Political Risk Latin America Blog @PolRiskLatam

Efficiency drive – A special report on Latin America

Posted in News and Articles, Political Risk by politicalrisklatam on September 13, 2010

by The Economist, September 9th, 2010.

Too many of Latin America’s businesses are uncompetitive—or outside the formal economy.

If productivity growth in Latin America since 1960 had kept pace with the rest of the world, real incomes in the region would be 47% higher than they are, reckons the IDB. Part of the problem is that the region neither saves nor invests enough. According to ECLAC, in 2008 it saved 23% of GDP and invested around 22%, which is better than it used to be but not nearly as good as China’s investment rate of close to 40% of GDP. But Latin America lags even further behind in total factor productivity, or the efficiency with which it combines capital, technology and labour. Between 1975 and 1990 both labour and total factor productivity actually fell in both industry and services (meaning that businesses became less, not more, efficient). Since 1990 productivity in industry has grown more slowly than in East Asia, and in services hardly at all.

Measuring productivity is not straightforward, and economists often disagree about it. Augusto de la Torre, the World Bank’s chief economist for Latin America, reckons that since 2002 productivity has been growing in several countries in the region, including Brazil, Chile, Colombia, Costa Rica and Panama. (continue reading… )

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