Latin America, lagging behind the world with 2% growth in 2023

The economy of Latin America and the Caribbean will grow 2% this year, a little more than expected but less than other regions of the world, which means it will still not reduce poverty, the World Bank reported this Wednesday.

The financial organization forecast in April that the regional economy would grow 1.4% in 2023, a percentage that has risen in its latest outlook.

Brazil will 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%.

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 be weak in 2024 (2.3%) and 2025 (2.6%).

“These rates, similar to those of the 2010s, are not sufficient to achieve the much-needed progress in inclusion and poverty reduction.”warns the World Bank.

This is what most worries William Maloney, chief economist of the financial institution for Latin America and the Caribbean.

The essential thing, according to him, is not to rest on one’s laurels and define “what to do to grow”.

No clear strategy

“I do not see a very clear strategy to take advantage of the moment in nearshoring (relocation of services to a nearby area) and, in many cases, in the green transition either.”, he declared to AFP.

Furthermore, remember, Latin America still has not caught up with the gap in terms of infrastructure and human capital formation.

“The region has proven to be largely resilient to various post-pandemic external shocks, but unfortunately growth remains anemic”, agrees Carlos Felipe Jaramillo, vice president of the World Bank for Latin America and the Caribbean, quoted in a statement.

The global context, although better than six months ago, does not help, with the consequences of high interest rates, low growth in advanced economies and uncertain prospects for China.

Latin American governments also face fiscal restrictions, which “limit the possibility of making the necessary investments,” the report notes.

Although “The debt-to-GDP ratio is estimated at 64%, up from 67% a year ago, still above the 57% recorded in 2019, and high rates have raised the burden of debt service.”adds the bank.

Despite everything, the financial institution sees improvements: “Poverty and employment have generally returned to their previous levels” to the pandemic and “Inflation, excluding Argentina and Venezuela, has fallen to a regional average of 4.4%”, below the average of the countries of the Organization for Economic Cooperation and Development (OECD).

Digital economy

World Bank experts estimate that Latin America has to find a way not to be left behind and take advantage of the advantages of the digital economy.

But without losing sight that “Digital connectivity and associated technologies are not a magic solution“Maloney said at a press conference this Wednesday. Furthermore, without clear objectives it could “exacerbate inequalities”.

We must start by increasing access to mobile internet, which is widespread in the region but still has 45 million people in areas without a broadband network.

Furthermore, only 42% of the population in rural areas has access to fixed internet. In 55% of homes with some type of internet connection, the problem is quality.

There are also gaps between countries and even between those who live in digital coverage areas, since 240 million people choose not to connect because it is expensive, they are unaware of the advantages of doing so or they do not know how to take advantage of this technology.