After nearly ten years of great economic performance thanks to its attractive commodity market, Latin America has lost its potential: economic growth is close to 0%, equality gains have slowed down, and the political landscape is being forced to change. Even though each nation in the region is different, all Latin American countries are currently facing a common economic climate. The graph below illustrates this poor performance.
This is represented as a constant decrease in the GDP over the last five years. On the other hand, other major emerging economies like China and India have maintained stable overall GDP growth over the years. This is in part thanks to increasing trade partnerships with countries around Europe and the Middle East.
Fixing a Continent
In Argentina, growing inequality and unprecedented macroeconomic change that occurred as a result of the unprofessional policy management of the previous administration has resulted in negative consequences for the country – an increase in unemployment in particular. Fortunately, this is now being slowly fixed by the new administration under Mauricio Marci.
For Brazil, 2016 saw one of the largest and most harmful recessions that the country had to go through in years. The country’s downturn was due to the political crisis and corruption the country had gone through. This paralysed policymaking and thereby left the government with limited possibilities to develop stability and growth. Moreover, this revolt caused an increasing lack of confidence from neighbouring countries.
The economic decline in Venezuela sped up in 2016 as a result of the constant fall in oil production, shortages of consumer goods and services, and increasing currency monitoring actions. This further increased the country’s inflation rate and therefore caused a broader deterioration of social conditions in Venezuela.
What Must Change in 2017?
First, inequality. The reason for this issue relates to historical conflicts between ethnic groups of European, indigenous and African origins respectively. This was reinforced in 2016 through the continuing division between the formal and informal sectors because of increasing economic instability. A collaborative interaction between these demographics would increase the efficient production and manufacturing of domestic products. Moreover, it would help expand the consumer market among the poorer classes of Latin America.
Second, education, where the continent suffers from a serious deficit. Weak quality of education continue to hold back the continent’s economy as future generations will find it more difficult to adapt to the new technological advancements in manufacturing and other sectors of the labour force. The adoption of highly successful systems of education from developed countries would be the first step towards solving this systemic problem. This strategy has proved to be successful in other developing countries like India and Georgia.
Third, the business climate in the most undeveloped Latin American regions, which exhibit continuing problems with inappropriate regulation, has constantly created big deficits in project development. Learning to develop and implement business models that have been successful in the construction of projects for important countries on the continent, like Uruguay or Colombia, would be a stepping stone for the better development of the poorest countries in Latin America like Honduras or El Salvador.
The Need for Commitment
The continuous economic downturn requires a constant commitment to maintain and further develop the most vulnerable classes within Latin America. Moreover, it is important to safeguard the gains made by citizens who manage to escalate from the poorer classes and become part of the middle class, which now represents 35% of the total Latin American continent.
Finally, helping countries get back to a healthy economic atmosphere for growth, and modernising social protection and healthcare systems would be key to maintaining the economic and social level of Latin American countries to a sustainable level of stability.