Rethinking Development in Latin America

Latin American countries face a crossroad that demands profound change in their development paradigm. In the last four decades economic growth, investment, and productivity have shown poor performance. This has made it impossible to break with the productive heterogeneity that characterises the region and its dependence on low value-added productive sectors and commodity-dependent export structures. Although there has been a positive advance in human development, high levels of inequality, poverty, social exclusion, and high labour market informality have been persistent in the countries of the region. Added to these structural problems is the need to face climate change, that has important distributive and social effects and requires a significant amount of investment in adaption and mitigation a will require a change in the development paradigm. A fiscal sustainability framework will be essential to ensure the viability of the public spending required to promote structural change. The framework should prioritise domestic resource mobilisation, through public revenues, which have historically been insufficient to meet the demands for public spending.