and the Caribbean in front of the current development crossroads - - PowerPoint PPT Presentation

ANTONIO PRADO

DEPUTY EXECUTIVE SECRETARY Regional Meeting of the Ambassadors of Norway in Latin America

Santiago, 20 January 2016

Challenges of Latin America and the Caribbean in front of the current development crossroads

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Latin America and the Caribbean is at a crossroads

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

After a period of prosperity, the region is facing a more difficult external context and slower economic growth

• The world economy has not expanded as expected. Growth projections for

2016 (2.9%) are slightly better than those for 2015 (2.4%).

• Upturn in growth in the United States (about 2.6% in 2016) with positive

impacts for remittances, tourism and trade in Mexico, Central America and the Caribbean.

• Fiscal imbalances and lack of competitiveness in the eurozone, plus high

unemployment and slow growth of 2.0% in 2016 are acting as a drag on global trade.

• Slowdown in China from a growth of 9.2% in 2011 to a lesser growth of 6.5%

in 2016 is having an impact on countries that export natural resources.

• End of quantitative easing (QE) in the United States and launch of QE in

Europe likely to create more volatile financial conditions.

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH, 2016 a

(Percentages, on the basis of dollars at constant 2010 prices)

The economic and trade slowdown indicates a future with lower growth

LATIN AMERICA AND THE CARIBBEAN: ANNUAL VARIATION IN MERCHANDISE EXPORTS, 2000-2015 a (Percentages)

Source: ECLAC, based on official figures from the countries’ central banks, customs offices and national institutes of statistics.

a Figures for 2015 and 2016 are projections.

• 15.0

1.0

• 14.0
• 30
• 20
• 10

10 20 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Volume Price Value

• 7,0
• 2,0
• 0,8

0,2 0,3 0,8 1,5 1,6 2,1 2,4 2,5 2,6 3,0 3,0 3,3 3,3 3,4 4,0 4,2 4,3 4,3 4,5 5,2

6,2

• 10
• 5

5 10

Venezuela (Bol. Rep. of) Brazil South America Latin America and the Caribbean Ecuador Argentina Uruguay The Caribbean Chile El Salvador Haiti Mexico Paraguay Colombia Honduras Costa Rica Peru Guatemala Cuba Nicaragua Central America Bolivia (Plur. State of) Dominican Republic Panama

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

• Reorganization of the global economy and international politics

in trade blocs: TPP, TTIP, RCEP, BRICS

• Decoupling of the financial economy from the real economy
• Technology revolution without precedent
• Tendency towards global inequality
• An uneven demographic transition: some countries have a

demographic dividend, others have an ageing population

• Large-scale migration as a result of disasters, wars and inequality
• Urbanization: 80% of the population lives in cities
• Growing ecological footprint
• Vulnerability to climate change and to natural disasters

(cumulative cost of US$ 350 billion)

• Conflicts, violence and insecurity

Global tectonic shifts

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

AMÉRICA LATINA (PROMEDIO SIMPLE 18 PAÍSES): CONCLUSIÓN DE AL MENOS CINCO AÑOS DE EDUCACIÓN TERCIARIA ENTRE JÓVENES DE 25 A 29 AÑOS, SEGÚN QUINTILES DE INGRESO PER CÁPITA Y SEXO, ALREDEDOR DE 2010 (Porcentajes)

Fuente: CEPAL sobre la base de tabulaciones especiales de las encuestas de hogares de los países. Nota: El dato de Argentina corresponde al Gran Buenos Aires y el de Uruguay a zonas urbanas.

1.3 2.2 3.6 6.9 22.6 9.0 1.4 2.3 6.1 13.1 32.1 12.3 5 10 15 20 25 30 35 40 Quintil 1 Quintil 2 Quintil 3 Quintil 4 Quintil 5 Total Hombres Mujeres

28 78

10 20 30 40 50 60 70 80 90 100

Nicaragua Guatemala Honduras

• Rep. Dominicana

El Salvador México Paraguay Uruguay Costa Rica Panamá Venezuela Bolivia Argentina Brasil Ecuador Colombia Perú Chile Promedio

Quintil 1 Quintil 5

AMÉRICA LATINA: POBLACIÓN 20-24 AÑOS QUE CONCLUYÓ LA EDUCACIÓN SECUNDARIA, 2010 (Porcentajes)

Not enough was done to increase investment in human capacities, and to reduce inequality

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

With social progress, the region still remains the worst distribution of income, and other inequalities

LATIN AMERICA AND OTHER WORLD REGIONS: GINI COEFFICIENT, AROUND 2010

Source: ECLAC, on the basis of special tabulations of data from household surveys in the respective countries.

