Latin American Economic Outlook 2019 Development in Transition

Foreword
Acknowledgements
Table of contents
Acronyms and abbreviations
Editorial
	What is key for this journey?
Executive summary
	Progress highlights the multi-dimensional nature of development
	Progress in LAC comes with new development challenges
	International co-operation for development needs to continue evolving
Overview: Development in transition in Latin America and the Caribbean: A new approach for inclusive and sustainable development in the region
	Latin America and the Caribbean as a region in development in transition
		Figure 1. GDP growth and income gap in Latin America and the Caribbean
		Figure 2. Poverty and income inequality in Latin America and the Caribbean
		Figure 3. Selected development indicators by country income groups
		Figure 4. Sub-national disparities across selected development indicators, selected Latin American and Caribbean countries
		Figure 5. Main symptoms of the “new” development traps in Latin America and the Caribbean
	Exploiting untapped opportunities for development in Latin America and the Caribbean
		Figure 6. Intensity of specific topics in development plans in selected Latin American countries
		Figure 7. Tax-to-GDP ratios in Latin America and the Caribbean, OECD and world average by income group, latest year available
	International co-operation as a facilitator of the LAC development agenda
		Table 1. Key dimensions for rethinking international co-operation as a facilitator for sustainable development in LAC
	References
Chapter 1. Socio-economic risks and challenges: A macro-perspective
	Introduction
	An insufficient economic recovery with limited policy space and low potential growth
		Latin America is experiencing a modest economic recovery with low potential growth
			Figure 1.1. Latin America and the Caribbean: Growth and income gap
			Figure 1.2. Total investment
		Heterogeneity persists across the region
		There is low or non-existent policy space across countries to boost inclusive growth
			Figure 1.3. Gross public debt and primary fiscal balance in selected Latin American and Caribbean countries
	The international context presents several risks to the region
		Main external conditions affecting the region
			Figure 1.4. Economic growth outlook and global trade
			Figure 1.5. Commodity prices outlook (2005=100)
			Figure 1.6. Financial volatility and capital flows to emerging markets
			Box 1.1. Debt accumulation by non-financial corporates, a potential risk
				Figure 1.7. Non-financial corporate debt in emerging economies
			Figure 1.8. Foreign liabilities in LAC, debt versus FDI
			Figure 1.9. GDP growth in Latin American economies with alternative scenarios
			Figure 1.10. Current account deficits and foreign direct investment
			Box 1.2. Flexible exchange rates and balance of payments adjustments
				Figure 1.11. Current account balance, exchange rate variations and financial volatility episodes
			Box 1.3. Latin America: Capabilities, productive structure and external constraint
				Figure 1.12. Latin America: Phases of external constraint and economic growth, 1960-2016
	Vulnerable economic performance affects social dimensions
		Insufficient economic growth holds back poverty reduction
			Figure 1.13. Poverty and inequality in Latin America and the Caribbean
			Box 1.4. Poverty and the business cycle
				Figure 1.14. Variation in the number of people living in poverty and extreme poverty, and variation in per capita GDP, 2002-17
		Inequality remains a key challenge with a predominant vulnerable class
	Conclusions
	Notes
	References
Chapter 2. Changing the lens: Development beyond income
	Introduction
	Why do we need to go beyond GDP per capita to assess development?
	Income per capita and well-being outcomes in Latin America and the Caribbean
		Key well-being dimensions have mixed outcomes compared to those warranted by GDP levels
			Figure 2.1. Well-being in Latin America and the Caribbean, selected indicators
		Heterogeneity within income-groups in Latin America and the Caribbean
			Figure 2.2. Selected LAC countries by GNI per capita
			Figure 2.3. Selected development indicators by country income groups
		Subnational heterogeneity in development outcomes
			Figure 2.4. Regional GNI in selected LAC economies
			Figure 2.5. Regional disparities across selected development indicators, selected LAC countries
		Large cross-country differences in domestic resource mobilisation
			Figure 2.6. Tax-to-GDP ratios in LAC, OECD and world average by income
	Links between GDP per capita and well-being outcomes weaken when moving up the income ladder
		Box 2.1. Well-being historical analysis: Technical note
			Table 2.1. Measuring well-being
		Figure 2.7.  The link between GDP per capita and well-being weakens as income per capita increases
		Figure 2.8. GDP per capita and selected development variables by level of income per capita
		Box 2.2. Panel fixed-effect regression of well-being on GDP per capita
	Actual versus expected well-being outcomes in LAC over time
		Box 2.3. How does actual well-being performance compare to expectations?
