Economy
Agriculture and mining have long been the economic mainstays of South America. More workers gain a livelihood from farming than from any other occupation. Mining employs relatively few workers, but often contributes much to national economies through exports. Since few countries have well-developed manufacturing industries, agricultural products and minerals are usually traded overseas in order to buy machinery and other vital manufactured items. Most countries depend heavily on the export of one or two major commodities and are vulnerable to changes in world market prices. A price drop, however small, may have disastrous results.
Most South American countries are attempting to diversify their economies by expanding manufacturing and privatizing inefficient state-owned industries. In another strategy for economic development, many South American countries have entered into regional trading blocs among themselves and with more industrialized countries. The largest and most important South American trading bloc, Mercosur, is a free trade zone among Argentina, Brazil, Paraguay, and Uruguay established in 1995. In 1994 leaders from North and South America met to begin negotiations to create a Free Trade Area of the Americas (FTAA) by 2005.
In many respects agriculture remains the chief economic activity of South America. It is declining in importance, however, as the continent's nations diversify economically and as the rural poor abandon farming to seek a better life in the cities. In the late 20 th century, about a quarter of South America's workerforce was engaged in farming.
About four-fifths of South America’s land could be utilized for agriculture, though in reality only about one-third is used, the rest serving as grazing land for animals. Most of the land in South America is divided into large properties called latifundios, owned by a small percentage of the population, and smaller properties called minifundios that provide food for a single family. Latifundios include haciendas which are large farms or country estates, plantations, owned by foreign companies, and technically advanced farms controlled by agribusinesses, which are companies that are engaged in producing, transporting, distributing, and selling farm products. Minifundios, employ traditional farming methods relying more upon human and animal labor, and though they cover less farmlands than latifundios, are greater in quantity.
Two kinds of traditional farming prevail. Subsistence farming is done on small plots by individual families and yields only enough food for a meager existence with an occasional small surplus for sale. This kind of farming is widely practiced. In contrast is the agriculture of the haciendas, estates that typically cover vast areas and produce either crops or livestock, or both. Haciendas are generally family-owned and operate in much the same manner as in the past, with little regard for efficiency. Most of them employ laborers and have tenant farmers; many of them contain much idle land. Many haciendas are held by absentee owners.
South America also has many modern commercial farms, especially in Argentina, Brazil, Chile, Uruguay, and Colombia. Most are medium-sized, family-operated holdings; they are often mechanized and use chemical fertilizers as well as the latest scientific methods to ensure high yields. There are also large commercial plantations, which are generally located on or near the coast and produce bananas, sugarcane, and other crops, mostly for export. Some plantations are owned by large foreign corporations.
Grains, such as corn and wheat, are widely grown the former being the general basic food in most countries. Most countries produce some wheat, though the great bulk of the crop comes from Argentina's fertile Pampas, west of Buenos Aires. Oats, barley, and rye are also grown in Argentina. Rice is important in southeastern Brazil.
Nearly half of the world's coffee comes from South America. The large fazendas, or coffee estates, of southeastern Brazil account for much of the production, with most of the remainder coming from the smaller, family-owned farms in the Colombian Andes. Other valuable crops include cotton and sugarcane. Cotton is grown mainly in parts of Argentina, Brazil, Colombia, Paraguay, and Peru. Brazil is by far the leading sugarcane producer. Bananas, cacao, citrus fruit, and grapes are also commercially important. Ecuador exports the largest amount of bananas in the world.
At the subsistence level, small farmers throughout South America tend to grow the same crops. Most common are beans, corn, potatoes, and manioc, or cassava. Along with other vegetables and some fruit, they make up the basic diet in most rural areas.
The late 20th century saw farmers growing nontraditional crops, with countries like Colombia cultivating flowers for sale in North America and Europe, Chile producing kiwi fruit, citrus fruits, and grapes for export during the winter months in the Northern Hemisphere, Argentina and Chile producing wine grapes, and Argentina and Brazil exporting soybeans for animal feed.
Many farmers earn high profits by cultivating such illegal crops as coca, used to produce cocaine, the source of cocaine, has become a major crop in the northern Andes; poppies, used to make heroin; and marijuana, and hence efforts to encourage them to substitute legal crops are an utter failure. This has displaced many traditional crops in a number of areas.
Livestock raising is an important part of South American agriculture. Many areas not particularly suited for cultivation make good grazing lands, although livestock are also kept wherever farming is practiced. Several areas stand out as major commercial cattle-raising centers, notably the Pampas of Argentina and Uruguay, southern and southeastern Brazil, and the Llanos of Colombia and Venezuela. Brazil has the largest numbers of cattle, but Argentina has generally better grazing lands and better breeds. Both countries export large amounts of beef. Sheep thrive where cattle would do poorly, as in the drier parts of the Pampas and in Patagonia and Tierra del Fuego. In the Andes, sheep are relied on for both wool and food. Hogs and goats are kept on many farms, most commonly in Brazil.
