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Latin American Economic Outlook 2008

image of Latin American Economic Outlook 2008
While democratic regimes seem to be firmly rooted in the region, Latin American economies continue to experience sustained economic growth, benefiting from the ongoing process of globalisation. This Latin American Economic Outlook, the first volume in an annual series by the OECD Development Centre, provides original insights and comparative indicators on four key issues affecting Latin America’s development: the impact of fiscal performance on democratic legitimacy; the relevance of pension fund reform and governance for national saving and capital markets deepening; the role market-seeking investments by the private sector can have at improving access to telecommunication services; and growing trade with China and India as an incentive to boost the competitiveness of Latin American countries. Policy recommendations and the identification of best practices in the areas under scrutiny aim to put OECD’s expertise and well-known analytical rigour at the service of Latin America’s development.

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Trade for Development

China, India and the Challenge of Specialisation

OECD Development Centre

China and India represent trade opportunities rather than trade competition for the bulk of Latin American countries. Most of China’s increased exports raise stronger competitive challenges to its Asian neighbours than to Latin American countries, although some of the latter, such as Mexico, do face substantial Asian export competition. Chinese and Indian growth also opens Latin American export opportunities to new markets. For a few countries, notably Mexico and Brazil, this includes intra-industry trade, though for a majority of Latin American countries, the foremost trade opportunities are to be found in commodities exports. Already, the Asian Drivers’ heightened demand for oil and minerals has increased both revenues — through the rising prices of commodities — and direct trade with Latin America. Commodity-export specialisation can, however, have some unwanted effects on the economy unless it is managed by responsible macroeconomic policies and well-governed and efficient institutions. Most Latin American economies appear to be coping well, but the challenges will persist. One of the important factors for ensuring long-term diversified growth is investment in innovation. Brazil and Chile are among the prime innovators in Latin America but are still behind OECD-country levels, mainly because innovation in the private sector has remained limited. Another important factor that would help long-term competitiveness and growth is well-functioning and efficient infrastructure. In 2007, this is one of the most important drawbacks in Latin American economies. Investment in infrastructure is therefore also a golden opportunity for improving export competitiveness and, particularly for Mexico and the countries in Central America, for capitalising on their favourable geographic position.

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