What good is growth? Latin America in 2014

By Chris Hershberger-Esh, MCC’s Context Analyst for Latin America and the Caribbean, based in Mexico City. 

As we roll into the New Year, some economists and commentators are projecting rosy forecasts for Latin America in 2014. Alexa L. McMahon, writing in The National Interest, asked, “2014: Is this Latin America’s big year?” Her answer is an emphatic “yes.”

The 1980s were unkind to Latin America. Surging drug violence, economic turmoil, and a staggering debt crisis all led to our southern neighbors’ “lost decade.” Yet since the 2000s, things have been looking—and going—up. In fact, thanks to its strong economic growth and growing international influence, 2014 has the potential to be Latin America’s best year yet.

Driven by the expanding economies of Brazil, Chile and especially Mexico, McMahon expects 2014 to be a breakout year in Latin America, with projected growth around 3.6 percent, according to the U.N.

In a New York Times op-ed entitled “Latin America Leans Forward,” Enrique Krauze also discusses the many reasons for optimism when looking into Latin America’s future:

Latin America of late has shown a maturity without precedent in its turbulent history. Our longtime tendency toward anarchy and dictatorship has veered into formal respect for electoral democracy. Equally encouraging has been our reaction to the worldwide financial crisis. We have certainly been damaged by it, but a number of our economies have responded solidly and effectively in a way that it as admirable as it was unexpected.

Most of the article is about discussing the bright future of Latin America, but Krauze still considers himself pessimistic, specifically mentioning organized crime in Mexico and some complicated politics around the PRI’s return to power. Those two country-specific issues don’t seem to outweigh the reasons for optimism on the regional level, but they are certainly real issues.

The projections for economic growth are on target with growth over the past 10 years. Between 2003 and 2012, regional economic growth averaged 4 percent a year, according to the latest Latin America Economic Output report. Political stability has increased tremendously since the 1980s, as Colombia, the only Latin American country with an ongoing civil war, seems to be on the verge of signing a peace agreement.

There is, however, a dark underside to these realities. Despite economic growth and decreased poverty, extreme inequality and limited social mobility persist, which according to a recent UNDP report, creates a group of people “who want their piece too.” As a result, virtually every country in the region has been gripped by surging violence, which in turn suppresses economic output (by 10.5 percent in Honduras, for example).

Economic growth can benefit communities, but the correlation is not automatic. Many economists see increasing GDP as the cure-all solution for any country’s problems, but it is rarely that simple. Despite having the biggest economy in the world, for example, the United States has higher levels of inequality than about half of Latin American countries.

Latin America has made gains, but the gap between the rich and poor has stubbornly remained. Civil wars have ended, but a new, messier form of violence has surged throughout the region. Some countries have seen true democracy emerge, whereas other places continue to be dominated by a few powerful families and political parties.

I am optimistic about Latin America’s future, but not primarily because of projected economic growth. Latin America has a rich history of resistance, which has birthed Liberation Theology, indigenous people’s movements, and opposition to neo-liberalism.

Economic growth can reduce inequality and raise people’s quality of life, or it can primarily benefit foreign investors, large landowners, and corrupt politicians. Projected economic growth is certainly not a bad thing, but it doesn’t automatically improve society.

If I can offer a 2014 New Years resolution for Latin America (or better yet, all of the Americas), it would be to justly grow economies from the bottom up, rather than the top down.