page_title: Latin American economy
section_title: The development of the colonial economy
hierarchical_section_title: Latin American economy / Colonial era and Independence (ca. 1500–1850) / The development of the colonial economy
caption_attribution_description: Acuarela del siglo XVIII, sobre obraje en el virreinato del Peru
context_page_description: Latin America as a region has multiple nation-states, with varying levels of economic complexity. The Latin American economy is an export-based economy consisting of individual countries in the geographical regions of North America, Central America, South America, and the Caribbean. The socioeconomic patterns of what is now called Latin America were set in the colonial era when the region was controlled by the Spanish and Portuguese empires. Up until independence in the early nineteenth century, colonial Latin American regional economies thrived and worked things out. Many parts of the region had favorable factor endowments of deposits of precious metals, mainly silver, or tropical climatic conditions and locations near coasts that allowed for the development of cane sugar plantations. In the nineteenth century following independence, many economies of Latin America declined. In the late nineteenth century, much of Latin America was integrated into the world economy as an exporter of commodities.
context_section_description: In Spanish America, the initial economy was one based on the tribute and labor of settled indigenous populations that were redirected to the small Spanish sector. But as the Spanish population grew and settled in newly founded Spanish cities, enterprises were created to supply those urban populations with foodstuffs and other necessities. This meant the development of agricultural enterprises and cattle and sheep ranches near cities, so that the development of the rural economy was closely tied to the urban centers.
  A major factor in the development of the colonial economy and its integration into the emerging global economy was the difficulty in transportation. There were no navigable rivers to provide cheap transportation and few roads, meaning that pack animals were used extensively, particularly sure-footed mules loaded with goods. Getting goods to markets or ports generally involved mule trains.
  There were other agricultural export commodities during this early period were cochineal, a color-fast red dye made from the bodies of insects growing on nopal cactuses in Mexico; cacao, a tropical product cultivated in the prehispanic era in central Mexico and Central America, in a region now called Mesoamerica; indigo, cultivated in Central America; vanilla, cultivated in tropical regions of Mexico and Central America. Production was in the hands of a wealthy few, while the labor force was poor and indigenous. In regions with no major indigenous populations or exploitable mineral resources, a pastoral ranching economy developed.
  The environmental impact of economic activity, including the Columbian Exchange have become subjects for research in recent years. The importation of sheep damaged the environment, since their grazing grass down to the roots prevented its regeneration. Cattle, sheep, horses, and donkeys imported from Europe and proliferated on haciendas and ranches in regions of sparse human settlement, and contributed to the development of regional economies. Cattle and sheep were used for food as well as leather, tallow, wool, and other products. Mules were vital to transporting goods and people, especially since roads were unpaved and virtually impassable during the rainy season. A few large estate owners derived wealth from economies of scale and made their profits from supplying the local and regional economies, but the majority of the rural population was poor.
caption: A Peruvian textile workshop or obraje.
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