Latin America’s Weak Economic Recovery
With the right approach, Latin America, which has recorded just 0.5% average annual GDP growth during the last five years, could improve its economic prospects considerably, potentially avoiding another lost half-decade. The question is whether it will muster the political will to take the necessary steps.
BOGOTÁ – Latin America is reaching the end of its fifth consecutive year of anemic economic growth. From 2014 to 2018, annual GDP growth has averaged just 0.5%, slower than during the first five years of the Latin American debt crisis (1981-85) and the five that followed the 1997 Asian financial crisis (1998-2002). It is safe to say that Latin America has suffered a “lost half-decade.”
While a few small economies have achieved annual growth rates exceeding 4% – notably, Panama and the Dominican Republic, and, to a lesser extent, Bolivia and Paraguay – Latin America’s larger economies have struggled. Venezuela, in particular, has experienced not only the sharpest collapse of any Latin American economy in history, but also the most severe hyperinflation. (Five other Latin American economies have endured hyperinflation in the past.)
Then there is Argentina, which this year faced a currency crisis, a run on the peso, and double-digit inflation, and had to secure an International Monetary Fund bailout totaling more than $57 billion – the largest the IMF has ever disbursed – to help it shore up its finances. In the last five years, Brazil also underwent its deepest-ever recession, from which it is emerging very slowly. Mexico, for its part, has maintained a mediocre growth record for decades.