Latin America has come an unimaginably long way in the past 20 years, leaving its past of coups, revolutions and economic boom-and-bust firmly behind it.

Now, with prices for commodities fuelling strong economic growth, Luis Alberto Moreno, president of the Inter-American Development Bank sees the region standing on the threshold of a historic opportunity.

f Latin America can double regional GDP by 2025, average income would also double and the poverty level would be slashed by two-thirds, Moreno says. With nearly three-quarters of the population then middle class, many of Latin America’s searing social inequalities will be eliminated.

To do that, the IDB reckons sustained growth of 4.8 per cent a year is needed, a goal “entirely within reach” in Moreno’s view, considering Latin America has achieved that rate on average in the last seven years, with exception of 2009 when the world slid into recession. Nonethelss, “the challenge, of course, is to keep it up for 15 years”.

How is that possible? Well, says Moreno, in Buenos Aires to present his new book – The Decade of Latin America and the Caribbean – a Real Opportunity – by clearing the following five obstacles:

1. Boost productivity. It’s not about investing more, it’s about making the service sector (including transport, health, retail), which provides about 70 per cent of the jobs in the region, more efficient, taking advantage of demand for the raw materials in which the region abounds to finance changes that make the sector “competitive in services and industries based on knowledge”. And reduce the shadowy informal sector.

2. Improve the quality of education. Again, it’s not about investing more – Mexico, Brazil and Argentina already invest quite a lot. It’s about revolutionising teacher training and finding ways to transform the standards in schools and universities. Latin America should also triple investment in research and development to keep competitive with other emerging markets.

3. Invest 6 per cent of Latin America’s GDP in infrastructure to make up for more than a decade of falling spending, logistical costs that can be almost four times higher than in OECD countries, and to withstand increasingly frequent extreme climate events, like floods that damage roads or droughts that impair hydroelectric generation capacity.

4. Put fighting violence and crime to the top of the political agenda. It’s already citizens’ No. 1 concern. “It’s time to recognise we have a serious problem,” says Moreno. Learn from policies that have borne fruit elsewhere in the region.

5. Don’t neglect macroeconomic policy. The current advantageous conditions for commodities do not eliminate the risk of strong price fluctuations and crises in other regions can interrupt capital flows. So establish stabilisation funds that would cushion external shocks, fund the increases in public spending needed to boost productivity and ease pressures on exchange rates and Dutch Disease.

Nothing new there, acknowledges Moreno. “The novelty is the conviction that none of these obstacles is sufficiently great to prevent us from reaching the goal of doubling our production in a little over a decade,” he says.

“It is a new vision for a renewed Latin America … a region which has learned from its mistakes and errors and is now ready to take advantage of its opportunities and fulfil its promise.”


Source: http://www.tribeca.com.co/s-blog/colombias-latest-triumph-investment-grade-rating/5/