The Economic Commission for Latin America and the Caribbean (ECLAC) has celebrated the efforts of the countries of the region to implement productive development policies, with the aim of “climbing out of the low growth capacity trap” and avoiding a third “lost decade”.
Challenges in Productive Development Policy
According to the latest Cepal press release, entitled “Panorama of Productive Development Policies in Latin America and the Caribbean, 2024”, current efforts are “marginal”, with public resources representing between 0.2% and 1.2% of GDP. This is significantly lower than the 3.5% that some countries of the Organization for Economic Cooperation and Development (OECD) are allocated to this type of policy.
Predominance of tax instruments
The study seems to be the one that prevails over tax instruments in the region in the implementation of productive development policies. For example:
- Argentina: 61.5% of the instruments are tax.
- Brazil: 87% of the instruments are tax.
- Chile: About 70% of the instruments are subsidies.
Dispersion and heterogeneity
ECLAC also reported a “great dispersion” in the institutions responsible for promoting productive development policies, which are poorly articulated among themselves. In addition, subnational governments contribute their own resources to the financing of these policies, but there is considerable heterogeneity in efforts between different territories within countries.
Growth forecasts
In August 2024, ECLAC cut its growth forecast for the region to 1.8%, three-tenths less than the 2.1% it estimated in May. It is forecast to expand by 2.5% in 2025. This contrasts with a 6.9% increase in 2021, which was a response to the impact of the pandemic, and a slowdown to 3.7% in 2022, followed by a 2.2% increase in 2023.
Between 2015 and 2024, the regional GDP growth rate was only 0.9%, which meets the urgent need to improve productive development policies in the region.
ECLAC stresses the importance of strengthening productive development policy and improving its articulation to avoid falling into a new “lost decade”. The adequate allocation of resources and the diversification of instruments are essential to promote sustainable growth in Latin America.
