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Economic Survey of Latin America and the Caribbean 2009-2010

The Distributive Impact of Public Policies

image of Economic Survey of Latin America and the Caribbean 2009-2010

In 2009, the countries of Latin America and the Caribbean experienced the brunt of the global financial crisis on their levels of activity. However, since the second half of the that year, most countries in the region just begun a vigorous recovery that should strengthen with a regional GDP expansion of approximately 5.2 per cent. The factors behind a more positive performance are both external and internal in nature. Amongst the former can be included the continued dynamism of some key Asian economies, whose sustained demand for products from this region has created important conditions for a recovery in exports, especially in the case of South America.

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Introduction

The purpose of this part of the document is to contribute to discussions of the impact that public policy can have in strengthening the link between economic growth and distributive equity, a link which has been quite elusive in the region’s economic history. The difficulties encountered in Latin America and the Caribbean in terms of consolidating that link are reflected in the idea of an empty box, taken from a work by Fernando Fajnzylber (Torres Olivos, 2007). In the early 1990s, Fajnzylber constructed a double-entry table in which he placed the Latin American countries according to their performance in respect of two variables: the income concentration index and the growth rate. Only one box remained empty, the one which combined high growth with low inequality; that was the source of the idea of the “empty box” as a chronic deficit in the region and a challenge which still faces its analysts and policymakers.

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