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Latin America’s Triple Policy Challenge (Goldfajn & Yeyati)

Latin America’s Triple Policy Challenge by Ilan Goldfajn and Eduardo Levy Yeyati published by Project Syndicate (8/2022).

“High levels of poverty and inequality have intensified a longstanding sense among Latin Americans that the economic chips are stacked against them. Unless policymakers consider voters’ frustration as they seek to boost fiscal sustainability, they will face a sharp and dangerous backlash, as occurred in Colombia last year.

 WASHINGTON, DC – Latin America faces three major macroeconomic problems: subpar growth, fiscal deficits, and rising poverty-driven inequality. Solving them requires addressing all three simultaneously, with a strategy that recognizes the complex interactions with one another.

Latin America was experiencing subpar economic growth well before the COVID-19 crisis, owing to low productivity and investment growth. Average annual per capita GDP growth actually fell by 0.7% in 2015-19, well below the emerging- and developing-economy positive average growth of 2.9%. And the pandemic has weakened the region’s growth prospects even further, with an uneven recovery that, in the absence of structural reforms, could lead to another “lost decade.”…”

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