The major challenges facing Latin America

(*) (Before we go any further, let’s just clarify what a multilatina company is: it’s a company that has its origins, and capital, in Latin America, with a parent company located in a Latin American country and operating subsidiaries in different countries in the region and the rest of the world.)

Manuel Aguilera, general manager of MAPFRE Economics, was cautious about this slowdown in growth, which is not expected to surpass 1.9% either this year or in 2025. “All Latin American economies, with the exception of Argentina, will experience growth in 2024, although this will continue to be well below its potential. This isn’t a temporary phenomenon. In the 1950s, the growth rate was 5.5%, over the next 20 years it was 2.7% and in recent decades, it’s dropped to 1.6%. As such, this is a process of structural weakening,” explained the expert, who participated in the roundtable discussion Latin America, economic outlook (I): Opportunities and reform agenda, with José Manuel González-Páramo, former executive director of the ECB and the Bank of Spain and a professor at IESE Business School; Ángel Melguizo, partner at Argia-GT&E; Silvia Hernández Martín, head of Economic Analysis at Telefónica; Rafael Doménech, head of Economic Analysis at BBVA; and Marisol de Francisco, LATAM expert at Banco Santander’s research arm.

In fact, Aguilera made reference to a report from the Economic Commission for Latin America and the Caribbean (ECLAC) dating back to 1969, in which the reasoning used to justify this stagnation could be perfectly applied to the present: “The experience accrued over the past decade once again shows that the fundamental causes of the economic and social backwardness that prevail in Latin America have deep roots in the functioning and structure of the economy. If these go unchanged, it will not be possible to speed up the development process or achieve a fairer distribution of income that will allow, within a reasonable period, half of the (poorest) Latin American population to actively participate in the production process, to improve their living conditions and to be integrated into an effective framework of social progress.”

The first and perhaps most worrying challenge that all experts agreed on was the informal nature of the economy. Aguilera offered a reminder that the underground economy accounts for about 48% of labor activity, and more than 10% of the Latin American population lives below the poverty line.

Some problems have been mitigated, such as bringing inflation under control. To this end, special note was made of the fast reaction of the region’s central banks. Average regional inflation is now estimated as standing at 3.5%, below the 5.7% of OECD countries.

However, traditional problems persist in Latin America, as listed by Aguilera, including issues with internal savings and low factor productivity. To make matters worse, the region is facing a whole host of new problems: demographic transition, problems with health systems, ungovernability and legal and citizen insecurity. This last point was the subject of debate at several of the roundtables.

The Multilatina Business Conference, celebrating its ninth edition this year, aims to provide an overview of the current state of economic and social relations between the European Union and Latin America, highlighting the role of multilatina companies. In addition to renowned economists, figures such as Trinidad Jiménez, chairwoman of the FIE; Andrés Allamand, Ibero-American secretary general; Félix Fernández-Shaw, director of LAC-OCTs at the European Commission; and Susana Sumelzo, secretary of state for Ibero-America and the Caribbean and Spanish in the World, participated in the event.

In addition to Aguilera, Juan Fernández Palacios, who leads the Fundación MAPFRE’s Ageingnomics Research Center, participated at the conference, as part of the Senior Economy: Challenges and Opportunities in the Ibero-American Community roundtable discussion. He presented the Senior Economy Tracker study, carried out by the Ageingnomics Research Center, concluding that the change in the senior economy is positive, with growth of 12% between 2015 and 2020, despite the fact that this figure represents an intermediate degree of progress compared to other European countries, ranking 15th out of 27. “This isn’t a phenomenon that affects only developed economies, it’s something transversal,” he explained. “We’re not talking about future possibility – we’re talking about a reality in the present. The senior economy is a driver of the economy in general,” he added, noting that the senior economy will grow at a cumulative rate of approximately 15% per year between 2015 and 2025.

The study, which is a holistic and quantitative indicator that measures the degree of change and development in the senior economy in each country, comparing it with other countries, suggests that the demographic transition toward an older population has become one of the major challenges of the 21st century. This is due to both the challenges posed by an aging population and the need to harness the potential of the population aged over 55. This context, apparent in every country, has positioned the senior economy as a key economic growth driver as we adapt to the new cycle. However, as noted in the report, the possibility for developing this segment varies greatly across the region.

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