Structural Change And Growth In Central America And The Dominican Republic

Foreword -- The current global economic context: will the international financial crisis be surmounted or revisited? -- Economic growth and stabilization in Central America and the Dominican Republicin 1990-2011 -- Labour markets, inequality and poverty -- Central America and the Dominican Republic: role in the world economy and structural change -- The balance of payments and economic growth in Central America and the Dominican Republic -- Macroeconomic policy: main instruments and objectives -- Reflections on a macroeconomic policy for development -- Bibliography -- Annex

Abstract: Accelerating economic growth in Central America, Panama and the Dominican Republic (CAPDR) remains an elusive task. While the region performed relatively well in the post-global financial crisis period, over the last five years obstacles to growth have become more evident and new challenges have emerged. In response, the region has strengthened macro-financial frameworks but more progress will be required to pave the way to sustained growth and prosperity. This book considers the structural factors underlying the region’s growth outlook and assesses its macroeconomic and financial challenges to help shape the policy agenda going forward. The book first identifies the structural determinants of growth in the region related to: capital formation; employment; demographic factors, including immigration; productivity; and violence. It then highlights the importance of creating fiscal space through the design and implementation of fiscal rules and mechanisms to increase accountability (better quality of public spending, adequate policies to reduce income inequality and sustainable retirement plans). Finally, it presents recent evidence on the importance of a supportive financial sector for growth (including through financial inclusion and development).

A comprehensive introduction to the important economic, social and political processes and development issues in this extremely popular region. The Central American nations and those of the Caribbean (including Guyana, Surinam and French Guiana on the mainland) share many historical processes as well as experiencing similar development problems today. These include European colonialism, structural adjustment, small size, reliance on primary production, influence of the United States and moves towards democratisation. While Mexico is obviously a much larger country in area, economy and population terms, it is included in this volume because of its close ties to the other countries in the region through processes such as trade and migration.

Central America, Panama, and the Dominican Republic coped well with the global financial crisis of 2008-09. The impact was generally less severe and shorter lived than in previous episodes, the balance of payments adjustment was orderly, and the stability of the financial system was not compromised. This resilience can be attributed to a large extent to the strengthening of the fiscal frameworks, monetary management, and financial reforms conducted in the years preceding the global crisis. Nevertheless, the region faces considerable challenges for the period ahead, including the need to raise medium term growth above historical levels and protect macroeconomic and financial stability. This book argues that meeting these challenges will have to come from within, in light of the anticipated modest demand growth from trade partners. Raising growth in the region will depend on the adoption of structural reforms that generate substantial productivity gains. Rebuilding fiscal space and securing debt sustainability will hinge on efforts to increase tax revenue and reorienting spending to social and investment priorities. In the non-officially dollarized economies, it will also be essential to strengthen the monetary policy frameworks to keep inflation low and increase exchange rate flexibility, and improve financial regulation and supervision.

The celebratory tone about the emergence of the BRICs and the improved growth in Sub Saharan Africa and Latin America during the 2000s obscures the reality that, for large parts of the developing world, the development challenges are more acute than ever before. After three decades of Washington Consensus policies, deepening globalization, and China's and India's increasing competitiveness in ever more goods and services, many developing countries are now facing three critical challenges: how to engender a transformation of the production structure that creates many more productive jobs, how to make growth more inclusive, and how to stimulate a growth process compatible with environmental sustainability. This book brings together development scholars and practitioners from multiple academic disciplines and policy perspectives to analyze important facets of this triple challenge, to explore interconnections among them and suggest strategies for overcoming the challenges in the current age of globalization. Three features distinguish this book from other current works in the field. First, this book looks beyond the current global crisis and short-term growth opportunities and analyzes the challenges to development from a long-term perspective. Second, books on the barriers to development tend to concentrate on one of the three challenges, e.g. Barbier (2010) A Global Green New Deal on environmental sustainability; Cimoli, Dosi, Stiglitz (2009) Industrial Policy and Development on structural transformation; and Milanovic (2011) The Have and the Have-Nots on exclusion. This book, in contrast, brings the three challenges together to emphasize that they challenges are interlinked and that strategies and policies must begin to recognize these interconnections to address different aspects of the challenges concomitantly. Finally, the contributors to the book include some of the most renowned development thinkers of our time.

Several countries in Latin America and the Caribbean are suffering severe economic downturns and the success of market-oriented reforms is being called into question. This report seeks to contribute to the debate by examining the nature of economic growth in the region. The aim is threefold: to describe the basic characteristics of growth; explain differences across countries and to forecast changes over the next decade.