The Era of Markets was characterized by the global ascendancy of market economies. During this period, rapid economic growth in China, averaging nearly 10%, along with growth in India and some Southeast Asian nations, shifted global GDP growth towards lower and middle-income economies. However, advanced economies saw their productivity boom slow down in the mid-2000s. This era also experienced an unprecedented increase in household, corporate, and government debt, with advanced economies reaching the highest debt levels since World War II. With the onset of a new era marked by inflation and rising interest rates, there are concerns about the global financial balance sheet's vulnerability, underscoring the need for accelerated productivity growth.
Latin America is showing signs of recovery from the economic crisis, with improvements in consumption, employment, and overall economic activity surpassing pre-crisis levels. However, high inflation persists, despite the region's central banks raising interest rates more quickly and aggressively than in many advanced economies. The crisis also led to public debt in Latin America exceeding 70% of GDP, potentially hindering future growth and raising questions about debt sustainability, especially if economic conditions worsen. Additionally, ongoing monetary tightening in the U.S. could negatively impact Latin American economies, particularly given that many governments and corporations in the region have significant debt in U.S. dollars, making them vulnerable to exchange rate fluctuations and the strengthening of the U.S. dollar.
Since the early 1980s, Latin America's annual productivity growth has averaged only 0.4%, about a fifth of the average in other developing economies. While comparable economies in Asia and Eastern Europe have experienced rapid economic growth per capita, Latin America has lagged behind. The region's corporate landscape is also a contributing factor, with a divide between large, established firms and a multitude of small, often informal, and unproductive businesses, lacking a robust presence of dynamic midsize companies. Access to capital for growth is a significant challenge, especially for midsize firms, with about 30% reporting finance as a major constraint. Despite a significant increase in private capital investment between 2015 and 2022, future investment trends remain uncertain due to tightening global economic conditions and shifting investor risk appetites.
To enhance its prospects, Latin America must address its low productivity growth, particularly as the demographic dividend that historically drove growth begins to diminish. In other emerging markets, factors like domestic investment, openness to foreign capital, integration with global export markets, and a business environment that promotes competition and the growth of large companies have been crucial for outperformance. As Latin American economies navigate current challenges, identifying and implementing strategies to boost productivity and achieve economic outperformance will be essential.
Today's world faces a myriad of daunting challenges, such as slowing economic growth, rising inflation, energy security concerns, political unrest, and strains on social cohesion. Despite these challenges, there are reasons to be hopeful.
Looking back, the postwar era has seen remarkable transformations despite intermittent disruptions. A new global interconnectedness has emerged, with over half of the world's population now using mobile phones and the internet. By 2019, 53% of people worldwide were living on more than $6.85 per day, as defined by the World Bank's highest poverty threshold. Additionally, more than half of the global GDP growth has been contributed by low- and middle-income countries.
Latin America has benefited from these global shifts but has yet to reach its full potential. The region boasts significant assets, including a large, youthful population, vast mineral resources, abundant energy supplies, and rich biodiversity. However, it has often struggled to fully leverage these strengths. Various factors have hindered its development, such as lower levels of human capital, an underdeveloped financial sector, insufficient infrastructure investment, weaker public institutions, and governance. While these issues aren't new, the potential onset of a new era underscores the urgency of addressing them.
The question remains whether Latin America can harness its collective and individual strengths to not only navigate the current challenges but also thrive in the emerging era. Key to this will be the region's ability to overcome its fragmentation and work towards shared objectives, such as setting integration goals, undertaking joint infrastructure projects, and strengthening regional institutions.
The upcoming era represents a pivotal moment for Latin America. Managed effectively, this period could leverage the region's vast resources, crucial for new sources of energy transition, driving investment in infrastructure and human capital, fostering technology transfer, and sparking innovation. Globalization shifts could enhance Latin America's connections to finance, markets, and international corporations. The youthful population presents opportunities for growth and new approaches. A positive cycle of investment and innovation could increase productivity, raise private and public incomes, and build the necessary capital, both human and material, for further growth. This might allow Latin America to mirror the economic successes seen in other high-performing middle-income regions. Conversely, mismanaging this transition could lead to increased inequality, heightened social discord, and economic stagnation.
세계를 읽는 눈 - 뉴스네이션
저작권자 ⓒ 뉴스네이션, 무단 전재 및 재배포 금지