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LATIN AMERICA’ GROWTH AND
GROWTH STRATEGIES
IN AN UNCERTAIN WORLD
José Antonio OcampoColumbia University
Presentation at LAPORDE 2016São Paulo School of Economics
Getulio Vargas Foundation
THE INTERNATIONAL CONTEXT
CONDITIONS PRIOR TO THE NORTH-ATLANTIC FINANCIAL CRISIS
Rapid expansion of international trade in 1986-2007.
Booming commodity prices since 2003/04.
Significant improvement in external financial conditions, the best for Latin America since the second half of the 1970s.
Significant opportunities for migration, particularly to the U.S. and Spain.
Of these conditions, the first and the last disappeared with the N-A crisis, the second in recent years, and doubts are now in the cards for external financing.
IMPORTANT ELEMENTS OF THE POST-CRISIS GLOBAL SCENARIO
1. After rapid recovery, strong slowdown of emerging/developing countries. Growing uncertainties surrounding China.
2. Late and weak recovery of the developed economies partly compensates for weakening of emerging world.
3. Strong slowdown in international trade, and perhaps a new era in global trade.
4. Exceptional period of external financing, which is now partly over.
5. Global imbalances generated pressures on non-oil emerging economies.
STRONG SLOWDOWN OF EMERGING ECONOMIES AFTER INITIAL RECOVERY
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
World GDP growth, 2001-2015(at market exchange rates)
World (UN)
Developed
Developing
World (IMF)
CHINA IS AT THE CENTER OF THE CURRENT SLOWDOWN
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Chinese GDP growth
WORLD TRADE’s “NEW NORMAL”: SLOW GROWTH
7.4%
3.7%
7.3%
3.1%
4.8%
3.2% 3.1%
2.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1950-1974 1974-1986 1986-2007 2007-2015
World Trade and GDP Growth
Exports
GDP
RECENT WORLD TRADE PATTERN: RECOVERY FOLLOWED BY VERY SLOW GROWTH AND A RECENT CONTRACTION
60
70
80
90
100
110
120
130
Jan-0
6
May-0
6
Sep-0
6
Jan-0
7
Ma
y-0
7
Sep-0
7
Jan-0
8
Ma
y-0
8
Sep-0
8
Jan-0
9
May-0
9
Sep-0
9
Jan-1
0
May-1
0
Sep-1
0
Jan-1
1
May-1
1
Sep-1
1
Jan-1
2
May-1
2
Sep-1
2
Jan-1
3
May-1
3
Se
p-1
3
Jan-1
4
May-1
4
Se
p-1
4
Jan-1
5
May-1
5
Sep-1
5
World exports (1st semester 2008=100)
Volume
Value
THE POST-CRISIS GROWTH OF TRADE HAS BEEN UNEVEN
-2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
World
Advanced Economies
United States
Japan
Euro Area
Emerging Economies
Emerging Asia
CE Europe
Latin America
Africa and ME
Volume of world trade: Jan-Oct/2015 vs. 1st sem/2008(annual rate of growth)
Imports
Exports
EXCEPTIONAL PERIOD OF EXTERNAL FINANCING, NOW PARTLY OVER
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
22.0
1/1
/19
98
4/1
/19
98
7/1
/19
98
10
/1/1
99
81
/1/1
99
94
/1/1
99
97
/1/1
99
91
0/1
/19
99
1/1
/20
00
4/1
/20
00
7/1
/20
00
10
/1/2
00
01
/1/2
00
14
/1/2
00
17
/1/2
00
11
0/1
/20
01
1/1
/20
02
4/1
/20
02
7/1
/20
02
10
/1/2
00
21
/1/2
00
34
/1/2
00
37
/1/2
00
31
0/1
/20
03
1/1
/20
04
4/1
/20
04
7/1
/20
04
10
/1/2
00
41
/1/2
00
54
/1/2
00
57
/1/2
00
51
0/1
/20
05
1/1
/20
06
4/1
/20
06
7/1
/20
06
10
/1/2
00
61
/1/2
00
74
/1/2
00
77
/1/2
00
71
0/1
/20
07
1/1
/20
08
4/1
/20
08
7/1
/20
08
10
/1/2
00
81
/1/2
00
94
/1/2
00
97
/1/2
00
91
0/1
/20
09
1/1
/20
10
4/1
/20
10
7/1
/20
10
10
/1/2
01
01
/1/2
01
14
/1/2
01
17
/1/2
01
11
0/1
/20
11
1/1
/20
12
4/1
/20
12
7/1
/20
12
10
/1/2
01
21
/1/2
01
34
/1/2
01
37
/1/2
01
31
0/1
/20
13
1/1
/20
14
4/1
/20
14
7/1
/20
14
10
/1/2
01
41
/1/2
01
54
/1/2
01
57
/1/2
01
51
0/1
/20
15
Emerging economies: Spreads and yields on bonds, 1998-2015
Spreads
Yields
CHANGING COMPOSITIONOF GLOBAL IMBALANCES
-800
-600
-400
-200
0
200
400
600
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Current account imbalances (billion dollars)
United States
European Union
Japan
Oil exporting countries
China
Other Asian emergingeconomies
Other emerging anddeveloping countries
LATIN AMERICA’S
ECONOMIC PERFORMANCE
THE 2004-2013 SUCCESS AND
THE RECENT COLLAPSE
Growth in 2004-07 was the best in three decades.
