Resource-Based Growth, Economic Dynamism and Social Inclusion in Latin America

Resource-Based Growth, Economic Dynamism and Social Inclusion in Latin America

A paper by Graciana del Castillo, Adjunct Professor of International and Public Affairs at Columbia University, presented for Eighth Rhodes Forum Session, October 2010

Despite being hit badly by the 2008 financial crisis—a crisis originating outside the region—Latin America as a whole showed strong resilience and has come out of it as a surprisingly strong performer. With the particularly bright short‐term outlook for the region projected by investment bankers and international financial institutions for 2010‐11, it seems almost petty to consider the question of whether growth represents a truly dynamic process, or whether the region is simply experiencing a resource‐based growth spurt that would not be sustainable.

For growth to be sustainable and lead to economic and social inclusion in the longrun, economies would need to engage in a dynamic process in which investment in infrastructure, innovation, education, employment generation, and public security would reinforce each other so as to improve productivity and potential growth rates. Otherwise, the resource‐based growth model could be constrained going forward by inadequate infrastructure—both physical and human—and by fluctuations in international prices. It could also lead to the “resource‐curse” in terms of appreciation of domestic currencies, deindustrialization and high unemployment, deterioration of the social fabric and public insecurity, and environmental degradation. All these problems are already evident, to different degrees, in some countries in the region. A debate is necessary and timely on how to move forward.

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