Latin America 2040: Breaking Away from Complacency

By Alexa Millinger
March 8, 2011

Despite Latin America’s recent rising growth rate, the region is still on par with the rapidly growing economies of East Asia said Harinder Kohli, president and CEO of the Centennial Group. Kohli and Dialogue senior visiting fellow Claudio Loser, editors of the recently released book Latin America 2040 – Breaking Away from Complacency: An Agenda for Resurgence, discussed the economic challenges facing Latin America and their  recommendations for the region’s future during a March 8 event at the Inter-American Dialogue.

Latin America 2040 encourages governments in the region to pursue more rapid economic growth and a faster reduction in disparities during the next three decades in order to avoid economic, social and political upheavals.  Expanding on these points, Kohli argued that most of Latin America is stuck in the “middle income trap,” meaning that the region experienced a period of accelerated growth and has since remained relatively stagnant after reaching a moderate level of development. The middle income trap leaves regions like Latin America “too rich to compete with poor countries and too poor to compete with rich countries.”

Kohli also discussed the region’s persistent inequality, which he called one of the most threatening problems facing Latin America. He added that the region has “the highest disparities and inequities of anywhere in the world.” These disparities, together with stagnant productivity, low savings and investment, and poor infrastructure, have a significant impact on society and may attribute to increased crime and violence.

At the same time, Kohli indentified a number of strengths possessed by the region that could be useful in stimulating further growth, including abundant natural resources, proximity to large markets, and historical economic ties to the US and Europe.

Loser, who is also president of the Centennial Group’s Latin America division, told the audience that “Latin America may be growing now at a rapid rate, but investment and savings is among the lowest in the world.” Capital has increased in the region, he said, but not productivity. Loser identified “three pillars” of focus for future sustainable growth: greater social inclusion, higher productivity and enhanced competition and openness. Loser also cited the need to bolster education reform efforts.

Sergio Bitar, a former Chilean government minister and visiting senior fellow at the Inter-American Dialogue, participated in the panel as a commentator. He followed Kohli and Loser by citing the lack of local groups in Latin America that engage in long-term policy strategizing as a hindrance to adequate forward planning, and said that the region’s success would require cultural change in addition to policy reform.

In response to an audience question as to whether it would be more appropriate for Latin America to look to a relatively successful and progressive country like Chile as an example rather than East Asia, Bitar acknowledged that despite being proud of what Chile has achieved, “in the same amount of time, [East Asian countries] have achieved double, triple what we have.”