That does the future hold for U.S.-Mexican relations? Optimistic assessments usually point to the high degree of interpenetration between the two societies, the recent history of intergovernmental cooperation, and the commonality of basic interests. Developments in one country have significant impact on the other, a process that now works both ways: the 1982 economic crisis in Mexico created serious difficulties for retailers on the U.S. side of the border, Mexico's subsequent cutbacks in imports prompted the loss of 200,000 jobs in the U.S., and Mexico's struggles with its international debt have crucial implications for banks in the U.S. Each country needs the other, and this kind of “interdependence” creates mutuality of purpose. According to this logic, the rational pursuit of national goals will build and fortify harmonious bilateral relations.

This Essay examines Soviet uses of economic trade for political and diplomatic purposes in Latin America. Recent events in Central America and the Caribbean have generated a great number of analyses of Soviet goals and tactics in the Western Hemisphere (Duncan, 1984; Leiken, 1984; Rothenberg, 1984; Varas, 1984; Valenta, 1982). Direct Soviet military aid to Nicaragua, and to Grenada prior to the U.S. invasion in 1983, has suggested a more forward Soviet role in the region. On the other hand, Soviet arms shipments to Latin America, excepting those to Cuba, are a relatively recent response to revolutionary developments that may prove to be ephemeral, or which may encounter stiff U.S. resistance. Given geopolitical realities of the area, the Soviet military option certainly is less viable in Latin America than elsewhere in the developing world. In contrast, trade and aid – and Soviet aid is given chiefly in the form of trade credits – are a long-established, politically safe tactical alternative.

Pronouncements by the Reagan Administration not withstanding, the oft repeated accusation that Nicaragua is but a Soviet or Cuban pawn does not appear consistent with a closer examination of the facts (see NACLA, 1985). Beginning with the original 1969 FSLN (Frente Sandinista de Liberación Nacional) Program, the Sandinista leadership which now rules Nicaragua has steadfastly maintained its nonaligned orientation. In fact, since coming to power, the Sandinistas have not only become active members of the Nonaligned Movement, but have also used their ties with the Nonaligned to explain their policies and to garner much needed international support for their actions. In the process, they appear to have taken full advantage of policy options created by the development of the Nonaligned Movement and only recently available to Latin American nations.

Differences in the degree of economic development and diversification among members of economic integration systems could easily create obstacles to economic integration, as they tend to have an impact on the distribution of costs and benefits of economic integration processes.

There are several reasons why the Least Developed Members (LDMs) within integration movements in Latin America are likely to be losers in the integration processes taking place within the region. First, the economies of these countries are less diversified than those of the more advanced countries. The LDMs have manufacturing sectors which are not well developed and which are concentrated in productive branches which process natural resources. When these countries join an integration movement with countries with more advanced and diversified manufacturing sectors, they would tend to import manufactured goods which are more protected than the natural-resource-based goods which they are likely to export.

Economic relations between the United States and Central and South America are pervasive, complicated and ever changing. The nature of these relations, i.e., conflict, cooperation or neutrality in settling issues, depends on the degree and the form in which their respective markets for inputs (labor, land, capital and technology), outputs (goods and services), financial assets and unilateral transfers interact. These relations evolve around and arise from the movement of people, goods, services and financial assets between the North and the South, and within the South.

In 1976, Macmillan of Canada published the first recent book-length study of Canadian-Latin American relations, Gringos from the Far North: Essays in the History of Canadian-Latin American Relations, 1866-1968, by Professor J.C.M. Ogelsby of the University of Western Ontario (1976a). Ogelsby deals with interactions between the residents of Canada and those of the Latin American republics – diplomatic, trade, business and religious relations; he includes subjects such as the emigration of Canadian Mennonites to South America. Ogelsby, who consulted Canadian and Spanish-American archives and travelled to the scenes of many of the events he describes, sets a standard for others in the field.

The international debt crisis has received a great deal of attention at the macroeconomic and the political levels, but there have been few analyses of its impact upon individual sectors. Thus this article will consider the consequences of the Latin American debt crisis for manufacturing industry, particularly the adjustments that this sector has made in its response to the crisis.

