Baker fellow describes economic growth in Latin America

Baker fellow describes economic growth in Latin America

BY FRANZ BROTZEN
Rice News staff

The last few years have been “exceptionally good” for the economies of Latin America, with the possibility of sustained progress in the future, according to the newest fellow at the James A. Baker III Institute for Public Policy.

José Antonio Ocampo Gaviria, the Will Clayton Fellow in International Economics at the Baker Institute, told an audience April 3 that Latin America as a whole has posted 6 percent annual growth rates over the last four years, the fastest economic growth since the 1970s. He attributed the growth to three factors: rising commodity prices, exceptional conditions of external financing and high levels of remittances from citizens working abroad.

GEORGE WONG

José Antonio Ocampo Gaviria, the Will Clayton Fellow in International Economics at the Baker Institute, told an audience April 3 that Latin America as a whole has posted 6 percent annual growth rates over the last four years, the fastest economic growth since the 1970s.

The most significant of the three, Ocampo said, is the worldwide demand for commodities. While agricultural prices have risen in recent years, the burgeoning demand for metals and energy has contributed the most to the current boom. Chilean copper and Venezuelan oil are examples of commodities that are supplying the world economy.

Ocampo was the United Nations undersecretary-general for economic and social affairs until mid-2007. In that post, he directed the United Nations’ Department of Economic and Social Affairs and chaired the United Nations’ Executive Committee on Economic and Social Affairs.

Ocampo described his April 3 lecture, titled “Latin America: The Boom and the Current Turmoil,” as an analysis of the latest economic trends in the region.

The effects of the economic boom have been “extremely positive” for the region, Ocampo said. Among the benefits, he cited high levels of investment, lower debt, a drop in poverty rates and an improvement in income distribution.

When asked about the causes behind the changes in income distribution, Ocampo pointed to the demographic transition that has been taking place across Latin America for a generation. As fertility rates dropped several decades ago, women joined the labor force, increasing the supply of workers. But in recent years, that drop in fertility meant fewer young people entered the labor market, a development that coincided with the economic upturn and a consequent rise in the demand for workers. “Labor was extremely abundant in Latin America for several decades,” he explained. “Now it’s becoming scarce.”
 
Ocampo acknowledged that not all signs for Latin American economies are positive. “The financial disturbances [in the industrialized world] have had significant effects,” he said. He singled out inflation as the most important short-term threat. In addition, he noted that in the region, only Mexico and Costa Rica have expanded their manufacturing-based exports recently — a cause for concern since most countries around the world that have developed quickly have done so by focusing on technology-based manufacturing, rather than commodity exports.

Still, Ocampo foresaw no signs that the current good times are coming to an end, largely because the fast-growing Chinese economy continues to import commodities at a rapid pace. The ongoing boom has also allowed Latin American countries to raise spending on social projects like education, health care and combating poverty.