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sustainable development 20 years on from the ... - José Eli da Veiga

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56<br />

patterns in Latin America, with a far-reaching process of trade liberalizati<strong>on</strong>, deregulati<strong>on</strong> of public<br />

services, opening of <strong>the</strong> domestic financial market and <strong>the</strong> capital account, rati<strong>on</strong>alizati<strong>on</strong> of <strong>the</strong> State<br />

apparatus and aband<strong>on</strong>ment of previous policies <strong>on</strong> industry and technology (Stallings and Peres, <str<strong>on</strong>g>20</str<strong>on</strong>g>00).<br />

By <strong>the</strong> mid-1990s inflati<strong>on</strong> was under c<strong>on</strong>trol: an achievement that should not be underestimated.<br />

Yet this success was not enough to bring about ec<strong>on</strong>omic growth or improve social indicators. As<br />

discussed in secti<strong>on</strong> A, <strong>the</strong> number of poor rose between 1990 and <str<strong>on</strong>g>20</str<strong>on</strong>g>02 (see figure I.1) as did <strong>the</strong> number<br />

of slum-dwellers (see figure I.11). With regard to ec<strong>on</strong>omic growth, as shown in table I.5, <strong>the</strong> yearly rate<br />

averaged no more than 3.6% between 1990 and 1997. 10 To this was added a deteriorati<strong>on</strong> in <strong>the</strong> current<br />

account balance, leaving <strong>the</strong> external sector extremely vulnerable to sudden stops in financing flows,<br />

especially financial capital.<br />

The ec<strong>on</strong>omic upturn in Latin America and <strong>the</strong> Caribbean took hold more firmly in <strong>the</strong> sec<strong>on</strong>d<br />

semester of <str<strong>on</strong>g>20</str<strong>on</strong>g>03. 11 This marked <strong>the</strong> <strong>on</strong>set of a str<strong>on</strong>g growth period in <strong>the</strong> regi<strong>on</strong> which has lasted to <strong>the</strong><br />

present, with a momentary interrupti<strong>on</strong> caused by <strong>the</strong> global crisis of <str<strong>on</strong>g>20</str<strong>on</strong>g>09 before recovery in <str<strong>on</strong>g>20</str<strong>on</strong>g>10. The<br />

external sector also gained a sounder positi<strong>on</strong>, with smaller deficits (and some surpluses) <strong>on</strong> <strong>the</strong> balanceof-payments<br />

current account in a number of ec<strong>on</strong>omies in <strong>the</strong> regi<strong>on</strong>. Gross fixed capital formati<strong>on</strong><br />

expanded significantly through domestic saving.<br />

The growth of <strong>the</strong> regi<strong>on</strong> in this period has been heavily tied to burge<strong>on</strong>ing demand for primary<br />

goods <strong>from</strong> China. The impacts of China’s ec<strong>on</strong>omic growth have been channelled not <strong>on</strong>ly through<br />

external trade but also through reserve accumulati<strong>on</strong>. The build-up of reserves has been a str<strong>on</strong>g factor in<br />

keeping internati<strong>on</strong>al interest rates low, which has had benign financial effects for <strong>the</strong> ec<strong>on</strong>omies of <strong>the</strong><br />

regi<strong>on</strong> in <strong>the</strong> past decade.<br />

In <strong>the</strong> sec<strong>on</strong>d half of <str<strong>on</strong>g>20</str<strong>on</strong>g>09, <strong>the</strong> regi<strong>on</strong> began to yield a str<strong>on</strong>ger ec<strong>on</strong>omic performance than <strong>the</strong><br />

more developed countries, thanks to prudent management of fiscal and m<strong>on</strong>etary policies and <strong>the</strong> positive<br />

trade and financial impacts of China’s growth. The internati<strong>on</strong>al financial crisis which broke out in <strong>the</strong><br />

developed countries late in <str<strong>on</strong>g>20</str<strong>on</strong>g>08 had an impact <strong>on</strong> Latin America and <strong>the</strong> Caribbean which, although<br />

temporary, dragged <strong>the</strong> regi<strong>on</strong>’s growth rate into negative territory in <str<strong>on</strong>g>20</str<strong>on</strong>g>09 (-2.0%), after which it<br />

rebounded rapidly (see table I.5).<br />

The Latin American and Caribbean regi<strong>on</strong> is, as a result, <strong>on</strong> a better ec<strong>on</strong>omic footing to<strong>da</strong>y than<br />

at <strong>the</strong> beginning of <strong>the</strong> 1990s and this is <strong>on</strong>e of <strong>the</strong> factors that make this <strong>the</strong> most propitious period for<br />

adopting <strong>the</strong> policies needed to shift <strong>the</strong> pattern of <str<strong>on</strong>g>development</str<strong>on</strong>g> towards greater sustainability. There are<br />

major challenges, however, in relati<strong>on</strong> to <strong>the</strong> c<strong>on</strong>stellati<strong>on</strong> of structural factors prevailing before and<br />

during <strong>the</strong> boom period. These will require an articulated array of macroec<strong>on</strong>omic, <str<strong>on</strong>g>development</str<strong>on</strong>g>,<br />

innovati<strong>on</strong> promoti<strong>on</strong>, productive <str<strong>on</strong>g>development</str<strong>on</strong>g> and social policies (see ECLAC, <str<strong>on</strong>g>20</str<strong>on</strong>g>10a and chapter V).<br />

10<br />

11<br />

For purposes of comparis<strong>on</strong>, in <strong>the</strong> 1960s <strong>the</strong> regi<strong>on</strong> expanded at an average annual rate of around 5.6%<br />

(ECLAC,<str<strong>on</strong>g>20</str<strong>on</strong>g>10a).<br />

The stock market crisis and recessi<strong>on</strong> in <strong>the</strong> United States in <str<strong>on</strong>g>20</str<strong>on</strong>g>01 caused a slowdown in <strong>the</strong> world ec<strong>on</strong>omy,<br />

weakening <strong>the</strong> regi<strong>on</strong>’s ec<strong>on</strong>omies still fur<strong>the</strong>r, especially those with closest ties to that country. Regi<strong>on</strong>al GDP<br />

grew by just 0.3% that year and c<strong>on</strong>tracted by 0.4% in <str<strong>on</strong>g>20</str<strong>on</strong>g>02.

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