Latin America’s Current Slowdown and the Middle Income Trap

• In Event: The Political Economy of the Middle Income Trap

Abstract

This paper argues that the first decade of the 2000s represents an exceptional period in Latin America’s economic history. Between 2000 and 2010 Latin America registered an unprecedented period of economic growth in three decades. In addition the region was able to withstand some of the most damaging effects of the Global Financial Crisis (2007-2009), managed to recover swiftly from the impacts of the crisis, and rapidly regained pre-crisis growth rate levels. The paper sustains that this ‘golden’ period also represents a missed opportunity as Latin American governments and policy makers did not take advantage of the favorable conditions to implement structural changes in their economy to promote long-term growth and overcome the Middle Income Trap. To some extent this situation is reflected in the fact that many Latin American countries, mainly due to internal conditions, and political economy considerations are currently heading towards a long-term low growth plateau. Using a capabilities-based approach the paper identifies and examines the types of policies that are needed to boost growth in order to avoid getting stuck in the Middle Income Trap which is currently the main danger that Latin America is confronting.

Author

• Esteban R Pérez Caldentey, CEPAL. United Nations