The authors discuss the relative importance of the livestock sector in South America, in developing countries and in countries world-wide. The development of animal health services is highlighted and the new challenges which these services must meet, with respect to the restructuring of international trade, are described. The economic impact of animal diseases and of disease control is evaluated by taking a regional approach and by analysing production systems. A classification of production systems is accompanied by case studies on the economics of animal health. Emphasis is placed on national control programmes, diseases which affect reproduction, parasitic diseases and mastitis, with particular reference to the livestock sector of Colombia. The authors suggest that integrated livestock development programmes include the management of animal health and production information. A change of attitude is also recommended with greater participation of those involved. The need to co-ordinate sustained research initiatives is stressed.