In this study, we discuss the structural problems of the faltering economic
development in middle income Latin American countries (LACs) in the twenty-first
century. Following the neo-structuralist’s discussion, we conceptualize
the region’s peripheral features that harm economic development as primary
commodity dependence, low level of technological progress, and poor formation
of global value chains (GVCs). Based on this concept of peripherality, we
categorize the current globalization in LACs into two types. The first type is
characterized by a low level of commodity dependence and high level of GVC
formation, but a low level of technological progress and weak social policies,
as typically seen in Mexico. The second type is characterized by a high level
of commodity dependence, low level of GVC integration, and low level of
technological progress but active social policies, as typically seen in South
American countries such as Brazil and Chile. However, we find that labor
productivity gaps vis-à-vis the United States of America have been stable or
widened in the second type of globalization as well as the first type, which
has succeeded in export-oriented industrialization based on GVC integration
during the 2000s. Therefore, we argue that both types of countries have
structural mechanisms such as specialization in low value-added tasks and
boom and bust cycles, which prevent sustainable economic development in
those countries; thus, it is essential to improve their quality of international
insertion through technological progress.
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