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Economic growth in Latin America, is it sustainable?

Despite positive economic growth within Latin America and a relatively smooth transition through the 2008 crisis, there are concerns about how this trend will continue.

“Previous periods of economic growth in the region have not been sustainable and several challenges to development policies remain: (i) a productive structure dependent on commodities and low-productivity sectors; (ii) exposure to the volatility of capital flows; and (iii) poverty and inequality. Agenda: Suramerica has analyzed these three issues separately in previous newsletters, but here we would like to point out that their combination might threaten the sustainability of economic growth if countries in the region do not take measures to cope with their negative impacts in the next five years.”

Implications from FORO:

“There are signals that these favorable conditions may change in the next two or three years, particularly with regards to commodity prices, higher inflation, exchange rate appreciation and financial bubbles. Yet it will take more than a half decade to carry out the reforms needed to strengthen domestic markets, increase productivity, and change the current structure of production and trade. In a turbulent international context, the factors underlying present progress could be the causes of the next economic crisis.”

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FORO December 2010, pages 3-4