In new book, Luis Alberto Moreno says long-term growth trends could enable the region to rapidly close the income gap if governments improve productivity, education and infrastructure
BUENOS AIRES, Argentina – The nations of Latin America and the Caribbean have an unprecedented opportunity to attain human development standards comparable to the industrialized world by 2025, Inter-American Development Bank President Luis Alberto Moreno said today.
Speaking at the launch of his new book, “The Decade of Latin America and the Caribbean: A real opportunity,” Moreno said that if the region sustains its current average growth rate, it could double its GDP within 14 years. The region’s average per capita income would also double shortly thereafter.
“Were we to achieve this, poverty in our region would drop from 32 percent to a little more than 10 percent of the population,” Moreno said. The middle class would expand to more than 500 million people, or 75 percent of the region’s total population. “This would allow us to close, at last, the terrible income gap that still persists in our societies,” Moreno added.
Moreno said that this target was “ambitious, but attainable” thanks to the convergence of two broad trends: Latin America’s significant progress over the last 20 years, and the accelerating shift toward “South-South” trade between emerging economies.
External factors such as surging commodity prices and inflows of foreign capital have fueled the region’s recent growth, Moreno said. However, he argued that in contrast to the short-lived economic booms of the previous century, the current outlook for Latin America reflects fundamental shifts in global trade flows that are likely to last for decades.
To take advantage of these favorable trends and sustain a growth, Moreno said the region will need to redouble its efforts to boost productivity, improve the quality education, increase investments in research, innovation and infrastructure, and prevent violent crime.
Moreno said policymakers must also strengthen macroeconomic policies to appropriately manage the risks associated to a tide of capital inflows and terms of trade gains, as well as to protect against adverse external shocks. He said measures such as “rainy-day” funds, which set aside a portion of income from commodity exports, can help to cushion such shocks while providing resources to finance investments in productivity and innovation.
Moreno acknowledged that these proposals are not new, but he argued that Latin America’s current prospects offer a chance to set more ambitious timelines for achieving them.
“What is new is the conviction that none of these obstacles is significant enough to prevent us from reaching the goal of doubling our GDP in little more than a decade,” Moreno said, “and the certainty that our region is capable of generating solutions based on our own experience and our own vision for the future.”
Moreno said an understandable concern with pressing problems such as violence and rising fuel prices tends to limit public awareness of the impressive gains that Latin America and the Caribbean have made in recent years. Between 1990 and 2010, despite numerous political and economic crises, the region doubled its average per capita GDP and dramatically reduced inflation and foreign debt. Social indicators in areas such as health and education also showed dramatic improvements, as did the coverage of basic services such as potable water and sanitation.
Over the past 20 years Latin America’s economic landscape has also been gradually transformed by growing intra-regional trade and commerce with Asia. The value of trade among the region’s countries increased 10-fold during this period, to $180 billion, and trade with Asia doubled as a proportion of all foreign commerce.
As a result, Moreno said Latin America and the Caribbean can now take advantage of long-term trends that should make it easier to finish the task of ensuring a decent standard of living for all citizens. “This is a new vision for a renewed Latin America,” he said.