LATIN AMERICA: a POVERTY AND INDIGENCE, 1980-2014b (Percentages)

Source: ECLAC, on the basis of special tabulations of data from household surveys.

a Estimate for 18 countries of the region plus Haiti. c The 2014 figures are projections.

48.4 43.8 43.9 41.9 33.5 29.6 28.1 28.1 28.0 22.6 18.6 19.3 15.3 12.9 11.6 11.3 11.7 12.0 10 20 30 40 50 60 1990 1999 2002 2005 2008 2011 2012 2013 2014 Poor Indigent

0.50 0.45 0.41 0.37 0.34 0.33 0.34 0.00 0.10 0.20 0.30 0.40 0.50 0.60

Latin America and the Caribbean (18) Sub- Saharan Africa (39) East Asia and the Pacific (10) North Africa and Middle East (9) South Asia (8) Western Europe and Central Asia (21) OECD (22)

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Vulnerability has come down considerably, but still applies to half the population

Source: ECLAC, Inclusive social development: the next generation of policies for overcoming poverty and reducing inequality in Latin America and the Caribbean , Santiago, November, 2015.

a Weighted average for the Plurinational State of Bolivia (2009), Brazil (2011), Chile (2011), Ecuador (2011), Mexico (2010), Paraguay (2011), Peru (2011) and Uruguay

(2011).

LATIN AMERICA (WEIGHTED AVERAGE FOR 18 COUNTRIES AND FOR 8 COUNTRIES): PROFILE OF INCOME VULNERABILITY, AROUND 1990, 2002, 2008 AND 2013, AND BY RACE OR ETHNIC GROUP, AROUND 2011 (Percentages)

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

With challenges of environmental sustainability to move towards low-carbon paths

GLOBAL TRENDS IN GREENHOUSE GAS EMISSIONS, 1990-2011 (Percentages of global emissions) LATIN AMERICA: PER CAPITA GDP AND PER CAPITA ENERGY CONSUMPTION, 2008 (Kilograms of oil equivalent and 2005 purchasing power parity dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Structural Change for Equality: an integrated approach to development (LC/G.2524(SES.34/3)), Santiago, Chile, 2012. Source: Economic Commission for Latin America and the Caribbean (ECLAC), The European Union and Latin America and the Caribbean in the new economic and social context, Santiago, 2015.

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Five major structural challenges

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

• 1. Insufficient investment for development and

innovation

• In infrastructure
• In research, science

and innovation

• In development

banking: inclusive financing

• In cleaner

production solutions

GROSS FIXED CAPITAL FORMATION, 1970-2014 (Percentages of GDP, on the basis of dollars at constant 2005 prices)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and World Bank, World Development Indicators.

23.6 20.5 20.4 19.5 20.8 20.4

10 15 20 25 30 35 40 45 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Latin America Eastern Asia and Pacific

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

• 2. Insufficient and limited fiscal space: little and poor

taxation

INTERNATIONAL COMPARISON OF THE LEVEL AND STRUCTURE OF THE TAX BURDEN (Percentages of GDP)

• Regressive tax

structure

• Low tax burden in

most countries

• High evasion
• Widespread

exemptions

• Social spending has a

limited redistributive impact

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Organization for Economic Cooperation and Development (OECD) and International Monetary Fund (IMF). a The coverage for calculating the Latin American average refers to central government except in Argentina, Brazil, Chile, Costa Rica and the Plurinational State

• f Bolivia, where it refers to general government.

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

• 3. The production structure has not changed:

it is heterogeneous and a source of inequalities

LATIN AMERICA (18 COUNTRIES): GDP PER WORKER, PPP AROUND 2009 (Thousands of dollars)

Source: ECLAC, on the basis of R. Infante, “América Latina en el ‘umbral del desarrollo’. Un ejercicio de convergencia productiva”, Working Paper, No. 14, Santiago, Chile, June 2011, unpublished.

