Economic progress slowdown

Latin American economies have seen two decades of substantial economic and social progress. Yet, with less favourable external conditions, and a slowdown in growth, how will we sustain gains in inclusion of the last decades. Continued progress towards greater equity and productivity enhancing reforms will be critical to reviving growth in the region.

The commodity boom fuelled by high growth in China, together with monetary easing in the industrialized world following the 2008 financial crisis, resulted in an increase in foreign direct investment, favourable terms of trade and a decade of strong growth in Latin America. Coupled with successful social program, the region saw a fall in poverty at unprecedented rates, a growing middle-class and some reduction in inequality.

The new normal, with slower growth in China, and a reversal in the terms of trade has made the underlying weaknesses of Latin American economies, with negative growth in productivity, all the more salient. The region urgently needs to find new engines of inclusive growth, implement policies that reverse the fall in productivity, resulting in the diversification and sophistication of economies and their further integration into the global economy.