## Raising Long-Run Growth in Latin America and the Caribbean—A Complex(ity) Issue

_IMF Blog, June 9, 2015_

## Source details

**Canonical URL:** [Raising Long-Run Growth in Latin America and the Caribbean—A Complex(ity) Issue](https://www.imf.org/en/blogs/articles/2015/06/09/raising-long-run-growth-in-latin-america-and-the-caribbean-a-complexity-issue)

## Other formats

- [Markdown version](/en/blogs/articles/2015/06/09/raising-long-run-growth-in-latin-america-and-the-caribbean-a-complexity-issue/index.md)
- [Structured JSON version](/en/blogs/articles/2015/06/09/raising-long-run-growth-in-latin-america-and-the-caribbean-a-complexity-issue/index.json)
- [Bundle manifest](/en/blogs/articles/2015/06/09/raising-long-run-growth-in-latin-america-and-the-caribbean-a-complexity-issue/bundle-manifest.json)

## Bibliographic details
- Authors: Fabiano Rodrigues Bastos, Ke Wang
- Published: June 9, 2015

---

### Overview and context
- Authors: Fabiano Rodrigues Bastos, Ke Wang
- Date: June 9, 2015
- Main problem: Growth in Latin America and the Caribbean has weakened significantly over the last few years; part of this weakness appears to be persistent and IMF economists have marked down medium-term growth projections.
- Historical note: Abstracting from the “golden decade” from 2003 to 2011, when rising commodity prices powered a strong expansion, the region has struggled to sustain sufficiently high growth rates to catch up with more advanced economies.

### Economic complexity: concept and regional status
- Definition: Economic complexity captures the productive knowledge of a country, inferred from the breadth and sophistication of goods that a country exports.
- Empirical relationship: More complex economies on average have higher levels of income per capita.
- Regional standing:
  - Latin America and the Caribbean are far less complex than advanced economies or the newly industrialized Asian economies.
  - Complexity in Latin America and the Caribbean has been stagnant or trending down since 1970.
  - The region’s complexity looks no worse than the broader group of emerging economies, despite heavy reliance on commodity exports.

### Predictive evidence and quantitative implications
- Data and methods: Analysis revisited Hausmann and coauthors’ findings using several econometric extensions and a large panel of more than 100 countries between 1970 and 2010.
- Key finding: Complexity helps predict long-run growth of GDP per capita alongside demographics, commodity exports, and indicators of macroeconomic stability.
- Quantitative implications for the region:
  - Variation in complexity levels across the region can account for differences of almost a full percentage point in annual per capita growth.
  - If other determinants are abstracted from, the most complex economies in the region (like Mexico and Brazil) would outpace the less complex ones by a full percentage point every year.
  - Offsetting factors:
    - Each year of macroeconomic instability can reduce GDP per capita growth by a cumulative 2 percentage points over the course of a decade.
    - Higher dependency ratios can meaningfully reduce growth, highlighting demographic risks over the coming decades.

### Policy takeaways and recommendations
- Complexity matters but is not sufficient on its own; maintaining macroeconomic stability is essential.
- Structural reforms should remain a priority, especially in areas closely associated with economic complexity:
  - Infrastructure
  - Education
  - Market openness
- Caution on activist development policies:
  - A renewed push for activist development policies needs careful handling.
  - A more systematic understanding of costs and risks is necessary before scaling up such policies.
  - Past experiences with industrial policies are cautionary, particularly where governance and institutional quality lag.
- Use of complexity research:
  - Complexity analysis can help countries better understand comparative advantages and assess potential for knowledge upgrading.
  - Cross-country insights can inform trade and investment negotiations to better leverage a country’s knowledge base.

### Conclusion
- Complexity appears to be an important determinant of long-run economic growth and a useful lens for analyzing the development of countries’ productive capacity, but gains from increasing complexity depend critically on macroeconomic stability, demographic trends, and implementation of supportive structural reforms.

*Source: IMF blog post — Raising Long-Run Growth in Latin America and the Caribbean—A Complex(ity) Issue (Fabiano Rodrigues Bastos, Ke Wang; June 9, 2015).*

---

## Content in this bundle

- **Elevar o crescimento a longo prazo na América Latina e no Caribe: Uma questão de complexidade**
  - [Elevar o crescimento a longo prazo na América Latina e no Caribe: Uma questão de complexidade (Markdown version)](/external/lang/portuguese/np/blog/2015/060315p.pdf.md){rel="alternate" type="text/markdown"}
  - [Elevar o crescimento a longo prazo na América Latina e no Caribe: Uma questão de complexidade (PDF)](/external/lang/portuguese/np/blog/2015/060315p.pdf){rel="external" type="application/pdf"}
- **REO_WHD-2015_FM.indd**
  - [REO_WHD-2015_FM.indd (Markdown version)](/external/pubs/ft/reo/2015/whd/eng/pdf/chap5.pdf.md){rel="alternate" type="text/markdown"}
  - [REO_WHD-2015_FM.indd (PDF)](/external/pubs/ft/reo/2015/whd/eng/pdf/chap5.pdf){rel="external" type="application/pdf"}

---

## References

- [https://www.imf.org/wp-content/uploads/2015/06/whd-reo-may-2015-1.jpg](https://www.imf.org/wp-content/uploads/2015/06/whd-reo-may-2015-1.jpg)
- [https://www.imf.org/wp-content/uploads/2015/06/whd-reo-may-2015-2.jpg](https://www.imf.org/wp-content/uploads/2015/06/whd-reo-may-2015-2.jpg)
- [https://www.imf.org/wp-content/uploads/2015/06/whd-reo-may-2015-3.jpg](https://www.imf.org/wp-content/uploads/2015/06/whd-reo-may-2015-3.jpg)

_Source: https://www.imf.org/en/blogs/articles/2015/06/09/raising-long-run-growth-in-latin-america-and-the-caribbean-a-complexity-issue_