Growth Challenges for Latin America

Ricardo Ffrench-Davis

No 27757 in World Bank Publications - Books from The World Bank Group

Abstract: Latin America faces the twin challenges of achieving economic growth and reducing extreme inequality. Notwithstanding the heterogeneity among Latin American countries (LACs), most of them exhibit both: (i) low average Gross Domestic Product (GDP) growth; and (ii) increased inequality during the 1980s. This long period includes the 'lost decade,' when outcomes in both variables were evidently negative. These negative trends have persisted since the early 1990s, in the period of intense reforms under the Washington consensus. The development gap (difference in GDP per capita or per worker between rich countries and LACs) and the equity gap have broadened in this period. The report evaluate: (a) the macroeconomic environment in which agents make their decisions (usually in LACs, under an economic activity operating significantly below potential GDP, with outlier macro-prices, and fluctuating aggregate demand); (b) features of financial reforms (usually intensive in short-term segments and weak financing of risk and long-term financing), and their implications for capital formation and the distribution of opportunities in the domestic economy; (c) features of trade reforms (intensive in resource-based exports but low total output of tradable); and (d) the distribution of productivities, which is closely linked to the narrow space granted for the development of small and medium enterprises (SMEs).

Keywords: Finance and Financial Sector Development-Access to Finance Finance and Financial Sector Development-Currencies and Exchange Rates Macroeconomics and Economic Growth-Economic Theory & Research Private Sector Development-Emerging Markets Macroeconomics and Economic Growth-Economic Growth Macroeconomics and Economic Growth-Economic Adjustment and Lending Macroeconomics and Economic Growth-Economic Policy; Institutions and Governance (search for similar items in EconPapers)
Date: 2009
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