The notable absentee in Latin America

According to the Economic Commission for Latin America and the Caribbean, the region’s annual average GDP growth rate, which stood at 5.5% between 1950 and 1979, fell to 2.7% between 1980 and 2009 and a mere 1.6% between 2010 and 2023.

Much has been written about the structural issues that have stagnated Latin America’s development. While issues like hyperinflation and rapid population growth, which plagued Latin America in the last century, have been largely mitigated, other challenges remain unresolved. These include insufficient savings and investment levels, low productivity, dependence on raw material exports, informal employment, and social inequality. Additionally, new challenges have emerged in this century, such as the effects of an aging population, the energy transition, and the need to bridge the digital divide, alongside concerns related to democracy, governance, and public security. Much has also been written about the structural reforms needed to overcome these challenges and unlock the region’s undeniable potential. And despite all this, the stagnation persists.

Beyond structural reforms, two strategic considerations may also be necessary. The first is to stop seeing Latin America as a homogeneous bloc of nations with a shared destiny. The second is the need for an external catalyst that can, in the absence of sufficient internal forces, generate the essential momentum for change.

In his 1815 Jamaica Letter, Simón Bolívar argued that, given their shared origins, language, and customs, Latin American nations should become “a single nation, with a single bond, linking its parts to each other and to the whole.” Ironically, this notion—an enduring mantra of Latin Americanism—may have inadvertently created one of the main obstacles to having an objective view of the region’s development. Far from converging toward the “Bolivarian dream,” the reality of Latin America is diverging more each day, suggesting that the idea of a shared destiny for the region might simply be a chimera.

The region’s decline, when viewed as a whole, masks vastly different realities. Several data points highlight these disparities. For instance, while Panama has enjoyed an annual average GDP growth of 5.5% so far this century, Mexico’s has been a mere 1.5%. In Uruguay, only 0.3% of the population lives in extreme poverty, whereas in Honduras, that figure stands at 34.4%. Overcrowded households account for 5.8% of the population in Costa Rica, but in El Salvador, they represent 39%. Similarly, 98.8% of households in Chile have access to water, electricity, and sanitation services, but in Bolivia, only 50.2% do. Even in terms of institutional perception, significant differences are evident. While 79% of Uruguayans believe that democracy is the best form of government, only 38% of Ecuadorians share that view.

It’s true that Latin American countries share structural challenges, but these obstacles are not fundamentally different from those faced by other nations during their emerging stages. What does differ, however, is that the internal mechanisms to overcome these challenges appear to be exhausted in Latin America. What is now needed is an external force to create the necessary conditions for progress. For instance, other nations, particularly in less developed regions of Europe, found that the European Union’s initiatives provided the external push needed to untangle the Gordian knot of social and political tensions, which often create problems that initially seem insurmountable.

From an intraregional perspective, it’s unlikely to emerge from efforts to form alliances based more on the idealistic vision of Bolivarian integration than on concrete economic needs, which often overlook the realities of global value chains. Similarly, from the perspective of the global community surrounding Latin America, it’s unlikely to come from cooperation projects that often appear as efforts to address historical grievances from the colonial past. As cold as it may seem, in today’s world, this external influence can only come from the economic and trade relations that nations establish with each other for mutual benefit.

Global economic powerhouses such as the United States and China, which approach Latin America with a pragmatic perspective focused on identifying potential economic and trade partners rather than historical grievances, are clearly leading the way. Meanwhile, Europe—despite its true cultural and historical affinity with the region—lags behind, maintaining an agenda that, while commendable in its attempt to address issues beyond mere economic relations, ultimately distances it from becoming the factor that could help solve the long-standing problems hindering the region’s future. Europe remains notably absent in Latin America, particularly in forging long-term alliances that leverage the unique potentials of individual countries rather than treating the region as a whole. By taking such an approach, Europe could play a crucial role in helping Latin America move towards a future that, while perhaps not the “Bolivarian dream,” could still offer greater prosperity and justice for the region.

Article published in El País on August 11, 2024