Halting Latin America’s Economic Slide
Economic growth in Latin America has decelerated, living standards have stagnated, and a return to poverty is a real possibility for much of the region’s emerging middle class. To avoid this worrisome scenario, the region urgently needs to increase investment in three priority areas.
BOGOTÁ – “Nobody’s backyard: The rise of Latin America” was the headline on the cover of The Economist on September 11, 2010. Inside was a special report that presented an optimistic view of the region’s future. And little wonder, given that high commodity prices were enabling most Latin American countries to expand social programs and significantly reduce poverty and inequality.
Governments across the region managed to improve living standards, regardless of whether they were led by left-leaning presidents such as Luiz Inácio Lula da Silva in Brazil and Néstor Kirchner in Argentina, or by those on the right such as President Álvaro Uribe in Colombia. China’s rapid growth and rising demand for Latin America’s minerals, soybeans, and oil created jobs and boosted tax revenues. In addition, quantitative easing by central banks in developed economies boosted global liquidity, making large amounts of capital available for investment.
But those days are long gone. Today, Latin America is at a crossroads. Economic growth has decelerated, living standards have stagnated, and the region’s social progress is at risk. The emerging middle class is now vulnerable, and a return to poverty is a real possibility for many. To avoid this worrisome scenario, Latin America urgently needs to increase investment in infrastructure, technology, and human capital.