The trend toward industrial development in virtually every country of South America is of major economic importance. Beginning in the 1930's and especially after World War II, many countries began to increase their output of manufactured goods to lessen dependence on trade with the United States and western Europe. Industrialization in several nations, particularly Brazil and Argentina, has been rapid. Many items, ranging from basic iron and steel to small consumer goods, are now made locally rather than imported.
Today, South America manufactures a great variety of goods, governments promote the manufacture of goods for export. Brazil, South America's most industrialized nation, has its heaviest concentration of manufacturing plants in the triangular region bounded by São Paulo, Belo Horizonte, and Rio de Janeiro. The well-developed iron and steel industry is the basis for the nation's other heavy manufacturing, including that of motor vehicles, chemicals, machinery, and electrical equipment. Large food processing and textile industries supply much of Brazil's food and clothing. Appliances and other consumer items are often made entirely of Brazilian-produced materials, rather than with imported components.
Argentina's industries are also extensive, but tend to concentrate more on the processing of agricultural materials than on heavy manufacturing. Food processing, particularly meat packing and grain milling, has long been the leading industry; steelmaking and oil refining are growing gradually.
Elsewhere on the continent, manufacturing is less well developed and is oriented toward food, textiles, and mineral processing. The larger countries of the west and north have modest iron and steel industries, and usually at least one petroleum refinery. Colombia and oil-rich Venezuela each have several oil refineries, and additional crude oil is shipped abroad for refining. Except for food and textiles, light industries in these nations are often unable to produce enough locally needed goods. Despite the general growth of manufacturing on the continent, many workers in manufacturing are still engaged in the making of simple handicraft items.
Several countries have formed export-processing zones where foreign multinational firms have set up factories employing numerous South Americans, and in the process, benefiting from complimentary excise policies and lower labor costs.
Endowed with considerable mineral wealth, South America was yielding gold and silver to the Incas long before European colonists arrived. Mining became the basis of the colonial economy, and mineral exports continue to account for much of the gross national product in several countries. In general, the continent is well supplied with metallic ores, but is short of fuels, especially coal. While reserves and production of certain minerals are very high, discovery and development of new deposits are often hindered by difficult terrain, great distances, and lack of investment capital. Foreign companies have established many of South America's largest, most modern mines and have operated them primarily for export.
The continent's richest mining regions have long been in the Andes. Here, metals are particularly important. Copper and tin, coming mainly from Chile and Bolivia respectively, are of long-standing significance. Other metals produced include iron, lead, zinc, silver, antimony, and molybdenum.
The Guiana and Brazilian highlands are increasingly becoming centers of mining. A wide range of metals and nonmetals are mined in the Brazilian Highlands as Brazil continues its rapid industrialization. Brazil, Guyana, Suriname, and Venezuela are among world leaders in mining bauxite, used to make aluminum. Chile is a major source of copper, apart from Peru, which also exports zinc.
The continent's lowland regions yield relatively few minerals other than fuels. Petroleum is produced in substantial amounts near the base of the Andes, especially in Venezuela, Colombia, Ecuador, and Peru. Petroleum is also produced elsewhere in the lowlands and at offshore sites. Argentina and Bolivia also export large quantities of natural gas, which is in high demand around the world. Gold and diamonds are obtained from alluvial deposits along some lowland rivers, especially in the Amazon Basin, and Colombia is a leading emerald producer. Mining creates wealth only for a small portion of the population and for large corporations, as it creates a few jobs. Mining also causes significant environmental damage, such as the pollution of water from mercury and other toxins used to process mineral ores
Forestry and fishing are two important industries of South America. Commercial fisheries are a source of food in many countries, in some cases adding significantly to the national economy. The cold waters of Peru and Chile are rich in fish, especially anchovies. The freshwater catch and the ocean fish are largely used as food by many South Americans. The anchovetta, a fish used in making oil and animal feed, is an important commercial variety that abounds in these countries. Since the mid 20th century, Peru has developed its fishing industry into one of the world's largest. The cool Peru Current (also called the Humboldt Current), flowing along the west coast of South America is rich in plankton and other organism that are used to make fishmeal, a livestock food that is a major export. Chile and northeastern Brazil have sizable fishing fleets that serve local markets. Excessive fishing over the ages has, however, affected the industry, which has seen a decline since the late 20 th century due to reduced fish stocks.
Relatively little of South America's vast forest land is cut commercially, except for wood used as fuel. The tropical forests are rich in valuable woods. Logging, however, is difficult because individual species do not grow in solid stands, but are widely scattered among many other types of trees. Also, transportation to river or ocean ports is usually difficult or virtually impossible. Mahogany, balsa, greenwood and rosewood are among the more common tropical woods cut. In the Gran Chaco, the quebracho tree is valuable as a source of tannin, used in making leather. The hard quebracho wood is much used in South America for railroad ties and fence-posts.
