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Unlike in previous crises, Latin America did not amplify nor suffer extensively during the recent financial crisis because demand for its products remained strong and reforms helped dismantle various economic time bombs, said Hernan Buchi, former minister of finance of Chile.
“Those bombs were dismantled sometimes for good reasons, because reforms were done,” Buchi said during a panel at the seventh annual student-led Vale Latin American Business Conference at Gleacher Center on April 10. “Sometimes they were dismantled for bad reasons—they had exploded very recently— and there was not enough power for them to explode again.”
The global crisis and recession have ended and no “double dip” will occur, said Nobel laureate Gary Becker, University Professor of Economics and of Sociology, who moderated the panel. As recovery takes shape, economists must carefully analyze the prospects for growth in Latin America, Becker said.
“There are some advantages to developing markets and some advantages to richer economies,” he said. “As I look at Latin America, in some sense there have been great achievements and in another sense there have been some disappointments. We don’t see the rapid growth rates in Latin America that we see in some emerging economies outside of Latin America that are poorer, but their economies are growing more rapidly.”
Between 1990 and today, East Asia has dwarfed Latin America in lifting people from extreme poverty, or per capita income of less than $2 a day, said Alberto Carrasquilla, former minister of finance in Colombia. China reduced those numbers from 98 percent of its population in 1990 to 40 percent today, Carrasquilla said.
However, Latin America sustained “equally amazing” progress in lifting people above the general poverty line, or per capita income of about $12 a day, of advanced economies, he said. “The number of people in Latin America who rose above this definition of poverty during the same time period is six times higher than in East Asia,” Carrasquilla said.
The two policies of greatest value that would improve growth in Latin America are the continued emphasis on access to education and continued fiscal responsibility and transparency in public accounts, said Joaquim Vieira Levy, secretary of finance of the state of Rio de Janeiro and former vice president of Inter American Development Bank.
“We can’t compete for cheap labor, because we are in some ways in the middle of the road between the developed countries and China,” Levy said. “Fiscal responsibility and transparency in government have tremendous consequences in terms of improving competition and creating more economic freedom.”
The panelists explained how Latin America today is much more resilient than before to financial crises and downturns in the developed regions of the world, said Carlos Ganoza, a second-year student in the Full-Time MBA Program and co-chair of the student-led Latin American Business Group, which organized the conference.
“That is very good news for entrepreneurs and people who want to go back to Latin America,” Ganoza said. “They know that it is a much more stable economy, less risky, less volatile, and a better environment to do business in. These panelists believe that reforms that are making the economy stronger and more resilient will continue.”
—Phil Rockrohr
Read what former Bolivian president Gonzalo Sanchez de Lozada said in the keynote address about the challenges facing Latin America.