LATIN AMERICA AND CARIBBEAN MUST DOUBLE GROWTH RATE TO OVERCOME SOCIAL INEQUITY, STATES NEW ECLAC STUDY

Press Release
ECLAC/340

LATIN AMERICA AND CARIBBEAN MUST DOUBLE GROWTH RATE TO OVERCOME SOCIAL INEQUITY, STATES NEW ECLAC STUDY

Latin America and the Caribbean must double their recent growth rates if social backwardness is to be overcome, warns the Economic Commission for Latin America and the Caribbean (ECLAC) in a new study prepared for its twenty-sixth session, currently under way through 20 April in San José, Costa Rica.

While the economies of Latin America and the Caribbean had experienced an average growth of 3.6 per cent in the 1990s, the ECLAC study indicates that such growth has not been sufficient to increase employment and social equity there. In the new report, Strengthening Development: the interplay of macro- and microeconomics, which was being presented to ministers and other government representatives during the week-long session, the Commission warns that the regional economies must grow by a steady rate of 6 per cent each year, requiring an average investment of 28 per cent of its gross national product (GNP). That figure was still far from being reached.

The Commission emphasizes in its report that overcoming low productivity is one of the most urgent tasks facing the region. Despite economic reforms introduced in the region in recent years, "productivity in Latin America and the Caribbean continues well below the levels of industrialized countries". Labour productivity is between three and five times lower than in the developed economies, while overall productivity is two or three times less. Recent experience like the financial crisis in Mexico in 1994 had underscored the dangers of overdependence on foreign capital. Hence, there is an urgent need to increase national savings capacity. A main objective should be a dramatic rise of national savings throughout the region to over 25 per cent of gross domestic product (GDP).

According to the report, some sectors, such as exporters of products derived from natural resources, have significantly improved their performance. However, in the region in general, "the old problems of low relative productivity and insufficient competitiveness and innovative drive remain to be solved". The study proposes a series of measures to improve the region's productive apparatus, covering all levels from the individual company to public policy-making.

- 2 - Press Release ECLAC/340 15 April 1996

The ECLAC study underlines the marked differences between national experiences. In 1995, for example, the per capita GDP of only nine countries had overtaken 1980 levels, and of these, only Chile, Colombia, Uruguay, Jamaica and the Dominican Republic had achieved this by a margin of more than 10 per cent. Regarding social equity, even Chile which is now on the path to sustained growth, emerged from the Mexican financial crisis with a relatively unimproved level of inequality. The study points out that during the early 1990s, "the incidence of poverty remained alarmingly persistent", and generally continued to be higher than before the crisis and unaffected by growth rates alone.

There is a widespread call for greater quality in macroeconomic policies, states ECLAC. Macroeconomic balances are a necessary condition for more dynamic development and greater social equity, and must be sustainable in order to stimulate savings and investment and achieve higher growth. However, the study warns that excessive reliance on the "automatic" effectiveness of macroeconomic price signals and reforms has led to a tendency to underestimate the weakness of institutions and the failures of markets.

During the current session, chaired by the President of Costa Rica, José Figueres, the governments will assess the Commission's activities during the past two years and approve its programme of work for the next biennium. The achievements and inadequacies of the reforms, introduced in the region following the debt crisis of the 1980s, will also be debated along with approaches towards more dynamic growth and greater social equity.

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