a new latin america, an old growth...
TRANSCRIPT
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A New Latin America, an Old Growth Problem?
Chief Economist OfficeLatin America and the Caribbean
Augusto de la Torre
31o Congreso Latinoamericano de Comercio Exterior
1-2 de junio de 2015San José, Costa Rica
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Where are we?Not in Kansas anymore
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The deceleration in LAC was unexpectedly large, abrupt, and more pronounced than in other emerging regions…
GDP Growth and Forecasts by Region
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…yet not uniformly distributed, hitting the commodity exporters much harder
GDP Growth Estimates and Forecasts
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The deceleration went in tandem with the big China and commodities cycle, yet in an amplified way
LAC, China, and U.S. Growth, and Commodities
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The amplification was due to a sharp contraction in investment, but employment effects are lagging
Sources: Authors’ calculations from national sources.
LAC: Investment Contribution to GDP Growth
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A New Latin America…
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After a decade of remarkable pro-poor growth…
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…and an unexpectedly large decline in income inequality…
Latin America: Changes in the Gini Index of Income Inequality2003–2012
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… Latin America finds itself with a deeply changed social structure
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1995 1997 1999 2001 2003 2005 2007 2009 2011
% d
e la
Pob
laci
ón
Clase Media ($10 a 50USD al día) Vulnerable ($4 a 10USD al día )
Pobre ($4USD al día)
Evolution of the Social Structure in Latin America
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Latin America is a middle income region on the way to a middle class region
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A new macro-financial immune system has helped Latin America overcome the “original sin”…
Currency/Monetary Policy
Banking/Prudential Policy
Debt/Fiscal Policy
Before Now
Weak/non credible/pro-cyclical
Fragile/unsound
Fragile/unviable/pro-cyclical
Credible/countercyclical
Sounder
More viable/less pro-cyclical
Latin America’s New Macro-Financial Immune System
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… and the macro-financial improvement was buttressed by a safer form of international financial integration…
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%19
90
1991
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% o
f GD
P
Net Equity Positions Net Debt Positions
LAC’s Asset Liability Positions vis-à-vis the Rest of the World
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… all of which moved Latin America out of recurrent macro-financial crises and into a better “asset class”
Source: Institutional Investor database
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Perc
ent
Incidence of Crises: Latin America and South East Asia
LAC SEA
Lost Decade Washington Consensus Golden Decade
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Inde
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Country Risk Ratings Simple Averages
LAC1 SEA MICs LAC-IT
Lost Decade Washington Consensus Golden Decade
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…with the same old growth problem?
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The reconfiguration of external factors is here to stay; hence, LAC as a whole is back to low growth
LAC: Average Growth by Period and Forecast
China’s growth settling around 7 percent.
G-7’s growth picking up, mainly due to the U.S.
Yet, uncertainty still looms: The new equilibrium of commodity
prices is hard to know Europe and Japan can drag G-7’s
growth Strong dollar appreciation could
undercut US growth momentum
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China and the commodity cycle explain most of the growth fluctuations in LAC but not the mean
Sources: Authors’ calculations from Bloomberg and national sources.
LAC’s Growth Largely Explained by External Factors
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Source: Maddison & WDI
Is LAC returning to the “hundred years of growth solitude” syndrome?
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Source: Maddison & WDI
Low growth has been a LAC-wide malady
0%
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1950
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GDP
Per C
apita
Rela
tive t
o US
Chile Panama
0%
5%
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45%
50%
1950
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GDP
Per C
apita
Rela
tive t
o US
Mexico Brazil Peru
Fluctuating
Semi-Converging
Nose Divers
Flat Liners
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Growth issue #1: firm dynamics – a growth stunting problem in formal firms explains the smallness syndrome
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1 to 4 5 to 10 10 to 19 20 to 29 30-39 40+
Núm
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de tr
abaj
ador
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Número de Trabajadores Promedio, por Edad de la Empresa
EAP4 ECA High Income LAC
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Growth issue #1: firm dynamics – innovation and growth deficit affects the entire spectrum of firms in LAC
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Den
sity
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USABrazil
Management Scores in Brazil and USA, circa 2010
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Growth issue #2: low quality of trade connections, which in part reflect a weak integration into GVCs
Notes: The directed links correspond to exports from one country to another as a percentage of the source country’s total exports. Source: LCRCE’s Flagship (2014) based on IMF’s DOTS.
Density Maps of Region-Centered Trade Networks, 2011
East Asia LAC
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Growth issue #3: LAC is a saving-constrained region
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as a
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DP
LAC1 SEA MICs
Saving Rates: LAC and the East Asian MICs
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Growth issue #3: low saving leads to low investment and low growth
Fuentes: UNSTAT y WDI.
Brechas del ahorro, tipo de cambio, crecimiento e inversión1990–2012
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Growth with equity issue #4: poor quality public education has long-term and persistent un-equalizing effects
Student Performance in PISA Tests and Inter-Generational Mobility, 2009
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Thank you!
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A new Latin America in a new global landscape for the real economy, where the South is no longer in the periphery…
Sources: Authors’ calculations based on IMF’s DOTS.
1980 2012
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