- Why Doesn’t Latin America Grow More, and What Can We Do About It?
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- by Velasco, Andrés
- In 2004, Latin America and the Caribbean grew 6 percent, the highest rate
since 1980. And the party is not over yet. In its most recent report dated
August 2005, the United Nations Economic Commission for Latin America
(ECLAC) forecasted that Latin America and the Caribbean will grow
4.3 percent in 2005. For 2006, ECLAC is forecasting 4 percent growth. If
these predictions come true, the region would complete 4 consecutive years of
growth, accumulating an increase of 10 percent in income per capita between
2003 and 2006. So after nearly a decade beginning with the Mexican crisis
of 1994, when talk of stagnation dominated the headlines, growth is back.
ECLAC is not alone in its optimism. Earlier, in its World Economic
Outlook dated April 2005, the International Monetary Fund had predicted
4.1 percent for Latin America in 2005, and 3.7 percent in 2006. The Fund
writes that “the strength of the recovery in Latin America has continued to
exceed expectations.” (p. 37)
That Latin America should be growing at a time of record high commodity
prices, record low international interest rates, and robust global demand,
is not surprising. What is surprising is that the region is not growing more in
this environment of the fastest world growth in 30 years. Indeed, according
to the same IMFWorld Economic Outlook, the region will post the slowest
average growth in 2005-06 of any developing region. Developing Asia will
grow by 7.4 and 7.1 in each of those two years, according to the Fund. Even
Africa, at 5.1 and 5.4 percent, will amply outgrow Latin America. And this
is even though recent Latin growth is overstated by the ongoing recoveries in
Argentina, Uruguay and Venezuela, countries that experienced large absolute
declines in output earlier this decade.
- Publication Type: WCFIA Working Paper
- Published Date: October 2005
- Field of Interest: International Economics
- Velasco, Andrés. "Why Doesn’t Latin America Grow More, and What Can We Do About It?" Working Paper 2008-0115, Weatherhead Center for International Affairs, Harvard University, October 2005.