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Latin American Growth Environment

May 29, 2019

 

A look at the growth in Latin America reveals slower and relatively volatile attributes, even when adjusted for its’ emerging market classification. GDP growth in Latin America equaled 2.8 percent on average between 2000 and 2016. Peru has been the quickest growing Latin averaging 5.2 percent per year. Regional growth’s volatility has been attributed to commodity booms of oil, mineral, and some agricultural products.

 

Latin America derives much of its GDP from the expansion of the labor force; the changing demographics in the labor force are due in part of an increased participation of women. With 66 million more workers in sixteen years, the labor force transition makes up 72 percent of the region’s overall GDP growth. In other emerging economies, the same factor created only 37 percent of GDP growth.

 

Looking forward this driver is steadily slowing down; fertility rates in Latin America have declined to around replacement rate since 2015. Therefore, labor force expansion is regarded as limited by economists, and productivity growth is required for continued expansion of this region. One of the other major problems of Latin America growth is logistical costs; the costs are almost double that of developed countries. The region ranks fifth out of six regions for quality of infrastructure, putting it in front of only Sub-Saharan Africa

 

Additionally, a small market presence of midsize company limits competition and thereby hampers productivity growth.

 

Keith Knutsson from Integrale Advisors commented, “Significant infrastructure investments to the Latin America region are key for further growth.”

 

 

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