LATIN AMERICA (18 COUNTRIES): STRUCTURAL HETEROGENEITY INDICATORS, AROUND 2009 (Percentages)

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

The greatest structural challenge is to diversify the export pattern to reduce dependence on raw materials

LATIN AMERICA AND DEVELOPING COUNTRIES IN EAST ASIA: PATTERN OF STRUCTURAL CHANGE AND SHARE OF EXPORTS, 1985-2011 (Percentages) LATIN AMERICA AND THE CARIBBEAN: EXPORT STRUCTURE BY TECHNOLOGY INTENSITY, 1981-2013 (Percentages of the total)

51.5 48.4 39.5 32.5 26.7 27.6 35.1 38.8 40.2 41.3 25.5 25.0 23.5 21.7 18.4 16.6 19.3 20.2 19.2 17.5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% High-technology manufactures Medium-technology manufactures Low-technology manufactures Natural resource-based manufactures Raw materials

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

• 4. Functional inequality: increasing concentration
• f income, capital and technology

LATIN AMERICA (13 COUNTRIES): VARIATION IN GINI INDEX AND WAGES RELATIVE TO GDP, 2002 AND 2009

Gini index Share of wages in GDP (Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of CEPALSTAT, National Institute of Statistics and Censuses (INDEC) of Argentina, and the central banks of Costa Rica, Guatemala and Uruguay.

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

• 5. The region continues to trade little with each itself

and with low levels of productive integration

Source: ECLAC, on the basis of United Nations Commodity Trade Database (COMTRADE).

a Includes the 10 members of ASEAN and China, Japan, the Republic of Korea, Hong Kong Special Administrative Region of China, and Taiwan Province of China.

SELECTED GROUPINGS: SHARE OF INTRA-GROUP EXPORTS IN TOTAL EXPORTS, 2008-2013 (Percentages)

Grouping Percentage ASEAN+5 34 TLCAN 19 European Union 17 Latin America and the Caribbean 10

SHARE OF PARTS AND COMPONENTS IN INTRA-GROUP EXPORTS, 2013 (Percentages)

59.1 49.6 49.8 19.2 27.0

10 20 30 40 50 60 70 2008 2009 2010 2011 2012 2013

European Union NAFTA ASEAN+5 a Latin America and the Caribbean Latin America and the Caribbean (excluding Mexico)

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

ECLAC proposal: structural change for equality and sustainability

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

The road in the social sphere

• Consolidate social public spending as a countercyclical

fiscal policy tool with more efficient implementation.

• Create opportunities for financing social spending.
• Design a new generation of social policies linked with

social investment, with instruments and mechanisms to increase efficiency, effectiveness, impact and sustainability.

• Investment in innovation, education and employment

for youth, generating solid bases for achieving

• bjectives of structural change for equality.
• Active policies on care and time-liberation, with a view

to full incorporation of women into the labour market

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Re-establishment of a productive architecture

• Promote structural change by mainstreaming environmental

sustainability

• With new institutions that promote productivity from an

explicit industrial policy

• Link low productivity sectors with those at the frontier

technology

• Integrated support strategy for SMEs with inclusive

financing that meshes well with the most dynamic sectors

• Greater hierarchy for science and technology
• Mediation mechanisms for social and environmental

conflicts

• Land use planning and urban planning

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Time for production integration

• Integration is a multidimensional process encompassing

economic, political, social, cultural and environmental issues.

• The production dimension as a strategic element of

regional integration

• Tackling inequality as well as social policies calls for a

change in the production and export structure and the creation of good quality and progressively more sophisticated activities.

• The regional space is the most conducive

to this transformation

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Politics and policymaking: the importance

• f compacts
• The development crossroads the region has reached calls for

revisiting the way in which its institutions and structures are linked to one another, involving a wide range of agents in the process

• A compact is a political instrument for putting into place, within a

democratic framework, medium-term institutional policies and reforms with a strategic vision, with less risk that they will be reversed later

• A social compact is necessary at a time of changes in the

interaction between the State, the market and society, with social effervescence and the emergence of new forms of participation

• The citizenry is a party to the compact, as a full bearer of rights,

with the State acting as guarantor of those rights

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Compacts relating to the seven pillars for transforming the region’s development process

• A fiscal compact
• A compact for investment and industrial policy
• A social and labour compact
• A compact for social welfare and public services
• A compact for environmental sustainability
• A compact for natural resource governance
• A compact among the international community

for development and cooperation towards 2030

Challenges of Latin America and the Caribbean in front of the development crossroads Antonio Prado

Compacts make it politically feasible to chart a new path of growth and structural change to ensure progressive and sustainable steps towards greater equality, based on proposals that have been developed and implemented by participatory and democratic methods, thus avoiding the danger that proposals will remain in the realm of volunteerism and the expression

• f good intentions.