Latin American Economic Outlook 2011 - How Middle-Class Is Latin America

Latin American Economic Outlook 2011 hOw middLE-cLAss is LAtin AmEricA? CENTRE DE DEVELOPMENT DÉVELOPPEMENT CENTRE 3 development centre e The Development Centre of the Organisation for Economic Co-operation and Development was establishedbydecisionoftheOECDCouncilon23October1962andcomprises25membercountries oftheOECD:Austria,Belgium,Chile,theCzechRepublic,Finland,France,Germany,Greece,Iceland, Ireland,Israel,Italy,Korea,Luxembourg,Mexico,theNetherlands,Norway,Poland,Portugal,Slovak Republic, Spain, Sweden, Switzerland, Turkey and the United Kingdom. In addition, the following non-OECD countries are members of the Development Centre: Brazil (since March 1994); India (February2001);Romania(October2004);Thailand(March2005);SouthAfrica(May2006);Egypt andVietNam(March2008);Colombia(July2008);Indonesia(February2009);CostaRica,Mauritius, Morocco and Peru (March 2009) and the Dominican Republic (November 2009). The Commission of the European Communities also takes part in the Centre’s Governing Board. The Development Centre, whose membership is open to both OECD and non-OECD countries, occupies a unique place within the OECD and in the international community. Members finance the Centre and serve on its Governing Board, which sets the biennial work programme and oversees its implementation. The Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. Participants in Centre events are invited in their personal capacity. A small core of staff works with experts and institutions from the OECD and partner countries to fulfil the Centre’s work programme. The results are discussed in informal expert and policy dialogue meetings, and are published in a range ofhigh-quality products for the research and policy communities. The Centre’s Study Series presents in-depth analyses of major development issues. Policy Briefs and Policy Insights summarise major conclusions for policy makers; Working Papers deal with the more technical aspects of the Centre’s work. For an overview of the Centre’s activities, please see www.oecd.org/dev. LATIN AMERICAN ECONOMIC OUTLOOK 2011 © OECD 2010 4 foreword rd Countries in Latin America have managed to resist the global economic and financial crisis more successfullythaninmanyotherregionsoftheworld.Similarly,theyareshowingrelativelyfastersigns of recovery. Economic growth in the region is expected to be stronger than in most OECD countries in 2010, confirming the trend signalled in last year’s OECD Latin American Economic Outlook. ImprovedmacroeconomicmanagementcontributedtoLatinAmerica’seconomicresilience.Butmore should be done. On the one hand, consolidation of good practices in monetary policy – for example, inflationtargetingwithflexibleexchangerates–hasadvancedinmanycountries,withclearbenefits. On the other hand, a similar level of institutionalisation of good practices has not yet been achieved on the fiscal front, though prudent fiscal management helped some economies weather the crisis. The task at hand is to consolidate counter-cyclical policy mechanisms. TheLatinAmericanEconomicOutlook2011focusesonthesituationofmiddle-incomegroupsinLatin America. The report shows that this group is economically vulnerable: few have university degrees, for example, and many of them work in the informal sector. This is a “middle class” that is not quite similar to that which became the engine of development in many OECD countries. To decrease this vulnerability and ensure that middle-income groups play a larger role in economic development,policiestopromoteupwardsocialmobilityareneeded.Thisincludespensionstoprotect today’s middle-income workers from falling into poverty later in life. Better education policies, too, can contribute critically to ensuring that the children in these income groups achieve more secure livelihoods than their parents, while improving productivity and competitiveness of the economy as a whole. Upward mobility can make Latin American societies fairer, more stable and more cohesive. The report argues why, and how, upward mobility should and can be promoted, and how safety nets can be put in place to protect the most vulnerable segments of people within those middle-income groups, as well as the poorest and most disadvantaged households. The policy recommendations put forth in the Latin American Economic Outlook 2011 build on the OECD Development Centre’s ongoing work on fiscal legitimacy. Latin American and Caribbean countriesneedtoundertakereformoftheirpublicfinancesinordertostrengthenthesocial contract and provide better opportunities for disadvantaged