The adjustment process which the manufacturing sector has undergone has produced implications which depend partly upon factors exogenous to the sector and partly upon the nature, and degree of competitiveness, of the manufacturing activity in each of the countries. In turn, the latter factors have been influenced by those very macroeconomic and exogenous variables. Some variables, such as the exchange rate, play major roles in determining the competitiveness of industry, as has frequently been emphasized in recent years. This is true of a number of variables at the industry and enterprise level as well.

Latin American societies and economies are. in a world of change and transition. The past decade, from 1973 to the present, has been for them an era of anxiety on the one hand and of opportunity on the other, a paradoxical era in which prospects for development had to compete with the high social costs of stagnation in many instances.

Energy was the catchword, and the name of energy was oil. Its price, its availability, and its promise (a road to riches for those fortunate enough to possess it, a threat of increasing poverty for those unfortunate enough to have to buy it) brought turmoil to the economies, and the bodies politic, of Latin America.

Central America has always seemed to me a particularly fruitful object of study, of economic and particularly monetary affairs, because of the existence of six countries of not too different size and economic structure. This situation provides an opportunity for assessing the workings of certain economic principles.

In economic terms, the countries of Central America are very small units. For such units, economics can provide a few analytical propositions that seem prima facie plausible. One is that such economies need not indefinitely specialize in exports of primary products, but if they diversity and industrialize their economies, it must be for export. Industrialization for the domestic market is unlikely to permit sufficient economies of scale. In this regard, the Central American countries have industrialized much less than the small republics in the Far East, and accordingly have not enjoyed as rapid a rate of economic growth.

It is now six years since the Sandinista National Liberation Front (FSLN) toppled the regime of Nicaraguan dictator Anastasio Somoza Debayle. Even today, the nature of the FSLN - its road to power, its political complexion and orientation, and its objectives - remains the subject of heated debate. Some still argue that the Sandinista regime is a nationalistic, non-aligned, although radical, Third World government. Others emphasize the Marxist-Leninist overtones characterizing its seizure and consolidation of power, its foreign relations, and its efforts to introduce socialist transformation to Nicaraguan society.

Basically, there are two exaggerated views of Nicaraguan foreign policy: one depicts Nicaragua as a communist pawn of Moscow and Havana; the other views Nicaragua as a classical non-aligned Third World nation. Neither school of thought reflects the complex reality of Nicaraguan politics and foreign policy.

Changes in the volume of new loans issued by the developing countries in Latin America have had a significant impact on the foreign exchange value of their currencies, and on most of their domestic macroeconomic variables. During the 1972-82 decade, the annual increase in external debt of many of these countries exceeded the interest payments on this debt. The result was a net cash inflow derived from the sale of new loans abroad. Consequently, at the time, no real economic cost was associated with this increase in external debt. After 1982 this situation changed. The annual increase in external debt diminished to the point where it was less than the scheduled interest payments. At that point Latin American borrowers began to experience a net cash outflow on their debt account. Thus, in order to generate the foreign exchange needed to pay even part of these scheduled interest charges, the economy had to undergo a costly adjustment process.

Growing political turmoil and economic stagnation in the Western Hemisphere, especially in Central America, caused the U.S. government and a number of private groups to search in depth for more profound understanding of the problems of the region and for appropriate policy responses. Beginning in 1979, with the anti- Somoza revolution in Nicaragua, a large number of scholars, journalists and commentators began to write about Central America to the amazement and amusement of those three or four academics who had covered the region before. All who studied the Central American situation found plenty wrong with it.

Virtually all developing countries at various times abandon laissez-faire policies with respect to international trade in order to pursue government-directed strategies of industrialization. Abandonment of free trade always means that private firms and consumers no longer base their economic decisions on world prices of goods but, rather, on distorted domestic prices that alter production and consumption decisions. For example, imposition of a tariff on automobile imports raises the domestic price of automobiles in comparison with other goods in the economy. The higher relative price of automobiles has two effects: first, consumers purchase fewer automobiles because of the higher price, relative to other goods they can buy; and, second, domestic production of automobiles increases in response to the higher selling price while domestic production of other goods falls, as labor and physical capital shift away from the other sectors and toward the automotive sector.