It was accompanied by an investment recovery…
.. and an excellent performance of social indicators (employment, poverty, income distribution)
The North-Atlantic crisis hit hard, but the recovery was strong, though uneven across the region.
Still, performance since the crisis was weak.
South America collapsed in 2014-15, but Mexico and Central America sustained growth.
The diversity of experiences imply that domestic policies are part of the story.
RECENT CYCLE: STRONG GROWTH, STRONG CRISIS AND RAPID BUT SHORT RECOVERY
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Latin America: GDP growth, 1950-2015
THIS FITS WITHIN A PATTERN OF
WEAK AND VOLATILE GROWTH
GDP growth: dynamics and volatility
Average Standard Coefficient
growth deviation of variation
1950-1980 5.5% 1.7% 0.31
1990-2015 3.0% 2.3% 0.75
LONG-TERM GROWTH HAS BEEN DISAPPOINTING
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Ecuador
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Dominican R.
Uruguay
Venezuela
Latin America
GDP growth: 1990-2015 vs. 1950-1980
1950-1980
1990-2015
EVEN IN THE YEARS OF RAPID GROWTH, LATIN AMERICA’S PERFORMANCE WAS
NOT PARTICULARLY REMARKABLE
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
World
Developed economies
China
East Asia, excluding China
South Asia
Western Asia
Africa
South America
Mexico and Central America
Economies in transition
World economic growth
2003-07
2007-13
2009-13
SOUTH AMERICA PERFORMED BETTER IN 2008-13, BUT WAS STRONGLY HIT IN 2014-15
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Latin America South America Mexico and CA
Growth, by subregion
2003-08 2008-13 2014 2015
SIGNIFICAN DIFFERENCES IN PERFORMANCE IN BOTH SUB-REGIONS
-2% 0% 2% 4% 6% 8%
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Paraguay
Peru
Uruguay
Venezuela
Mexico
Costa Rica
Dominican R.
El Salvador
Guatemala
Honduras
Nicaragua
Panama
GDP growth, 2003-08, 2008-13 and 2014-15
2003-08
2008-13
2014-15
-5.6%
INVESTMENT RATES RECOVERED DURING THE BOOM, BUT DECLINED RECENTLY
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
26.0%
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
Investment ratio of Latin America (% of GDP)
2000 Dollars
2010 Dollars
SIGNIFICANT POVERTY REDUCTION IN THE 2000s, BUT IT HAS STOPPED
40.5
48.4
43.8 43.9
33.5
28.1 28.0
18.6
22.6
18.6 19.3
12.9 12.3 12.0
0.0
10.0
20.0
30.0
40.0
50.0
1980 1990 1999 2002 2008 2012 2014
Poverty and extereme poverty in Latin America (ECLAC)
Poverty
Extreme poverty
SAME PATTERN WITH EMPLOYMENT INDICATORS
6
7
8
9
10
11
12
51
52
53
54
55
56
57
Labor market conditions
Employment rate Unemployment rate
MAJOR MACROECONOMIC ISSUES
MAJOR MACROECONOMIC ISSUES
The major issue: managing external shocks, positive and negative (Balance of payments dominance).
The capital account continued to be a constant source of cyclical shocks, though decreasingly so.