		Figure 2.9. Actual and expected performance for selected well-being outcomes in Latin America and the Caribbean over time
	Multi-dimensional approach to measure development: Going beyond GDP
	Conclusions
	Annex 2.A1. The link between various well-being dimensions and what GDPper capita cannot explain in well-being
		Figure 2.A1.1. The link between various well-being dimensions and what GDP per capita cannot explain in well-being
	Notes
	References
Chapter 3. The “new” development traps
	Introduction
	The productivity trap
		Figure 3.1. Labour productivity in LAC, OECD, China, Korea and Norway
		Figure 3.2. Decomposition of GDP per capita and output per hour in Latin America relative to the United States
		Table 3.1. Sectoral output per worker in Latin America relative to the United States (2010)
		Figure 3.3. The productivity trap in Latin America and the Caribbean
		Disentangling the productivity trap
			Figure 3.4. Export structure by technology level, world regions (1990-2016)
			Table 3.2. Latin America: Share of firms’ number, employment and production for different types of enterprises (percentages)
			Figure 3.5. Relative internal productivity of MSMEs in Latin America and the European Union
	The social vulnerability trap
		Figure 3.6. Latin American population by socio-economic groups
		Figure 3.7. The social vulnerability trap in Latin America and the Caribbean
		Disentangling the social vulnerability trap
			Figure 3.8. Labour informality by socio-economic group in selected Latin American countries (2014 or latest year available)
			Figure 3.9. Yearly labour market transitions out of informality in Latin America
			Figure 3.10. The link between education, income and labour informality in Latin America
	The institutional trap
		Citizens’ demands are rising and remain unmet
			Figure 3.11. Satisfaction with public services in Latin America, Southeast Asia and OECD
			Figure 3.12. The institutional trap in Latin America and the Caribbean
			Figure 3.13. Tax morale in Latin America: Do citizens find it justifiable not to pay taxes?
			Figure 3.14. Tax-to-GDP ratios, LAC and OECD averages, 1990-2016
	The environmental trap
		Figure 3.15. The environmental trap in Latin America and the Caribbean
		Disentangling the environmental trap
			Figure 3.16. Fossil fuels and mining: Contribution to countries’ GDP, 2017
			Figure 3.17. Greenhouse gases’ emissions by region and sector
			Figure 3.18. GDP growth vs. GHG emissions growth in Latin America and the Caribbean (1990-2015)
	Interactions between these development traps
		Figure 3.19. Development in transition traps in Latin America and the Caribbean
	Conclusions
	Notes
	References
Chapter 4. Making states more capable: Building and implementing national strategies
	Introduction
	Improving state capacities for planning and policy making in Latin America
		Development planning in Latin America: The role of National Development Plans
			Figure 4.1. Latin America (16 countries): Intensity of specific topics in development plans
			Box 4.1. Well-being indicators and structural gap approach: Two complementary methodologies for informing policy makers in the region
		From planning to action: The policy-making process in Latin America
			Figure 4.2. The stylised reform cycle: Activities, principal actors and bottlenecks
	Towards more and better spending for development in LAC countries
		More efficient and effective public spending as a driver of development
			Figure 4.3. Central government current and capital expenditure in LAC
		Closing the spending gap
			Figure 4.4. Public social expenditure in OECD and LAC countries
	Domestic financing for development: The role of public and private sectors to raise funds for development
		More and better public resources are needed to fund development
			Figure 4.5. Tax structure (as percentage of GDP) in the LAC and OECD regions, 2016
			Figure 4.6. Impact of taxes and transfers on income distribution in Latin America, the European Union and selected OECD economies
		Private domestic resources for development: The role of financial markets
			Figure 4.7. Financial inclusion by income and education levels
			Figure 4.8. Capital markets in Latin America compared to OECD countries, 2017
			Figure 4.9. Policy gaps to financial development in selected LAC countries
			Figure 4.10. Numbers of Fintech start-ups per segment (to August 2017)
		National development banks, a complement to financial markets
			Box 4.2. Selected national development banks in Latin America
		The role of public-private partnerships to finance development
	Conclusions
	Annex 4.A1. National Development Plans in Latin America coveredin the analysis
	Note
	References
Chapter 5. International co-operation as a facilitator to address new domestic and global challenges
	Introduction
	Is LAC ready for the new development opportunities offered by changing global and domestic contexts?
