How Can Latin America Keep Up Inclusive Growth?

What has been making international headlines in the past few years? Slow growth, commodity crash and corruption, but these only tell part of the Latin American story. Many Latin American companies have taken steps to foster meaningful inclusive growth, but there are still some hurdles. It’s time to do more to embrace disruption from within, or risk being at the mercy of global forces.

The Latin American (ILF) (EWW) economy contracted in the second half of 2015. The fourth quarter registered the biggest fall in six years. The region’s GDP declined 1.2% in the first quarter of 2016, indicating a continued weakness.

However, these statistics hide more than they reveal. Some countries in the region are managing their economic and social fabric in a much better manner. They’ve also taken steps toward more inclusive growth.

Latin America (ECH) (EWZ) is showing signs of improvement with a stabilization in exchange rates and commodity prices (GSG). Economic activities in many countries are expected to pick up in the coming quarters.

However, for more inclusive growth, the region needs to improve competitiveness and productivity. Structural reforms aimed at better fiscal discipline, regulations facilitating business confidence, labor reforms, and an overhaul of the energy and infrastructure sector are required to ensure sound macroeconomic fundamentals.

The government will have to provide an enabling business environment to facilitate the growth of enterprises that could improve productivity, investment, and inclusive growth.

In the long run, stimulating cutting-edge research, innovative business ideas, and entrepreneurship is required to boost inclusive growth. The region needs to promote civic innovation and reforms. Otherwise, the combination of slower growth prospects and persistently high levels of inequality could pose huge social and economic challenges.