By: Staff Writer
September 12, 2024
A United Nations Economic Commission for Latin America and the Caribbean (ECLAC) report said that the Latin American and Caribbean (LAC) region is “mired in three traps: an inability to grow; high inequality, with low mobility and cohesion; and low institutional capacity and ineffective governance.”
This, according to the ECLAC’s “Panorama of Productive Development Policies in Latin America and the Caribbean, 2024: How can the region advance the great productive transformation it needs?” report as the LAC comes to grips with having to make gradual adjustments to boost growth.
Among its main findings, the document indicates that the efforts the region has been making on productive development policies are marginal in light of the productivity challenge it faces and in light of what other countries are doing in this area. The countries analyzed in the Panorama allocate public resources equivalent to between 0.2 percent and 1.2 percent of GDP in PDPs. These figures are very low compared with the 3.5 percent that some countries belonging to the Organisation for Economic Co-operation and Development (OECD) are estimated to invest.
The report also said: “The numbers on the low-growth trap speak volumes: in the 10 years from 2014 to 2023, the region grew at an annual average rate of just 0.9 percent —less than the two percent recorded in the lost decade of the 1980s— meaning that the region rounded off a decade that was even more “lost” than the first. The question now is what needs to be done to avoid a third lost decade and how to do it.
“International experience shows that productive development policies are the main instrument for fostering higher, sustained, inclusive and sustainable growth. It goes without saying that an enabling macroeconomic environment is also essential, but while macroeconomic stability is a necessary condition, it does not suffice.
“Productive development policies are the tools that can be used to raise investment rates, increase productivity, focus on sectors that drive growth, train human resources to meet the needs of driving sectors, develop solid business ecosystems, remove obstacles and bottlenecks, and make course corrections in response to the changing scenarios of the global economy and geopolitics.
“ECLAC is recommending that all this be done in keeping with a new approach to productive development policies that differs substantially from what has hitherto been referred to as “industrial policies.”
The report also said: “The region has failed to find a steady path to economic growth. First, it lags far behind other regions in terms of investment, recording the lowest levels worldwide. Second, and perhaps more importantly, its productivity has stagnated, and even declined, in recent decades.
“As explained in detail in Economic Survey of Latin America and the Caribbean, 2024, this low-growth trap is also weighing heavily on the capacity to create good-quality jobs and to sustain dynamic labour markets.”