Notwithstanding what a recent World Bank report says has been “significant progress” in economic stabilization in Latin America and the Caribbean over recent decades, the Bank’s recent assessment of the region, contained in a report made public earlier in April, is by no means oozing confidence about the overall immediate future of the economies of the region. In fact, if there is general acceptance that the surge in the country’s oil recovery makes Guyana the present standout among the countries of the hemisphere, the Bank remains insistent that growth in the LAC countries has stalled, inflicting an undermining effect on the economies of most of the region.
The Bank’s new report, titled, “Competition: The Missing Ingredient for Growth,” makes no bones about what it says are the potential areas that demand focused remedial action. Here the Bank cites the leveraging of competition policies and institutions as keys to an impactful growth strategy for the region as a whole. The news will be met with disappointment in a region which had been somewhat buoyed by the ‘lift’ afforded by Guyana’s world class oil discovery and the outcomes of that development. The recent World Bank Report forecasts that regional GDP will expand by 1.6 percent in 2024 and by 2.7 and 2.6 in 2025 and 2026, respectively, reportedly the lowest compared with all of the other parts of the world and insufficient to drive prosperity.
While the World Bank’s assessment of the economies of the hemisphere, as a whole, is unlikely to unduly trouble some countries, including Guyana, Caribbean countries still menaced by food security concerns will receive the World Bank’s report with a considerable measure of worry. “Persistent low growth is not just an economic statistic, it’s a barrier for development. It translates into reduced public services, fewer job opportunities, depressed salaries and higher poverty and inequality. When economies stagnate, the potential of its people is constrained. We must act decisively to help Latin America and the Caribbean break away from this cycle,” World Bank Vice-Presi-dent, Carlos Felipe Jaramillo, is quoted as saying in his assessment of the report.
The Bank’s report says that factors driving the prevailing unimpressive growth numbers include low levels of investment and domestic consumption, elevated interest rates and high fiscal deficits, declining commodity prices, and uncertainty in the prospects of important partners such as the U.S., China, Europe and other G7 countries. An adverse global scenario, marked by geopolitical tensions, disruptions of shipments through the Suez Canal, and the El Niño phenomenon could further dampen prospects, the Report says.
A bright spot in the World Bank’s generally disappointing assessment of the state of the economies in much of the region has been its observations on inflation, the state of which, it says, reflects decades of solid macroeconomic reforms. Regional inflation, excluding Argentina and Venezuela, stands at 3.5%, compared with 5.7% in Organization for Economic Co-operation and Development countries. The World Bank report says that if improvement is to be achieved, countries in Latin America, particularly, must address longstanding challenges, focusing on among other things, reforms in infrastructure, education, and trade which are critical to enhance its productivity and global integration.
High on the World Bank’s list of recommendations for improving the economic condition of countries in the hemisphere is the adoption of “an agenda that drives growth forward… otherwise,” he says, “The region will remain stuck and won’t be able to attract investments or seize new opportunities, such as near-shoring or the low-carbon economy. Improving competition systems should be part of these strategies, leading to improvements for consumers and businesses.”
The World Bank’s recommendation for transforming the growth profile of the hemisphere includes “fostering competition,” a pursuit which, it says, is key to reviving countries’ economies and winning back investor confidence. “When competition is underpinned by sound policies, institutions and frameworks, companies innovate, become more efficient and provide technological breakthroughs. Consumers are better off thanks to lowered prices and more choices. In LAC, this is a pressing matter. The region has low competition levels, undermining innovation and productivity. Consumers are also penalized, facing higher markups than the rest of the world,” the World Bank asserts.