Conditions have worsened in this regard, but performance will likely be better during the current crisis.
After being a source of negative shocks, commodities boomed in 2004-13. This turned into the dominant adverse shock in 2014-15.
External demand shocks were also important for manufacturing exporters in 2008-09.
CAPITAL ACCOUNT SHOCKS HAVE BEEN INCREASINGLY WEAKER (1)
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Financial flows (% of GDP)
Gross Net Transfer of resources
CAPITAL ACCOUNT SHOCKS HAVE BEEN INCREASINGLY WEAKER (2)
0
2
4
6
8
10
12
14
16
18
20
4/1
/19
97
7/1
/19
97
10
/1/1
99
71
/1/1
99
84
/1/1
99
87
/1/1
99
81
0/1
/19
98
1/1
/19
99
4/1
/19
99
7/1
/19
99
10
/1/1
99
91
/1/2
00
04
/1/2
00
07
/1/2
00
01
0/1
/20
00
1/1
/20
01
4/1
/20
01
7/1
/20
01
10
/1/2
00
11
/1/2
00
24
/1/2
00
27
/1/2
00
21
0/1
/20
02
1/1
/20
03
4/1
/20
03
7/1
/20
03
10
/1/2
00
31
/1/2
00
44
/1/2
00
47
/1/2
00
41
0/1
/20
04
1/1
/20
05
4/1
/20
05
7/1
/20
05
10
/1/2
00
51
/1/2
00
64
/1/2
00
67
/1/2
00
61
0/1
/20
06
1/1
/20
07
4/1
/20
07
7/1
/20
07
10
/1/2
00
71
/1/2
00
84
/1/2
00
87
/1/2
00
81
0/1
/20
08
1/1
/20
09
4/1
/20
09
7/1
/20
09
10
/1/2
00
91
/1/2
01
04
/1/2
01
07
/1/2
01
01
0/1
/20
10
1/1
/20
11
4/1
/20
11
7/1
/20
11
10
/1/2
01
11
/1/2
01
24
/1/2
01
27
/1/2
01
21
0/1
/20
12
1/1
/20
13
4/1
/20
13
7/1
/20
13
10
/1/2
01
31
/1/2
01
44
/1/2
01
47
/1/2
01
41
0/1
/20
14
1/1
/20
15
4/1
/20
15
7/1
/20
15
10
/1/2
01
5
Latin America: Spreads and Yields of Soverign Bonds, 1997-2015
LATAM Spreads
LATAM Yields
A NEW LENDER IN TOWN
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Chinese lending to Latin America (million US$)
Latin America Argentina, Ecuador and Venezuela
CONDITIONS ARE CHANGING, BUT HOW SEVERE WILL THEY WILL BECOME? (1)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
1-J
an
-07
1-A
pr-
07
1-J
ul-0
7
1-O
ct-
07
1-J
an
-08
1-A
pr-
08
1-J
ul-0
8
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-0
9
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-1
0
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-1
1
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-12
1-O
ct-
12
1-J
an-1
3
1-A
pr-
13
1-J
ul-1
3
1-O
ct-
13
1-J
an
-14
1-A
pr-
14
1-J
ul-1
4
1-O
ct-
14
1-J
an
-15
1-A
pr-
15
1-J
ul-1
5
1-O
ct-
15
Latin America: Spreads vs. Yields of Sovereign Bonds, 2007-15
Yields Spreads
CONDITIONS ARE CHANGING, BUT HOW SEVERE WILL THEY WILL BECOME? (2)
0.0
5.0
10.0
15.0
20.0
25.0
Emissions of Latin American bonds, 2003-2015(billion dollar, monthly figures)
Monthly Five months moving average
SIGNIFICANT DIFFERENCES ASSOCIATED TO PERPECTIONS OF “POLITICAL RISK”
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
EMBI
LATAM
Brazil
Chile
Colombia
Mexico
Panama
Peru
Argentina
Ecuador
Venezuela
Latin America: Bond yields vs. sub-prime
Jan-Jun 2007
2011-2012
Nov 2012-Apr 2013
2014
Oct-Dec 2015
DURING THE SECOND SEMESTER OF 2015, BRAZIL WAS HIT PARTICULARLY HARD
5
5.5
6
6.5
7
7.5
8
8.5
9
Bond yields, second semester of 2015
Composite LATAM Brazil
THE TRADE SCENARIO
Commodities boomed since 2004, with a short interruption during the North-Atlantic crisis.
