A recent article in the Economist explains why Latin American economies aren’t growing as fast as some other global economies. It has been blamed on lower Productivity growth. It defines Productivity growth as “gains in the efficiency with which capital, labour and technology are used in an economy—is the elusive holy grail of economic development”. It goes on to say ” productivity growth means squeezing more output from the same inputs. And Latin America has been particularly bad at this. The short answer is that the typical Latin American firm is a small, inefficient service business and may well be operating in the informal economy. Productivity growth tends to be higher in manufacturing and agriculture than in services.”
This is quite interesting since, typically, lower population and homogeneous demography are considered key ingredients for success. South American countries qualify in both those areas yet this region gets dinged due to lower productivity growth. Although Chile and Brazil might be a little ahead of others we have to wait for quite some time before the benefits of education and infrastructure start impacting productivity positively.
