Rethinking Latin America’s Development Strategy

Mauricio Cárdenas

Data in this report was updated on April 27, 2010.


While Latin America performed relatively well in the context of the global economic crisis, the reality is that the region has a growth problem. As the region recovers from the crisis and GDP growth rates approach the 4-5 percent range, central banks are worrying about inflationary pressures and beginning to discuss increases in policy interest rates to moderate aggregate demand. What this suggests is that potential GDP growth is too low in a region where poverty and unemployment  are still  major problems.

The growth problem is not new to Latin America. According to the historical databases constructed by Maddison (2003), per-capita GDP growth in Latin America has been systematically below that of the U.S. since at least 1700 (the only exception is the 1871-1929 period, when growth rates were slightly higher in Latin America). For example, between 1980 and 2000, average income per capita growth was only 0.4 percent in Latin America compared to 2 percent in the U.S.

But the problem is not just in relation to the U.S. More worrisome is perhaps the evidence suggesting that the problem of economic divergence in Latin America relative to the rest of the world—with the only exception of Africa—has worsened in recent decades.

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