Does the Investment Climate Matter?: Microeconomic by Pablo Fajnzylber, Jose Luis Guasch, J. Humberto Lopez

By Pablo Fajnzylber, Jose Luis Guasch, J. Humberto Lopez

Even supposing the Latin American region's progress charges are at a 3 decade excessive, they've been traditionally disappointing in relative phrases, which can't be dissociated from the microeconomic setting within which corporations function. coverage makers might have to counterpoint their concentrate on macroeconomic balance with an elevated emphasis on microeconomic reforms. through offering empirical facts linking genuine enterprise functionality to shortcomings in Latin America's funding weather, the booklet discusses rules which may have an important impression on enterprise productiveness through enhancing the surroundings during which organisations make investments and function.

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Is another study of economic performance needed? 11 trend or be clearly below it. Second, and focusing on the most recent years, one can see that in 2005 almost two-thirds of Latin American countries had growth rates lower than global trends. That is, the disappointing performance on the growth front in relative terms extends well beyond the median country and would reach a significant majority of countries in the region. Third, the problem is less marked in the larger economies. For example, among the seven largest economies, four had positive deviations during recent years: Argentina, Chile, Peru, and the República Bolivariana de Venezuela.

6 In contrast, among the 13 smallest economies, only three countries (Ecuador, Panama, and Uruguay) had recent positive deviations with respect to global trends. On the whole, the previous discussion indicates that the track record of the region on the growth front during the past 40 years has been quite poor. Moreover, while one must recognize the marked economic improvement in per capita GDP growth rates experienced by the region since 2003, one must also recognize that when these rates are compared with the experience in a variety of countries (developed, middle-income, East Asian, and natural resource–abundant countries), there is still plenty of room for improvement in the region.

10 Thus, it seems not only that Latin America’s investment rate is low but also that the existing investment has had a low return in terms of its growth payoff. This last element is particularly important, because if the problem were lack of capital, growth strategies aimed at shifting spending from consumption to capital accumulation might lead to rapid growth accelerations. 7 also suggests that growth strategies that rely solely on raising investment levels without addressing possible constraints to the productivity of capital may be doomed to fail.

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