Latin America and the Caribbean would not be the most volatile region in the world in economic terms, especially when compared to other developing regions, indicates a study published in the most recent issue of ECLAC Magazinethe main academic publication of the United Nations Economic Commission for Latin America and the Caribbean.
Edition No. 139 of the magazine (April 2023) is now available online on the ECLAC website with different articles by leading international professors and specialists, also including topics such as the role of modern (professional) services in development, and Central American trade integration from the perspective of intraregional added value, among other investigations.
In the article entitled “Constraints linked to instability and development traps: an empirical analysis of growth cycles and economic volatility in Latin America and the Caribbean”, by Danilo Spinola, Associate Professor of the Department of Finance and Economics at the Birmingham City Business School (United Kingdom) noted that, despite what is said in the literature, the region is not the most volatile in the world, but its countries have many particular characteristics in common.
According to the author, although macroeconomic volatility is not a new issue, it is currently a central problem for developing countries. Drawing on structuralist theory, the aim of Professor Spinola’s work is to address the periodic phenomenon of volatility as driven by structural fragility (defined as the inability of an economy to absorb external economic shocks). Focusing on aspects associated with the volatility of GDP growth, its study empirically demonstrates different patterns of volatility in a variety of countries and regions.
It concludes that, on the one hand, the volatility patterns of Latin America and the Caribbean clearly differ from the pattern observed in developed countries, while, on the other, the region’s pattern is similar to that of many other developing regions, especially Central Asia and certain parts of Sub-Saharan Africa. Spinola indicates that there are some indications that Latin America and the Caribbean behaves differently from developed countries, but there is no evidence that further differentiates it from other developing regions. “In short, the data shows that the countries of Latin America and the Caribbean are, on average, more volatile than developed countries. However, it cannot necessarily be said that the countries of the region are more volatile than other developing countries”, he adds.
For their part, in the article “The role of services in economic development and the center-periphery relationship”, professors Wallace Marcelino Pereira, from the Federal University of Pará (UFPA), Fabrício José Missio, from the Federal University of Minas Gerais (UFMG), and Frederico Gonzaga Jayme Jr., also from UFMG -both entities located in Brazil- raise a theoretical discussion on the importance of the modern services sector (professional services) for Latin America in order to update the thesis central to the Latin American structuralist approach, in the sense that they contribute to innovation, increased productivity and, consequently, economic growth.
According to its authors, today’s world is made up, on the one hand, of developed countries that produce sophisticated services, that make intensive use of technology and are highly integrated with other sectors of the economy, and, on the other, of a group from (developing) countries that produce low-tech services that are uncompetitive at the international level and aimed at the domestic market. This represents a new stage of structural change that reinforces the center-periphery dichotomy. In this framework, they indicate that Latin American countries are not complex, they are not very productive and they are not leaders in the technological progress of modern services. The central countries have competitive services, while the peripheral ones occupy a restricted space in foreign trade.
In the article “Analysis of Central American trade integration from the perspective of intraregional added value”, Ramón Padilla Pérez, Head of the Economic Development Unit of the ECLAC subregional headquarters in Mexico, and Roberto Orozco, Research Assistant at the same Unit, study Central American trade integration in terms of added value on the basis of the first regional input-output matrix, an instrument that ECLAC built in close collaboration with the region’s central banks and statistical institutes.
They indicate that the open regionalism strategy applied by the Central American countries has resulted in significant intra-regional trade integration in terms of gross exports, but a significant proportion of extra-regional intermediate inputs are incorporated into them. According to the authors, intra-regional exports create less national value added than total exports, incorporate a considerable proportion of extra-regional intermediate inputs and, consequently, create little added value in the region itself.
The latest edition of ECLAC Magazine includes a total of 10 articles by renowned academics and international experts. In addition to the studies already mentioned, research on energy security in Central America is also published; the pandemic and its narratives about social policy in Costa Rica; the productive development policy in Chile; the pass-through of exchange rate shocks in Brazil; and a debate on the privatization of health systems, the pandemic and deprivatization, among other topics.
Readers are reminded that the opinions expressed in the articles published in the Review are those of the authors and do not necessarily reflect the views of ECLAC.
