The Great Depression in Latin America heavily affected the region in the 1930s after Depression had spread globally since the stock market crash of 1929 on Wall Street.
The Great Depression saw the change in Latin America's governments, their economic policies and the nations' economic performance. It is characterised by the economic decline of the American and British economy, saw the economic declines of Latin American countries because they relied on Britain and America for investment in the region's economies and on their demand for the region's exports.
The rise in fascist governments was brought upon by nationalist desires during the Great Depression, as was demonstrated by the Vargas government in Brazil, which ruled from 1930 to 1945. The period further saw a shift in economic and government policies in Latin America, such as in Argentina, in efforts to adjust their economies to recover from the Depression. Latin American countries that were economically impacted by the Depression included Brazil, Cuba, Chile, Mexico, and Peru.
Background
The Great Depression, which followed the Wall Street Crash of 1929, badly affected the countries of Latin America.
Chile, Peru, and Bolivia were, according to a League of Nations report, the countries that were the worst hit by the Depression. The rise of fascism also became apparent in Latin America in the 1930s because of the Great Depression. Fascist governments were the result of a desire for nationalism, which was exploited by rulers like Getúlio Vargas of Brazil in propaganda. Haiti came out of the Great Depression as a fully-independent country since the United States ended the military occupation of the country in 1936.
Brazil was hit hard by the Depression. Between 1929 and 1932, coffee exports fell 50%. Foreign investment in the country was reduced to zero. To keep coffee prices from falling even more, the government in 1931 ordered the dumping of thousands of coffee sacks into the ocean. Entire coffee plantations had their production bought by the government and set on fire to reduce production and to keep prices from hitting rock bottom, which would have caused many bankruptcies. Sugar production became so cheap that many sugar mills in the country halted all production for years.
In other Latin American countries like Mexico, responses to the Depression also included to an increase in industrialization, which had begun during the 19th century.
Peru
Peru's economy, prior to the Depression, specialized in exports and relied on US loans to fund public finance. As a result, Peru's economy was affected by a decrease in export revenue during the Depression. The country's exports decreased in the early onset of the Depression by 72% between 1929 and 1932. Peru's exports were cut from US$132 million in 1929 to US$38 million in 1932.
Peru's imports also declined from US$76 million in 1929 to US$16 million in 1932.
The Depression also saw a decrease in employment in the sugar sector and mining. Field labor in sugar industry was 20,000 in 1932, a fall of 6,000 from 1928.
In the mining sector, blue-collar employment fell from 25,000 in 1929 to 13,000 in 1932 and white-collar employment from 3000 in 1929 to 1000 in 1932. The poor performance of exports and imports contributed to an unstable balance of payments, as was demonstrated by the Peruvian government's suspension of the payment of Peru's foreign debt in March 1931.
However, the impact of the Depression on trade levels lasted less than 10 years, as Peru's export of cotton, lead, and zinc was exported at encouraging prices, which had led to the return of the 1929 trade levels by 1937.
Mexico
Mexico's economy experienced a decline in the early onset of the great Depression because of its close ties with the US, which experienced an economic collapse after the Wall Street Crash in 1929.
The early effects of the Depression on Mexico were directly felt by the mining sector in which the overall export price index fell by 32% from 1929 to 1932. The real value of Mexican exports fell by 75%, that of outputs by 21%, and the external terms of trade fell by 50% between 1928 and 1932. The value of Mexican exports fell more than those of Brazil, where during that period, they declined by 44%, but less than those of Chile, whose exports fell by 83%.
However, one could argue a decline in demand for exports had a less severe impact on Mexico since other countries' exports made up a larger percentage of their GDP like in Chile. Exports made up only 12% of Mexico's GDP, much smaller than the proportions in Chile (30%) and Argentina (27%).