Productivity dropping and climate change are presenting significant challenges for the economic development in Latin America, according to a recent UN report.
The United Nations Economic Commission for Latin America and the Caribbean, or ECLAC, downgraded this year’s regional growth forecast to 1.8 percent, significantly lower than its previous projection of 2.1 percent, indicating the challenges and potential risks the region faces.
The ECLAC also reported a record-low growth rate of 0.9 percent last year, which is “lower than the 2.0 percent recorded in the ‘lost decade’ of the 1980s”, it said. It attributed the slowdown to high inflation, limited room for monetary policy to have an effect, an uncertain economic environment and relatively low employment rates.
“The ECLAC report discusses some significant challenges,” said Luis Ignacio Roman Morales, an economics professor at the Autonomous University of Nayarit in Mexico. “Not only are there productivity issues, but there are also implications from climate change. Export prices for Latin American products may also change too. As a result, the employment growth rate has been low.”
The report said Latin America and the Caribbean could face additional economic challenges because of weaker growth forecasts from its main trading partners.
Export sector
Santiago Bustelo, who holds a PhD in international politics from Fudan University in China, said one of the keys to demonstrating successful development and economic growth is having a strong export sector.
Asian countries such as China, Japan and South Korea “saw a big boost in growth that went hand in hand with building up a strong, competitive sector for exporting goods”, Bustelo told China Daily.
Chile and Israel, on the other hand, are examples of smaller countries with lower overall economic growth compared with China and South Korea, but which demonstrate highly competitive export sectors in industrial goods, commodities and technology, he said.
“South American countries can also develop strong export industries in these areas, which are fundamental for driving economic growth,” he said.
Despite the gloomy economic outlook, the ECLAC projected improved growth of 2.3 percent for Latin America and the Caribbean in 2025.
Bustelo emphasized the need for targeted policies to develop strong export sectors.
“The development of an export sector through targeted policies, both industrial and technological, as well as complementary macroeconomic policies that encourage private sector investment, along with public investment, is critical to ensuring satisfactory economic performance and sustained high growth over the medium and long run,” he said.
The writer is a freelance journalist for China Daily.
