Parting shot: A moment in time

Sep 25, 2013

Latin economies must boost productivity growth if they are to avoid economic and political crises. Emerging Asia’s success is instructive. By Barry Eichengreen

The last decade was kind to much of Latin America. Growth averaged 4% since 2003, nearly double that of the preceding two decades. Crises were notable by their absence.

Two developments explain this improved performance. First, with a few notable exceptions, countries showed admirable discipline in managing their fiscal and financial affairs. Balanced budgets and current account surpluses became the order of the day. The region reduced its external debt to GDP ratio from over 60% to less than 30% between 2002 and 2009.

External debt denominated in someone else’s currency became less of a problem. The difference was not so much the greater success of Latin countries in selling local currency debt to foreign investors. The hoopla surrounding local-currency bond funds...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management