They gradually weakened since 2012, and oil collapsed in the second semester of 2014.
The boom led to a “re-primarization” of the export structure..
… reinforced by growing trade with China.
The downward trend of commodity prices is not just a short-term phenomenon.
Intraregional trade provides an opportunity for an alternative export structure, but Latin American integration is experiencing a deep crisis.
A SUPER-CYCLE OF COMMODITY PRICES…
0
50
100
150
200
250
18
65
18
70
18
75
18
80
18
85
18
90
18
95
19
00
19
05
19
10
19
15
19
20
19
25
19
30
19
35
19
40
19
45
19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
Real non-oil commodity prices, 1865-2014 (1980=100)
… BUT DIVERSE AMONG COMMODITY GROUPS (1)
0
20
40
60
80
100
120
140
160
180
200 Real commodity prices (1980=100)
Oil
Non oil
Base
… BUT DIVERSE AMONG COMMODITY GROUPS (2)
40
60
80
100
120
140
160
180 Real non-oil commodity prices (1980=100)
Tropical agriculture
Non-tropical agriculture
Metals
Total non oil
Base
THE BIG TofT WINNERS WERE ENERGY
AND MINERAL-EXPORTING ECONOMIES
-20% 0% 20% 40% 60% 80% 100% 120% 140% 160%
Costa Rica
Honduras
El Salvador
Guatemala
Panama
Nicaragua
Dominican R.
Paraguay
Uruguay
Mexico
Argentina
Brazil
Ecuador
Peru
Colombia
Bolivia
Chile
Venezuela
Gains and losses from terms of trade changes since 2003
2003-2008
2003-2013
THE BOOM IS NOW OVER (1)
0
50
100
150
200
250
20
03
M0
1
20
03
M0
5
20
03
M0
9
20
04
M0
1
20
04
M0
5
20
04
M0
9
20
05
M0
1
20
05
M0
5
20
05
M0
9
20
06
M0
1
20
06
M0
5
20
06
M0
9
20
07
M0
1
20
07
M0
5
20
07
M0
9
20
08
M0
1
20
08
M0
5
20
08
M0
9
20
09
M0
1
20
09
M0
5
20
09
M0
9
20
10
M0
1
20
10
M0
5
20
10
M0
9
20
11
M0
1
20
11
M0
5
20
11
M0
9
20
12
M0
1
20
12
M0
5
20
12
M0
9
20
13
M0
1
20
13
M0
5
20
13
M0
9
20
14
M0
1
20
14
M0
5
20
14
M0
9
20
15
M0
1
20
15
M0
5
20
15
M0
9
Monthly commodity prices, IMF (2005=100)
Non-energy
Energy
THE BOOM IS NOW OVER (2)
0.0
50.0
100.0
150.0
200.0
250.0
20
03
m0
1
20
03
m0
7
20
04
m0
1
20
04
m0
7
20
05
m01
20
05
m0
7
20
06
m0
1
20
06
m0
7
20
07
m0
1
20
07
m07
20
08
m0
1
20
08
m0
7
20
09
m0
1
20
09
m0
7
20
10
m01
20
10
m0
7
20
11
m0
1
20
11
m0
7
20
12
m0
1
20
12
m07
20
13
m0
1
20
13
m0
7
20
14
m0
1
20
14
m0
7
20
15
m01
20
15
m0
7
Real commodity prices, CPB Netherlands Bureau (2005=100)
Fuels
Non-fuels
THE RESULT: RE-PRIMARIZATION OF LATIN AMERICA’S EXPORTS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1981-82 1985-86 1991-92 1995-96 1998-99 2001-02 2005-06 2008-09 2012-13
Technological Contents of Latin American Exports
High-techmanufactures
Mid-techManufactures
Low-techmanufactures
Resource-basedmanufactures
Primary goods
COMMODITY DEPENDENCE: STRONGER IN SOUTH AMERICA.
IMF: Word Regional Economic Outlook, 2013.
