Are the golden years for Latin America over?
Ignacio Munyo, Ernesto Talvi, 7 November 2013
In recent years, the growth rates of Latin American countries have been cooling-off in comparison to the period of 2004-08. This column argues that the cooling-off is not due to a change in external factors because these have remained favourable. Persistent economic growth can be achieved by internal transformations. It cannot be sustained solely by the external conditions.
Latin American growth is cooling –off sharply.
Topics: Development, Global economy
Tags: economic growth, Latin America
Sustaining trade reform: Institutional lessons from Peru and Argentina
Elías A. Baracat, J. Michael Finger, Julio J. Nogués, Raúl León Thorne, 28 October 2013
Trade reforms must be durable if countries are to reap the benefits of international specialisation and trade. Whereas Peru has sustained the reforms it carried out in the 1990s, Argentina has introduced multiple trade restrictions in recent years. This column argues that Peru’s success is due to two factors. First, Peruvian trade reform was part of a broader reform effort. Second, by highlighting the success of Asian countries and negotiating bilateral agreements, Peru’s political leaders fostered a positive vision of Peru’s role in the world economy.
Beyond removing restrictions, trade reform in Latin American in the 1980s and 1990s was also an attempt to reform the culture of policy management, and in some countries to introduce an optimistic, ‘Asian’ perspective into trade politics. In Peru, reforms have been sustained over several changes of president.
Topics: Institutions and economics, International trade
Tags: Argentina, Latin America, Peru, reform, trade liberalisation, WTO
Who benefits from aid for trade?
Philipp Hühne, Birgit Meyer, Peter Nunnenkamp, 31 July 2013
One of the few areas where multilateral trade talks are making progress is the so-called Aid-for-Trade Initiative designed to remove frictional barriers to trade such as in transportation, communication and energy infrastructure. This column discusses research suggesting that both donors and recipients benefit from the aid. Aid-for-Trade, however, seems to best promote the exports of middle-income countries rather than, for instance, sub-Saharan African ones.
Donors are widely believed to use aid as a means to foster their own commercial interest (e.g., Berthélemy 2006, Hoeffler and Outram 2011).
Topics: Development, International trade
Tags: Africa, aid, East Asia, Latin America
Four decades of terms-of-trade booms
Gustavo Adler, Nicolas Magud, 4 July 2013
Commodity exporters have been both blessed and cursed by the boom-and-bust nature of commodity-price and demand swings. This column presents a new metric that computes the additional income arising from changes in the real purchasing value of output as a result of changes in relative prices. Focusing on Latin America, it’s clear that although its recent terms-of-trade boom is of similar magnitude to that seen in the 1970s, the associated income windfall has been much larger. The current weakening of external current-account balances in Latin America – even if driven by higher domestic investment – warrants close monitoring.
Throughout history, commodity exporters have been blessed and cursed by the boom-and-bust nature of commodity-price and demand swings (see Spatafora and Tytell 2009).
Topics: International finance, International trade
Tags: boom and bust, commodities, current-account balance, Latin America
Save more to improve infrastructure in Latin America and the Caribbean
Eduardo Cavallo, 3 April 2013
Latin America and the Caribbean have less infrastructure than the rest of the world. What they have is also of much poorer quality. This column argues that to reap the rewards of good infrastructure, Latin American and Caribbean countries must increase both investment and saving over the long-term by creating institutional capacity, strengthening the rule of law, and building stable macroeconomic-policy frameworks. It won’t be easy.
Saving and investment, like the chicken and the egg, involve circular causality. But regardless of causality, there is no doubt that Latin America and the Caribbean need more of both.
That the region has an infrastructure problem hardly requires an explanation:
Tags: Caribbean, investment, Latin America, savings
The trend reversal in income inequality and returns to education: How bad is this good news for Latin America?
Augusto de la Torre, Julián Messina, 7 March 2013
The last decade has seen unprecedented economic and social achievements in Latin America. This column investigates the relationship between changes in the labour market and the drop in income inequality across the continent. There is certainly room for more research to help us better understand Latin America’s spectacular decline in income inequality, but what is clear is that the good news is tempered by the fact that the specialisation of the region’s economies are relatively low in skill intensity and therefore productivity.
Latin America witnessed unprecedented economic and social achievements during the last decade. In particular, the year 2003 appears as an important inflexion point for the region’s economic history, a point that we have highlighted in several World Bank publications1.
Topics: Labour markets
Tags: education, income inequality, Latin America
Why scarce small and medium enterprise financing hinders growth in Latin America: A role for public policies
Rolando Avendaño, Niels Boehm, Elisa Calza, 27 January 2013
Small and medium-sized enterprises provide the vast majority of employment in developing countries and are keystones in the productive structures of emerging economies. This column argues that the growth of such firms is being hindered by scarce financing. Looking at Latin America, it is clear that public financial institutions are increasingly important in meeting credit demands. If emerging economies want to see long-term growth, there needs to be a comprehensive approach to reducing the ‘traditional’ barriers to small and medium enterprise financing.
Small and medium enterprises represent a significant share of emerging economies’ business fabric. Nevertheless, they continue to face multiple challenges in meeting their financing needs. Public financial institutions have come to play an active role in addressing these financing gaps through new operational mechanisms and adapted instruments.
Tags: Finance, Latin America, SMEs
Monetary policy in Latin America: Where are we going?
Christian Daude, 10 December 2012
Latin American central banks are facing new challenges in the form of unprecedented levels of uncertainty and exchange rate appreciation pressures. This column, focusing on Brazil, Chile, Colombia, Peru and Mexico, argues that there is an overestimation of the potential output in several Latin American economies, a lack of an explicit policy direction from central banks, and lacklustre frameworks for macroprudential policy. Although inflation targeting has served countries in Latin America well, significant risks remain.
Inflation targeting has served countries in Latin America well . They have achieved macroeconomic stability by reducing inflation and the pass-through of external shocks such as oil price and exchange rate fluctuations (cf. Mishkin and Schmidt-Hebbel 2007).
Topics: Macroeconomic policy, Monetary policy
Tags: Brazil, Central Banks, Chile, Colombia, foreign exchange, inflation targeting, Latin America, Mexico, Peru
Coping with financial crises: Latin American answers to European questions
Eduardo Cavallo, Eduardo Fernandez-Arias, 17 October 2012
The Eurozone body politic seems to be slowly learning the lessons for crisis management. This column argues that Latin America’s decades of financial crisis can provide key insights for Europe.
Many peripheral Eurozone countries are suffering from financial and competitiveness problems reminiscent of previous Latin American challenges. The analogy has been noticed many times.
Topics: Global crisis
Tags: Eurozone crisis, Latin America, moral hazard
Fiscal policy in Latin America: How much room for manoeuvre?
Christian Daude, Ángel Melguizo, 11 September 2012
Latin American economies performed remarkably well during the crisis – and the years before. This column compares the fiscal policies in the region with those of advanced economies and discusses the factors behind the differences, before outlining some areas for policy reform.
Latin America and the Caribbean (LAC) continue to show a relatively strong economic performance despite the current slowdown in economic growth – mainly due to the Eurozone crisis and China’s slower growth.
Topics: Development, Macroeconomic policy
Tags: fiscal policy, Latin America