Can Latin America Avoid Another Lost Decade?
As Latin America enters the 2020s, it must take steps to ensure that the next five years are not lost. Yes, the international context will make a difference. But the region’s governments have it within their power to improve economic performance significantly.
BOGOTÁ – In the 1980s, Latin America endured a debt crisis so severe that the entire decade was “lost” to poor economic performance. Since then, other economies – most notably, Japan – have endured their own “lost decades.” But, today, it is again Latin America that is facing difficulties. In fact, it has already lost five years.
Latin America has suffered through a half-decade of anemic growth for the second time since the 1980s, and its lowest-performing quinquennium since World War II. In the region’s previous lost half-decade, after the 1997 East Asian crisis, annual GDP growth averaged 1.2%. In 1980-1985 – the worst five years of the debt crisis – average growth amounted to 0.7%. Over the last five years, it reached a mere 0.4%.
This is partly the result of an unfavorable global environment, reflected in Latin America’s deteriorating terms of trade since 2014, the virtual stagnation of international trade overall, and two years of renewed financial turbulence in emerging economies. But other developing regions have faced the same external headwinds, and every one of them has outperformed Latin America, not only in the last five years, but since 1990 – a period during which annual GDP growth in the region averaged just 2.7%.