TRADE WITH CHINA HAS BEEN THE
SOURCE OF RE-PRIMARIZATION (ECLAC)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
LatinAmerica
UnitedStates
EuropeanUnion
Rest ofAsia
China
High-techmanufactures
Mid-techmanufactures
Low-techmanufactures
Resource-basedmanufacturesPrimary Goods
RISE OF CHINA
AS A TRADING PARTNER (1)
A. Destination of exports B. Origin of imports
Source : ECLAC
RISE OF CHINA
AS A TRADING PARTNER (2)
Destination of Exports Source of Imports
2000 2008 2014 2000 2008 2014
Argentina 6 2 2 4 3 2
Brazil 12 1 1 11 2 1
Chile 5 1 1 4 2 1
Colombia 35 4 3 15 2 2
Peru 4 2 2 13 2 2
Venezuela 37 3 2 18 3 2
Costa Rica 26 2 5 16 3 2
Mexico 25 5 2 6 3 2
Cuba 5 2 2 5 2 2
Source : ECLAC, 2014.
THE FALL OF COMMODITY PRICES HAS GENERATED A DECLINE IN EXPORT VALUES
60
70
80
90
100
110
120
130
140
150
Jan-0
6
May-0
6
Sep
-06
Jan-0
7
May-0
7
Sep
-07
Jan-0
8
May-0
8
Sep
-08
Jan-0
9
May-0
9
Sep
-09
Jan-1
0
May-1
0
Sep
-10
Jan-1
1
May-1
1
Sep
-11
Jan-1
2
May-1
2
Sep
-12
Jan-1
3
May-1
3
Sep
-13
Jan-1
4
May-1
4
Sep
-14
Jan-1
5
May-1
5
Sep
-15
Value of exports (1st semester 2008=100)
World Asia Latin America
THE POLICY DEBATE: FISCAL POLICY
In open economies, fiscal policy has to play a special counter-cyclical role.
Fiscal rules are essential: Fiscal sustainability rules are not the best
Counter-cyclical rule are better, but have not spread.
Counter-cyclical fiscal policy has to compensate for strong pro-cyclical pressures are strong: Economic pressure: pro-cyclical financing
Political-economic pressures.
For this reason, pro-cyclical fiscal policies tend to be the rule.
THE POLICY DEBATE: MONETARY AND EXCHANGE RATE POLICIES
The orthodox view: the optimal policy is inflation targeting with flexible exchange rates.
Essential problems with this view: Real exchange rate movements generate
procyclical effects…
… and exchange rate instability taxes production sector and export diversification.
The alternative paradigm: multiple objectives for central banks Employment as an explicit objective.
In emerging economies: add competitive and relatively stable real exchange rates.
Financial stability.
MAJOR ISSUES GOING FORWARD
THE MAJOR ISSUES GOING FORWARD (1)
Short-term conditions are difficult for two basic reasons:Latin America spent the terms of trade boom
We may be starting a long phase of low commodity prices.
Financial conditions remain generally positive, thanks to low external indebtedness.
Due to low global trade growth, an orthodox export-led strategy would not work.
The end of the commodity boom implies that the China-Latin American trade pattern has to change.
THE BASIC STRENGH: LOW NET DEBT RATIOS
0%
5%
10%
15%
20%
25%
30%
35%
40%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
External Debt (gross and net) as % of GDP
Debt Net of foreign exchange reserves
THE BASIC WEAKNESS: LATIN AMERICA SPENT THE TERMS OF TRADE BOOM
-9.0%
-7.0%
-5.0%
-3.0%
-1.0%
1.0%
3.0%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Current account balance, adjusted by the terms of trade (% of GDP)
Current account balance Adjusted by the terms of trade
COMMODITY PRICES FOLLOW LONG-TERM CYCLES
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
4.0
4.2
4.4
4.6
4.8
5.0
5.2
5.4
1875 1900 1925 1950 1975 2000
Real Price Trend
Non Trend Super Cycle
Real Non-oil Commodity Price Components, Total Index, 1865-2010
(Log Scaling)
WILL FINANCIAL CONDITIONS CONTINUE TO DETERIORATE?
