Why Latin America’s economies are stagnating

FORECASTERS SLASHING their predictions for economic growth in Latin America has become a depressing annual ritual. This year is no different. The IMF at first expected growth of 2%. By April that had become 1.4%. Even this may be too rosy. In the first three months of the year the three biggest economies—Brazil, Mexico and Argentina—all seem to have contracted and others performed weakly. Since the world economy has expanded relatively strongly in recent years, what this means is that Latin America is falling behind.

Of course there are some bright spots. Many Latin American economies are at least more resilient and less volatile than they were, thanks to more responsible fiscal policy. Those countries where leaders thought that prudent macroeconomic policy was for dummies—Hugo Chávez in Venezuela, Dilma Rousseff in Brazil and Cristina Fernández in Argentina—have seen slumps. But the really worrying thing is that Latin America’s lagging economic performance has lasted for several decades (see chart). The gap between the region’s average income per person and that of the United States is wider than it was in the 1950s. Two new studies try to explain this relative failure, and how it could be reversed.