NCPA - National Center for Policy Analysis

Latin American Woes

July 29, 2002

In the early 1990s, Latin American countries opened their economies to world markets and sold off many state-run industries. Leaders hoped that these reforms would bring prosperity. However, researchers say that these reforms are not bearing fruit as predicted.

Economic growth rates are still low:

  • In Latin American countries, the average annual growth rate in gross domestic product (GDP) in the 1990s was 3 percent.
  • While this growth rate was higher than the 1980s growth rate of 2 percent, it is still much lower than the growth rate of 6 percent in the 1970s.
  • Inflation-adjusted earnings grew slightly by 1992, but dropped back to their 1990 levels by 2000.

Additionally, increasing poverty is hampering economic progress:

  • The share of the population living in poverty increased more than 3 percentage points over the course of two decades.
  • The number of persons in the region living in poverty increased approximately 5.5 percent between 1990 and 1999, from 200 million to 211 million people.
  • Likewise the number of households considered poor rose 5 percent, increasing from 39 million households at the stare of the decade to 41 million at the end.

There are some positive signs however. Hyperinflation, a common epidemic in the 1980s, is no longer occurring. Also, the poverty growth of 6 percent is less than the population growth of 16 percent.

Researchers say that further institutional reforms are needed. However, institutional reforms, like restructuring legal codes, are far more difficult to implement than selling off nationalized industries.

Source: Elizabeth McQuerry, Coordinator of the Latin America Research Group, "In Search of Better Reform in Latin America," EconSouth, Federal Reserve Bank of Atlanta, Second Quarter 2002.

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