Latin America's New Lost Decade
The region's economies, taken together, will be the worst-performing of the developing world as they emerge from the pandemic. Paradoxically, the best way to overcome Latin America’s ongoing lost decade may be to focus on issues that go beyond economic growth.
NEW YORK – In any other year but this one, economic growth in Latin America would give the region’s governments reason to boast. The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) estimates that GDP growth in 2021 will be around 6%, while the International Monetary Fund forecasts 6.3% growth. Unfortunately, even the more optimistic projection is insufficient to compensate for the -6.8% contraction the region suffered in 2020.
Latin America will be the worst-performing region of the developing world as it emerges from the pandemic. Due to the very weak growth in the five years prior to the COVID-19 pandemic, the region experienced a “lost half-decade.” Now, with the economic collapse of 2020, the limited recovery of 2021, and expected moderate growth for 2022 (2.9% according to ECLAC), it’s clear the region is in the midst of another lost decade of development. If 2023 is similar to 2022, average annual growth for the 2014-23 period could be just 0.7% a year – worse than the 1.4% annual rate during the lost decade of the 1980s.
The region’s economic recovery from the COVID-19 crisis also has been very uneven. When 2020 and 2021 are considered together, Chile and Colombia are the two best-performing larger countries; both are expected to exceed their pre-pandemic levels of economic activity. Brazil and Peru also may do so, but Brazil’s GDP contracted in the second and third quarters. Argentina and Mexico will have a lower level of economic activity than in 2019, and the economic collapse in Venezuela has continued. Among the smaller economies, only the Dominican Republic, Guatemala, and Paraguay will show higher economic activity in 2021 than in 2019.