Will Latin America make the changes necessary to achieve its full economic potential? (You can read this article in Spanish here.)
May 17, 2012 - 12:00 am
No wonder so many people are bullish on Latin America: Countries with massive amounts of raw materials have achieved the economic and financial stability that long eluded them. Last year, the president of the Inter-American Development Bank, Luis Alberto Moreno, published a book titled The Decade of Latin America and the Caribbean. China has been flooding the region with investment, and India is starting to catch up. According to the Congressional Research Service, U.S. trade with Latin America grew at a faster rate (82 percent) than U.S. trade with Asia (72 percent) between 1998 and 2009. Looking ahead, Brazil will benefit enormously from its recent discovery of enormous new offshore oil deposits; Colombia has been included in the CIVETS bloc of emerging-market economies; and Panama is in the process of completing a $5.25 billion expansion of its famous canal, which has been described as a “game changer.”
Now for the bad news: Latin America’s overall competitiveness is still hampered by inefficient tax codes, cumbersome regulations, shoddy infrastructure, poor education systems, rampant corruption, and high crime rates. Many countries are still way too dependent on commodities, which tends to increase economic and fiscal volatility. Goldman Sachs economist Alberto Ramos put it well last year: “This definitely could be the Latin American decade — if policymakers seize the opportunity to adopt longstanding structural reforms geared to increase productivity, diversify the economic base, and boost real GDP growth.”
In other words, the region has great potential, but nothing is guaranteed. Thus far in the 21st century, economic and political reformers have been winning key ideological battles in most of the major Latin American countries. (Chávez and his fellow leftist autocrats are, thankfully, outliers.) But the region is still lagging on critical reforms, and the global economy gets more competitive every day. Now is the time for bold, far-reaching leadership.
You can read this article in Spanish here.