Latin America’s Next Growth Challenge
Since 2003, Latin America’s economies have been thriving, with GDP, including estimates for 2006, up by 17% – an average annual growth rate of 4.3% and a 12% increase in per capita GDP. While impressive, this is only the second time in 25 years that Latin America experienced four consecutive years of positive economic growth. Will such good times continue?
This recent growth has been fueled by a strong boom in commodity prices, including not only energy inputs such as oil, gas and coal, but also metals, minerals, and agricultural products. Growing demand for raw materials, owing to sharply increased industrial growth in Asia, particularly China and India, has benefited the terms of trade of many Latin American countries, and this is not expected to end anytime soon.
Historically, fiscal profligacy tends to take hold at times like these, with windfall revenues wasted on extravagant public projects. But not this time – at least so far. In Latin America’s seven principal economies (Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela), which together account for almost 90% of regional GDP, annual economic growth averaged 6% in the third quarter of 2006, while industrial output was up by 8%. But their governments seem to be taking advantage of the bonanza to pay off pending external debt and increase their foreign reserves.
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one? Log in