World Bank: Commodity expansion can fuel sustainable growth in Latin AmericaBy Christine Armario, AP
Monday, September 13, 2010
Study: Commodities can fuel Latin America’s growth
MIAMI — Commodity wealth, long considered a trap holding back sustainable growth in Latin America and the Caribbean, could be the foundation for future prosperity, a new World Bank study concludes.
Examining the recent growth in commodity exports and the shift in destination markets, the World Bank report states that the increased demand from countries like China could serve as a key driver of regional economic expansion — if the current windfall is properly managed and invested.
“It could leave the region in a more vulnerable situation, but it needs not,” said Augusto de la Torre, chief economist for Latin America and Caribbean at the World Bank.
The study was presented Monday in Miami on the eve of the Americas Conference, an annual event held by the World Bank and The Miami Herald that convenes leading policy makers in Latin America. Those expected to attend include Mauricio Funes, president of El Salvador, and U.S. Assistant Secretary of State Arturo Valenzuela.
De la Torre said the region’s emergence from the global economic crisis can be partly attributed to the growth of commodity exports to emerging Asian countries. From 1990 to 2008, China’s share as a destination market for Latin American natural resources grew tenfold, from 0.8 percent to 10 percent of total commodity exports, while the United States’ share declined from 44 to 37 percent in the same period.
That includes demand for soy products from Argentina, copper from Chile and fish from Peru.
“China offers the opportunity because it’s demanding commodities,” de la Torre said in an interview with The Associated Press. “But the policies in Latin America need to seize that opportunity.”
More specifically, he said, the region needs to ensure that commodity-based integration with China does not result in an undiversified trade structure and weak institutions.
World Bank projections show how significant commodities remain to Latin America: 97 percent of its GDP is produced in net commodity-exporting countries. In 2008, commodity exports reached a high of nearly $400 billion in the seven largest countries in the region. Most Latin Americans live in countries that benefit from high commodity prices.
This dependence has persistently been characterized as a detriment to the region’s economic success, making it vulnerable to booms and busts in the world market.
De la Torre said there are three main concerns policymakers must address: The way in which commodities are produced; maintaining competitiveness; and ensuring commodities don’t negatively affect institutions. He said this can be done, in large part, by not wasting the present bonanza.
The economist said that requires discipline and the ability to save.
“The ability to save requires certain rules, certain institutions, and a political will to do so,” de la Torre said. “Which is not easy because, of course, the moment you start accumulating savings the political system wants to use it today while they are in power. So it requires a sort of implicit contract between the current generation and the future generation. Someone has to speak for the future generation.”
He said the bank sees positive signs this is taking place, giving Chile and its copper mines as one example.
Americas Conference: www.miamiherald.com/americasconference/
World Bank report: go.worldbank.org/5UTUVKOPE0
Tags: Asia, China, East Asia, Florida, Greater China, International Trade, Latin America And Caribbean, Materials, Miami, North America, South America, United States