Brazil is South America ’s chief producer of forestry products. Southern parts of south America produce softwood pine trees. South American forests also yield coconuts, dates, edible nuts, oils, and ingredients used to make medicines and other pharmaceutical products, apart from wood. The sap of rubber trees, called latex, is found in the Amazon rain forest, and is used to make rubber tires.
During the debt crisis of the late 20th century, many countries leased land to foreign logging firms that cut down vast areas of trees, causing many environmental problems such as soil erosion, water pollution, and the extinction of some species of animals, plants, and microbes. Since then, many South American countries have launched afforestation and reforestation programs to save trees.
Service industries employ more than half of South America ’s work force, and include the sectors of banking, commercial sales, government services, health care, and tourism. Service jobs that do not need much skill and also pays quite low wages are cleaning and food preparation. Data processing, legal services, and telecommunications are service jobs that are gaining importance, and require a high standard of education.
South American cities harbor many underemployed people lacking full-time jobs, who work in the informal economy that provides low-cost services, and exists without government control and tax structures. South American professional people, earning less than their North American and European counterparts are benefited by the informal economy, which also embraces such illegal activities as prostitution and the sale of illegal drugs.
Two great natural barriers—the Andes Mountains and the Amazon Basin—are major obstacles to the development of good transportation in South America. In most places, roads and railways are concentrated near the coast. Few railways reach far inland; only a very few cross the Andes. Until the 1970's no road spanned the broad Amazon lowlands. Only southeastern Brazil and the Pampas of Argentina have adequate rail networks.
Roads are more extensive than railways and reach much farther inland. Road building receives much more attention and money than do railways, which are deteriorating in some countries. Fairly good roads link major cities within most countries, but international routes are limited.
Water transportation is the oldest and still one of the most widely used means of moving goods and passengers. Several large river systems—the Amazon, Orinoco, Magdalena, and La Plata-Paraná in particular—are especially important as commercial shipping routes. Coastal shipping in Brazil and Chile helps compensate for the shortage of land routes in parts of these countries. Chile uses ferries to connect its central region to the far south, where the coastline is quite irregular and there are hardly any paved roads
Air travel is of major importance. In remote areas, such as the Amazon Basin, it is often the only means of transportation. Even in densely settled regions, air service may be heavily used, as are the commuter—type air shuttles between São Paulo and Rio de Janeiro.
Most South Americans who cannot afford to fly, and do not own automobiles, rely on buses for cheap transportation. There are a few subway systems operating in some of the bigger cities. The increasing number of automobiles leads to traffic congestion, and air pollution is a major problem arising from transportation in the large cities.
Increasing commercial operations among the South American nations makes it a necessity to improve transportation. Many countries have begun to combine their transportation systems and also to build roads across borders as well as to the coast. Chile is also in the process of constructing a megaport on its northern coast at Mejillones, which is to serve as a point of access to the Pacific Ocean for Argentina, Bolivia, Brazil, and Chile.
Communication.
Books, magazines, and newspapers are important means of communication in South America, as over 90 percent of adults in the major countries are literate.
Radio and television have grown in significance in recent times, especially in urban areas, In 2005, Venezuela launched, along with Argentina, Cuba, and Uruguay a TV network called Telesur that transmits news. Soccer matches and soap operas called telenovelas are popularly enjoyed in South America .
Telephone service extends over most of South America, except in the extremely inaccessible communities. A growing number of people are also resorting to cellular phones for their daily business. Since the mid-20th century, the use of the Internet has also seen a great deal of advancement.
The countries of South America are all members of the World Trade Organization (WTO), which regulates international trade and attempts in reducing trade barriers between countries. In 1991, Argentina, Brazil, Paraguay, and Uruguay formed a trade association called Mercosur, which endeavors to boost trade among members and encourages better commercial relations with the European Union. The Andean Community, another trade association founded by Bolivia, Colombia, Ecuador, Peru, and Venezuela (which withdrew in 2006), is not too successful, its drawback being that member nations produce quite a large amount of similar goods.
South America’s major trading partners have traditionally been North America and Europe, and are now gradually extending towards the Middle Eastern nations. Trade with such Pacific nations as Australia, China, Japan, and South Korea has also developed since the late 20th century. Internal trade, amongst countries in South America is also frequent.
Brazil accounts for about 40 per cent of South America's imports and exports by value. Venezuela, Chile, Argentina, and Colombia account for most of the rest. Leading products exported from South America include food and beverages, tobacco, fuels, machinery, and transportation equipment. South America imports chemicals, foodstuffs, fuels, machinery, and transportation equipment
