Structural Change

The commodity boom has led to an increase in the share of extractive industries, such as mining, oils and minerals, as well as basic agriculture, in Latin America’s GDP and export basket, but further diversification is needed to sustain growth.

High demand for raw inputs from a growing China resulting in an increase in prices represented a positive terms of trade shock to net commodity-exporting countries. Both the increase in price and less favourable conditions for other tradable sectors as investment was driven towards commodity production and exchange rates appreciated, resulted in concentration in less technologically advanced sectors.

As prices fall, large external imbalances have appeared with current account deficits increasing, fiscal imbalances growing with less government revenues from taxation and growth has stalled. Diversifying national economies and export baskets through policies that improve productivity has been identified as a priority for the region. The growth of new sectors, driven by innovation, science and technology, and entrepreneurship, together with productive and social inclusion policies that improve productivity and participation, is urgent in the region. Productive development policies delivering inclusive productivity rank high in the region’s agenda for growth and prosperity.