		Tapping the opportunities of a shifting global development landscape
		Tapping the right policies to convert new development traps into virtuous dynamics for ongoing change
			Table 5.1. LAC’s Traps
		Tapping international co-operation opportunities to address LAC’s development traps
			Table 5.2. Addressing LAC’s Traps: Beyond traditional co-operation
		Institutional capacities, social aspirations and political will: Are these enough for LAC to embrace a new international co-operation?
		The Latin American region’s evolving relationship with official development assistance: From aid dependence to aid as a catalyser
			Figure 5.1. Taxes and ODA in the six most aid-dependent Latin American countries in 1990
			Box 5.1. Development assistance in Latin America and the Caribbean
	The role of international co-operation for development as a facilitator
		What does a facilitating role in international co-operation mean?
		Adapting approaches to current realities: The context is ripe for a facilitating role for international co-operation
			Box 5.2. What is international co-operation?
		How to speed up the transformation of international co-operation as a facilitator for sustainable development?
			Table 5.3. Key dimensions for rethinking international co-operation as a facilitator for sustainable development in LAC
	The governance model: Working inclusively on shared issues
		New actors, but an outdated governance structure
		Policy partnerships: Countries exchange as peers on shared domestic and global issues
		Multi-stakeholder partnerships: Development actors unleash the fuller potential of co-operation
			Box 5.3. Multi-stakeholder partnerships: Still unmet potential?
		Financing “inclusiveness” in the era of global public goods: Lessons from ODA and development banks
	Building capacities of countries in Latin America and the Caribbean
		Building capacities for better aligning planning with the global context
		Building capacities for better connecting planning with co-operation efforts
			Table 5.4. Co-ordination institutions in selected Latin American and Caribbean countries
		Building capacities for successfully participating in the global agenda
	Tapping into a broader set of instruments and actors
		Co-operation modalities in the post-2015 era
			Table 5.5. Examples of co-operation modalities for development based on SDG 17
		Rebalancing the set of modalities: Adapting to LAC’s specificities
		Rebalancing instruments: Towards greater technical co-operation
		Adopting a “whole-of-government” approach: Broadening actions, tools and actors
			Box 5.4. From the Marshall Plan to the OECD: Evolution from financial to policy co-operation
			Box 5.5. International co-operation and coherent policies can enhance migration’s contribution to the development of Latin America and Caribbean countries
		South-South co-operation and Triangular Co-operation: One of the keys to support the rebalancing of modalities
	Conclusions and proposed next steps
		A call to action: Building the machinery of international co-operation as facilitator
	Notes
	References
Chapter 6. Special feature: The Caribbean small states
	Introduction
		Economic challenges: Structural imbalances, and lack of competitiveness and productivity
		Social development: Overcoming the social vulnerability trap
			Table 6.1. The Caribbean and selected regions and groupings: Changes in Human Development Index ranking 2010-15
			Table 6.2. The Caribbean: Poverty rate by age group, various years
			Table 6.3. Caribbean community: Gross enrolment rates in education, average for 2008-14
			Figure 6.1. Population below national poverty line, unemployment rate and youth unemployment in the Caribbean
		Environmental vulnerability: Constraints and opportunities
			Figure 6.2. Installed generation capacity, Caribbean and LAC, 2015 or latest
		Institutional challenges: Aligning development frameworks with global sustainable development agendas
			Figure 6.3. Intensity of specific topics in development plans, Caribbean (nine countries)
	Conclusions
	References
Country Notes
	Argentina
	Brazil
	Chile
	Colombia
	Costa Rica
	Dominican Republic
	Ecuador
	El Salvador
	Guatemala
	Mexico
	Panama
	Paraguay
	Peru
	Uruguay
	Technical Note
	References