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
1-J
an
-07
1-A
pr-
07
1-J
ul-0
7
1-O
ct-
07
1-J
an
-08
1-A
pr-
08
1-J
ul-0
8
1-O
ct-
08
1-J
an
-09
1-A
pr-
09
1-J
ul-0
9
1-O
ct-
09
1-J
an
-10
1-A
pr-
10
1-J
ul-1
0
1-O
ct-
10
1-J
an
-11
1-A
pr-
11
1-J
ul-1
1
1-O
ct-
11
1-J
an
-12
1-A
pr-
12
1-J
ul-12
1-O
ct-
12
1-J
an-1
3
1-A
pr-
13
1-J
ul-1
3
1-O
ct-
13
1-J
an
-14
1-A
pr-
14
1-J
ul-1
4
1-O
ct-
14
1-J
an
-15
1-A
pr-
15
1-J
ul-1
5
1-O
ct-
15
Latin America: Spreads vs. Yields of Sovereign Bonds, 2007-15
Yields Spreads
WORLD TRADE DOES NOT SEEM TO BE PROVIDING GOOD OPPORTUNITIES
60
70
80
90
100
110
120
130
140
150
Jan-0
6
May-0
6
Sep
-06
Jan-0
7
May-0
7
Sep
-07
Jan-0
8
May-0
8
Sep
-08
Jan-0
9
May-0
9
Sep
-09
Jan-1
0
May-1
0
Sep
-10
Jan-1
1
May-1
1
Sep
-11
Jan-1
2
May-1
2
Sep
-12
Jan-1
3
May-1
3
Sep
-13
Jan-1
4
May-1
4
Sep
-14
Jan-1
5
May-1
5
Sep
-15
Value of exports (1st semester 2008=100)
World Asia Latin America
THE MAJOR ISSUES GOING FORWARD (2)
Structural change, with a technology-focus, has to be back in the Latin American agenda.
An essential element has to be an aggressive production sector development strategy
The central focus has to be sectors with high knowledge (technological) contents.
Re-industrialization should be an essential element
But knowledge-intensive service sectors and technological change associated with natural resources can also contribute.
The space for orthodox export-led policies is over, but aggressive export diversification has to be part of the strategy, including of trade with China.
THE MAJOR ISSUES GOING FORWARD (3)
Given the constraints on world trade, the domestic market should be seen as an opportunity, supported for further advance in social conditions
But a pure inward-looking strategy would work for very few countries (perhaps only Brazil).
Integration (an “expanded domestic market”) is an opportunity…
… but this requires overcoming the constraints currently posed by politics.
Increasing infrastructure investments can have both short- and long-term favorable effects.
A NOW LONG AND PREMATUREDE-INDUSTRIALIZATION
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
19.0%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
26.0%
27.0%
28.0%
29.0%
19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
2010 p
rices
197
0 a
nd
199
0 p
rices
Share of Manufacturing in GDP, 1950-2013
1970 prices 1990 prices 2010 prices
SIGNIFICANT TECHNOLOGICAL GAP
% of high-tech R&D as Patents USTPO
industries % of GDP per million
vs. USA inhabitants
Latin America 0.31 0.38 0.8
East Asia 0.96 1.88 62.4
Natural Res.-intensive
developed countries 0.59 1.68 66.9
Mature economies 1.12 2.53 172.2
Source: ECLAC
Indicators of technological development around 2010
LARGE LAG IN DEVELOPING
TECHNOLOGY-INTENSIVE EXPORTS
Source: World Development Indicators.
SIGNIFICANT LAGS IN
RESEARCH AND DEVELOPMENT
Sources: OECD Main Science and Technology Indicators 2009-1; (MSTI) and RICYT.
TIME TO DIVERSIFY
THE EXPORT STRUCTURE
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
LatinAmerica
UnitedStates
EuropeanUnion
Rest ofAsia
China
High-techmanufactures
Mid-techmanufactures
Low-techmanufactures
Resource-basedmanufacturesPrimary Goods
IN THAT PROCESS, INTRAREGIONAL TRADE IS A GREAT OPPORTUNITY
Intra-regional Exports as a Share of Total Exports, 2008
MERCOSUR Andean Central
Community America
Commodities 17.8 12.9 13.9
Manufactured goods 39.8 51.5 48.4
Resource-based 25.8 38.4 63.7
Low-technology 43.4 71.3 50.5
Medium-technology 51.5 61.9 54.5
High-technology 41.8 65.8 19.2
Total 29.8 21.1 39.3
LATIN AMERICA’ GROWTH AND
GROWTH STRATEGIES
IN AN UNCERTAIN WORLD
José Antonio OcampoColumbia University
Presentation at LAPORDE 2016São Paulo School of Economics
Getulio Vargas Foundation
