MercoPress. South Atlantic News Agency

ECLAC highlights low investments and productivity in the region

“The question is whether the Argentine people will have the patience to wait,” Salazar-Xirinachs wondered

The Santiago de Chile-based Economic Commission for Latin America and the Caribbean (ECLAC) issued this week a new edition of its annual Economic Survey of Latin America and the Caribbean 2024 report highlighting the region's poor investment performance, low labor productivity, and limited fiscal space.

The United Nations agency dubbed this scenario “a low economic growth trap,” due to which it foresees overall expansions of 1.8% this year and 2.3% in 2025.

The organization also underlined inconvenient climate change and employment dynamics coupled with little domestic space to implement reactivation macroeconomic policies and global uncertainty. Launching the report at the Chilean capital was ECLAC Executive Secretary José Manuel Salazar-Xirinachs.

The document also noted that over the last decade, Latin American countries have shown low economic growth, with an average rate of 0.9% between 2015 and 2024. Therefore, steaming up growth is paramount for the region in the face of environmental, social, and labor challenges.

“Facing the growth trap, increasing employment, and creating higher productivity jobs requires the strengthening of productive development policies that are complemented by macroeconomic, labor, and climate change adaptation and mitigation policies,” Salazar-Xirinachs underlined.

ECLAC's Economic Survey 2024 projects that Latin America and the Caribbean will maintain a low growth trajectory this year, at an average rate of 1.8%. This slow growth would be observed in all sub-regions, with South America growing by 1.5%; Central America and Mexico by 2.2%; and the Caribbean (excluding Guyana) by 2.6%. By 2025, the region as a whole is expected to grow by 2.3%, a rebound that would be explained, in particular, by South America's performance (which will reach 2.4%).

The second part of the report deals with the impact of the low-growth trap and climate change on employment dynamics. There is a close relationship between growth and job creation so the growth rate slowdown translated into a fall in the growth rate of the number of people employed in the last decade. Between 2014 and 2023, the average growth in this regard reached 1.3%, when in the 1970s it stood at 3.9%. In addition, there was a drop in labor productivity, which in 2024 is estimated to be lower than the one recorded in 1980.

Regarding climate change, the ECLAC report found that investments in adaptation and mitigation were not made. Those initiatives could mean a loss of some 43 million jobs (i.e. 10% of the labor force) by 2050, of which some 15 million would be lost between the agricultural and tourism sectors.

In an interview with EFE, Salazar Xirinachs spoke of a second “lost decade” and warned that the region could face a third one if deep structural changes are not made.

”When we have a growth rate as low as 0.9%, which is half of what we had in the 'lost decade' of the 1980s (2%), it is very difficult to generate quality jobs, reduce poverty, and even reduce inequality,” the Costa Rican economist explained.

The ECLAC report also placed the Dominican Republic at the top of the list of countries posting economic growth while Argentina stood at the bottom of the following ranking: Dominican Republic (5.2%), Venezuela (5%), Costa Rica (4%), Paraguay (3.8%), Honduras (3.8%), Nicaragua (3.7%), Uruguay (3.6%), El Salvador (3.5%), Guatemala (3.4%), Panama (2.7%), Peru (2.6%), Chile (2.6%), the Caribbean (excluding Guyana) and Brazil (2.3% each), Mexico (1.9%), Ecuador (1.8%), Bolivia (1.7%), Colombia (1.3%) and Cuba (0.5%), Haiti (-3%), and Argentina (-3.6%).

”Argentina is being subjected to shock treatment. The president himself announced to the Argentine people that things were going to get worse before they got better (...) The question is whether the Argentine people will have the patience to wait,” Salazar-Xirinachs wondered.