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FOCUS: Latin America

Latin America’s potential: Some snapshots After performing strongly for almost a decade, many of Latin America’s countries slowed in 2015, with average growth in the region falling below that of OECD countries for the second consecutive year. How can the region recover its momentum?

0.04

Growth in Latin America, which was strong before the crisis,

0.02

started to ease from 2010. Loss of investment momentum is one of the key factors behind the recent slowdown. Investors’ expectations have deteriorated over the past few years, partly because changes in the global context led to subdued external

Slowing trend .+7NYV^[OPU3H[PU(TLYPJHHUKKLTHUKJVTWVULU[»Z JVU[YPI\[PVUHUU\HSNYV^[O

0.10 Net exports Investment

0.08 3.7%

0.06

2.0%

such as policy uncertainty and the passing of reform bills

0.4%

4.5%

0

3.7%

0.6% 1.1% - 0.6%

2.4% -0.8%

-1.0%

-1.4%

-1.9%

0.8%

3.2%

-0.02 -0.04

2010

conditions including softer global demand, lower commodity prices and tighter financial conditions. Also, domestic factors

Consumption GDP at market prices

2011

2012

2013

2014

Source: OECD (2016), Latin American Economic Outlook 2016: Towards a new partnership with China, OECD Publishing http://dx.doi.org/10.1787/888933291400

(notably on taxes) may have had an effect in some countries. The contribution of public investment was not strong enough to compensate for the retrenchment of the private component; actually, in some cases, it even reinforced it.

Evading the middle-income trap

Middle-income trap Latin America’s recent slowdown looks set to persist in the

.+7WLYJHWP[HPUZLSLJ[LK3H[PU(TLYPJHUHUKV[OLY LJVUVTPLZ<: 7\YJOHZPUN7V^LY7HYP[PLZ"ZLL:[H[SPUR MVYTVYLJV\U[YPLZ

medium term, a trend that reflects a slowing global economy

35 000

but also persistent regional weaknesses. These include low

30 000

productivity and weak investment growth as well as high levels of inequality–28% of people in Latin America live in

20 000

challenges, many of them risk getting stuck in the middle-

15 000

of growth and becoming unable to build on earlier success. Other economies, such as Korea and Spain, managed to escape the middle-income trap; some of Latin America’s economies, such as Chile, Uruguay and Argentina, have also done so, but most have not.

1980

1950

25 000

poverty. If the region’s economies do not confront these income trap–a phenomenon that sees countries hit a ceiling

2014

10 000 5 000 0

il ile ay ina uela Rica xico bia raz Peru m nt Ch rugu z ta e B M olo ge ne U C Ar Ve Cos

a

re

Ko

ain

Sp

Source: OECD (2016), Latin American Economic Outlook 2016: Towards a new partnership with China, OECD Publishing http://dx.doi.org/10.1787/888933291317

More data on page 94

OECD Yearbook 2016 © OECD 2016

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OECD Yearbook 2016  

Views and discussion, issued for the annual OECD Forum and Ministerial Council Meeting in May-June 2016, brought to you by the OECD Observer...

OECD Yearbook 2016  

Views and discussion, issued for the annual OECD Forum and Ministerial Council Meeting in May-June 2016, brought to you by the OECD Observer...