UN Official: Region Has No Good Ideas on How to Address Ills

By Elisabeth Burgess
April 12, 2007

Event: A Conversation on Latin America's Economic and Social Challenges
Featuring: José Antonio Ocampo, United Nations' Undersecretary-General for Economic and Social Affairs

UN Official: Region Has No Good Ideas on How to Address Ills

By Elisabeth Burgess

WASHINGTON, DC—Latin America is not only failing to address widespread inequality and poverty, but also suffers from a lack of good economy policy ideas to remedy the situation, the United Nations' undersecretary general for economic and social affairs said Thursday.

"There are no ideas," for economic policy, lamented Jose Antonio Ocampo, speaking at a panel discussion hosted by the Inter-American Dialogue. "There is nothing in the agenda."

Efforts to make labor markets more flexible and support small- and medium-sized businesses are only benefiting the highest income groups in the country, he said. The rest are left behind by what he called a "vacuum" of good ideas.

Ocampo said it was "very good news" that Latin America as a region has experienced four consecutive years of economic growth, and he praised countries for commitments to maintain strong fiscal accounts and keep inflation under control. He noted, however, that the region's growth lags behind that of other emerging markets.

"We should be asking ourselves why we aren't growing seven, eight, or nine percent," said Ocampo, who in his native Colombia has held the highest posts in the ministries of finance, planning, and agriculture.

Latin America achieved a relative high of 5.9 percent growth in 2004, according to data from the UN's Economic Commission for Latin America and the Caribbean.

But "close to 50 percent of the current expansion is explained by external factors," such as such as high commodity prices, according to Ernesto Talvi, executive director of the Uruguay-based Center for the Study of Economic and Social Reality and a panelist at Thursday's event.

"Our core growth, or underlying growth, doesn't seem to be improving in any significant way," said Talvi.

A look at poverty levels makes the picture even bleaker. Although income per capita in the region has increased 10 percent since 1980, poverty levels have remained the same and income distribution "has deteriorated," said Ocampo, emphasizing the need to link economic policy with social policy [see chart above].

Ocampo identified several other economic weak spots, including poor export diversification compared to emerging Asia and the fact that, broadly speaking, commodity-exporting nations are the ones enjoying the best current account figures due to booming prices.

Perhaps surprisingly, among commodity-exporting countries, "the heterodox economies are doing better than the orthodox economies," Ocampo said. Those nations that are not pursuing orthodox economic policies—such as Venezuela, Argentina, and Bolivia—enjoy higher current account surpluses as a proportion of GDP than their orthodox counterparts—such as Chile, Colombia, and Peru—even with comparable terms of trade.

"Primary commodity producers are in fact enjoying the surplus, but the rest of the economy is ... borrowing heavily from the rest of the world at the tune of 4 percent of GDP," according to Talvi.

"If we scratch below the surface, we uncover serious vulnerabilities," he said. "The region is not taking appropriate steps to deal with them in an appropriate manner."