Beachfront high-rises are just a short distance from favelas (shantytowns). Latin America remains the most unequal region in the world and without reforms that spur growth and further tackle inequalities, these recent gains are at risk. Photo: AHLN/Flickr
An exclusive op-ed by Christian Daude, Senior Economist, Head of Colombia/Greece Desk, OECD
The global economy today presents important challenges for Latin America. According to the latest OECD Economic Outlook, global growth is projected to barely reach 3 percent in 2016 and to pick up only marginally to 3.3 percent in 2017. This falls short of the pre-crisis long-term average of 4 percent. While this difference seems small, it amounts to a shortfall of almost the size of the entire Mexican economy just over the next two years. Growth in the OECD will limp along at around 2 percent and is slowing in many emerging market economies, particularly China.
After a long decade of investment-driven growth, which created a voracious demand for many of Latin America’s commodities, China’s economy is slowing as it rebalances towards a more consumption-based path. This rebalancing has had a significantly negative impact on commodity prices weighing on growth prospects in the region, particularly for South America’s commodity-intensive economies.
Financing conditions for emerging markets have deteriorated and volatility remains high. Although financial markets have somewhat recovered from the spike in global risk aversion earlier this year, risks remain. Low interest rates and uncertainty about the path of monetary policy in in advanced economies, together with financial vulnerability risks in emerging markets with currency mismatches or high corporate debt, such as China, will …
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