located just miles from skyscrapers, beaches, and tourist areas. Photo by UltimaGaina.