What went right? Latin America endured a “lost decade” of slow growth during the 1980s, as a consequence of which both poverty and inequality rose. That long bust resulted from a previous spate of artificial debt-fueled growth. But the structural reforms that countries enacted as the price of debt relief have, over time, paid off in the form of more durable, broader-based prosperity. Freer trade among Latin countries, and between Latin America and the United States, helped, too.
The region’s governments increased spending on health, education and social benefits — and targeted those resources more efficiently to the neediest. Across the region, better education and health care for women, coupled with more freedom and democracy (except in Cuba, Venezuela and their clients), contributed to declining fertility rates. This enabled women to earn more, and families to devote more time and resources to each of their children.
The results have been most dramatic in the largest Latin American nation, Brazil, which is now so prosperous that it is being looked to for help in bailing out Europe. Between 2003 and 2009, the share of Brazil’s population living on $2 per day or less fell from 22 percent to 7 percent, according to the World Bank, whose loans supported Brazil’s anti-poverty programs. But the second-largest country, Mexico, also has bounced back from a sharp recession in 2009; Wells Fargo Securities Economic Group forecasts that Mexico’s economy will grow 4.3 percent in 2012 — double the predicted U.S. rate. Inequality has eased there as well.Notably, Mexico, like another U.S. friend, Colombia, kept its economy moving despite struggling against drug-related violence.
Obviously all is not perfect in Latin America. Cuba still stagnates, and Venezuela under Hugo Chavez is burdened by crime and inflation. Millions of Latin Americans engaged in farming and informal urban employment have yet to share in the benefits of growth. Some Latin countries remain dependent on commodity prices; China’s raw-material shopping spree has buoyed them, but probably can’t last forever.
But the basic trends are positive — much more so than many would have predicted based on the region’s predicament at the end of the 1980s. Latin America is reaping the fruits of reform, openness and hard work. There’s a lesson in that for the whole world.