RESEARCH DEPARTMENT
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The IDB has researchers in many departments producing working papers on economic and social topics. Many of these documents constitute background research for the IDB’s flagship publication "Development in the Americas" prepared by the Research Department. In addition, the IDB finances and mentors studies conducted by other institutions in order to build knowledge and research capacity. All IDB working papers are peer reviewed and meet high editorial standards.

DIA 2021: TRUST - The Key to Social Cohesion and Growth in Latin America and the Caribbean

TRUST The Key to Social Cohesion and Growth in Latin America and the Caribbean

Edited by Philip Keefer and Carlos Scartascini

  • Trust is a tremendous opportunity for countries in Latin America and the Caribbean. By making trust a goal of public policy, and not simply its byproduct, countries can accelerate growth and employment. Decisions to invest, employ, produce, buy, or sell all depend on trust. The most productive, skilled, and innovative individuals have greater economic opportunities in high-trust societies. Greater trust will unleash growth.
  • Mistrust in the private sector is an obstacle to inclusive growth. It is well known that the business sector tends to distrust governments, and this hurts investment and productivity. A survey of thousands of export-oriented firms in the region reveals that distrust within firms is also an obstacle to investment and innovation.
  • Mistrust in the public sector is an obstacle to inclusive growth. Trust in governments is low in the region. Our study finds that the lack of trust makes it difficult for citizens to demand better public policies and services. A survey of thousands of public officials revealed that mistrust within public agencies, and their mistrust of citizens, reduces public sector capacity to serve citizen needs.
  • Restoring trust depends on information and empowerment. Citizens do not trust government when they are uninformed about what government is doing for them, and when they have little capacity to act together to hold government accountable. Firms do not trust each other when they can do little about opportunistic behavior. Governments should inform and empower to restore trust.

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2021 LATIN AMERICAN AND CARIBBEAN MACROECONOMIC REPORT: Opportunities for Stronger and Sustainable Postpandemic Growth

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Coordinated by Eduardo Cavallo and Andrew Powell

  • Latin America and the Caribbean was hard hit by COVID-19. The 7.4% loss of GDP was the largest on record in a single year, 26 million jobs were lost and (extreme and moderate) poverty is expected to rise by about 5 percentage points of the population. Growth in 2021 could be as low as 0.8% if vaccine roll-out is delayed or mutations prove to be vaccine resistant. But in a positive scenario of higher world growth, the region could grow as much as 5.2%. In a central scenario growth would be around 4.1%.

  • The average fiscal package to address the crisis was 8.5% of GDP and deficits increased by an average of 5.3% of GDP in 2020. Public debt increased from 58% of GDP in 2019 to 72% in 2020 and could continue to rise to 76% by 2023. However, the trajectory is highly dependent on growth and fiscal policy.

  • Governments should take action to ensure fiscal, monetary, and financial sustainability. They should also implement a set of urgent reforms to improve fiscal outcomes and boost growth by assisting viable firms, helping workers find formal jobs in the face of reallocation, improving connectivity, implementing a plan towards faster digitalization, and investing in sustainable infrastructure. These measures will help boost productivity, spur growth, and achieve ambitious climate goals.

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LATEST BLOG POSTS

Building Trust for Social Cohesion and Growth in Latin America and the Caribbean
Building Trust for Social Cohesion and Growth in Latin America and the Caribbean

It would always get a laugh from readers of Peanuts. Lucy would hold the football for Charlie Brown to kick. Then she would pull it back at the last minute and send him flying onto his back. The gag, repeated over and over throughout the years, was funny because of Charlie’s absurdly trusting behavior. Having […]

The post Building Trust for Social Cohesion and Growth in Latin America and the Caribbean appeared first on Ideas Matter.

Another Year of Living Dangerously?
Another Year of Living Dangerously?

The last two years have been a roller coaster in terms of economic performance in Latin America and the Caribbean. As detailed in the 2021 Latin American and Caribbean Macroeconomic Report, the 7% loss in GDP in 2020 was the worst recession in a single year suffered by the region since the struggles for independence […]

The post Another Year of Living Dangerously? appeared first on Ideas Matter.

Tracking the Health of Democracies During the Pandemic
Tracking the Health of Democracies During the Pandemic

Nearly two years into the coronavirus pandemic, electoral democracy continued to do its work at a steady, if sometimes turbulent, pace in the countries of the Latin America and Caribbean region. Amid the pandemic-induced health crisis and economic downturn, the region witnessed about 25 national-level elections or referenda. Public support for democracy in the region […]

The post Tracking the Health of Democracies During the Pandemic appeared first on Ideas Matter.

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