Latin America falls behind global average with 2% growth in 2023

The economy of Latin America and the Caribbean will grow 2% this year. This is a little more than expected, but still less than other regions of the world. Unfortunately, the growth rate is not enough to reduce poverty, as reported by the World Bank on Wednesday.

In April, the financial organization predicted a 1.4% growth for the regional economy in 2023. This percentage has been revised upwards in their latest forecasts.

Specifically, Brazil is expected to grow 2.6%, Colombia 1.5%, Costa Rica 4.2%, Dominican Republic 3.1%, Ecuador 1.3%, El Salvador 2.8%, Guatemala 3.4%, Honduras 3.2%, Mexico 3.2%, Peru 0.8%, and Uruguay 1.5%.

On the other hand, Argentina’s economy will contract by 2.5% and Chile’s by 0.4%. The World Bank does not provide data on Venezuela.

According to the organization’s forecasts, regional growth will remain weak in 2024 (2.3%) and 2025 (2.6%). This raises concerns, as these rates are insufficient to achieve the much-needed progress in inclusion and poverty reduction.

William Maloney, the chief economist of the financial institution for Latin America and the Caribbean, shares these concerns. He emphasizes the importance of defining a clear strategy to take advantage of the moment, particularly in terms of nearshoring and the green transition.

Furthermore, Latin America is still lagging behind in terms of infrastructure and human capital formation.

Carlos Felipe Jaramillo, the vice president of the World Bank for Latin America and the Caribbean, agrees that the region has shown resilience to various post-pandemic external shocks. However, growth remains anemic. The global context, with high interest rates, low growth in advanced economies, and uncertain prospects for China, doesn’t help either.

Latin American governments also face fiscal restrictions, limiting their ability to make necessary investments.

Despite these challenges, there have been some improvements. Poverty and employment levels have generally returned to pre-pandemic levels, and inflation has fallen to a regional average of 4.4% (excluding Argentina and Venezuela), which is below the average of OECD countries.

The World Bank experts believe that Latin America must not be left behind and should capitalize on the opportunities presented by the digital economy. However, it is important to note that digital connectivity and technologies are not a magic solution and can exacerbate inequalities without clear objectives.

Starting with increasing access to mobile Internet is crucial, as there are still 45 million people in areas without a broadband network. Additionally, only 42% of the population in rural areas has access to fixed Internet, and in 55% of homes with an internet connection, the issue is the quality. There are also gaps between countries and within digital coverage areas, with 240 million people choosing not to connect due to cost, lack of awareness, or limited knowledge of how to utilize the technology.

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