and vulnerable people. Such an approach could helpgovernmentsraisefiscalrevenuesand,atthesame,timeprovidebetterqualitypublicservices. This can in turn help build a constituency for needed tax reform. Indeed, the Outlook confirms what is intuitively obvious: that the region’s middle-income citizens are more willing to pay taxes for services, such as health care and education, if they perceive them to be of high quality. This fourth edition of the Latin American Economic Outlook illustrates the OECD’s commitment towardsemergingeconomiesand,inparticular,towardsLatinAmericaandtheCaribbean.TheOECD has just celebrated the accession of its second Latin American member country, Chile. It has also launched the Latin America and the Caribbean Initiative, which aims to support the region’s policy makers in the fields of fiscal policy, innovation, investment and public-service delivery, providing a forum to share best practices and know-how. LATIN AMERICAN ECONOMIC OUTLOOK 2011 © OECD 2010 FOREWORD The Latin America and the Caribbean Initiative and the Latin American Economic Outlook are both premised on the fact that decision makers have much to learn from each other. This is the kind of peer learning that is at the very heart of the OECD’s mission and which we want to contribute to the region’s well-being. 5 Angel Gurría OECD Secretary-General LATIN AMERICAN ECONOMIC OUTLOOK 2011 © OECD 2010 6 acknowledgements ments TheOECDLatinAmericanEconomicOutlook2011 waspreparedbytheOECDDevelopmentCentre’s Americas Desk, headed by Jeff Dayton-Johnson and under the supervision of Mario Pezzini, Director of the Development Centre. Responsibility for the various chapters was distributed as follows: Macroeconomic Overview, Alejandro Neut, Sebastián Nieto Parra and Caroline Paunov; Chapter 1, Francesca Castellani, Jeff Dayton-Johnson and Gwenn Parent; Chapter 2, Rita Da Costa, Juan R. de Laiglesia,EmmanuelleMartínezandÁngelMelguizo;Chapter3,ChristianDaude;Chapter4,Bárbara Castelletti,ChristianDaude,HamletGutiérrezandÁngel Melguizo;andtheCountryNotes(available on our website), Rita Da Costa, Alba N. Martínez and Emmanuelle Martínez, with contributions from NataliaVillagómez Gonzalez. Box 1.1was written byCarolinePaunov, Box 1.3by Eduardo Lora,and Box 3.1 by Alba N. Martínez. Box 4.1 was written by Bárbara Castelletti and Hamlet Gutiérrez, and Box 4.2 by Christian Daude and Ángel Melguizo. Writing was co-ordinated by Christian Daude, and production was managed by Rita Da Costa and AnnaPietikäinen.AnaGonzález,BéatriceMelinandNataliaVillagómezGonzálezprovidedinstrumental assistanceinthepreparationofthepublication.Specialthanksgotooureditor,DavidCamier-Wright, who helped to turn the original manuscript into a readable report, and to the team of translators, concordeursandproofreaderswhomakesurethatthisisthecaseinalllanguagesofthepublication. The authors of the report would like to thank the rest of the staff at the OECD Development Centre, whose invaluable support helped complete this fourth edition of the OECD Latin American Economic Outlookseries.Enriching feedbackandsuggestionswereincorporated thankstointernal brown-bag seminars. Adrià Alsina, Ly-Na Dollon, Magali Geney, Michèle Girard, Vanda Legrandgérard and Olivier Puech from the OECD Development Centre’s Publications and New Media team ensured the production of the publication, in both paper and electronic form. This Outlook benefits greatly from the advice provided by several individuals whose contributions have brought much to the quality and relevance of the final product. Mentioning everyone would be impossible: some 50 experts alone participated in the meeting we organised in Paris on 26-27 April 2010 to review initial drafts of the chapters. In particular, however, the team would like to thank the following for their active participation in various stages of the authoring process: Lykke Andersen,NataliaAriza,GerardoBracho,AndersonBrandão,MauricioCárdenas,LuizdeMello,Martin Hopenhayn, Barbara Ischinger, Luis Felipe López Calva, Eduardo Lora, Marco Mira d’Ercole, Joaquim Oliveira,LarsOsberg,GeorgePsacharopoulos,FranciscoRodríguez,Rafael Rofman,JameleRigolini, Carlos Sepúlveda, Florencia Torche, David Tuesta, Leonardo Villar, Javier Warman and Juan Yermo. We would like to acknowledge the special contribution that the Latin American Economic Outlook InformalPolicyBoardmakestoenhancetheexcellenceandimpactofourannualflagshippublication. The Board is composed of some of the most noted policy makers and experts on Latin American affairs, and we are honoured to have their support. Co-chaired by OECD Secretary-General Ángel Gurría and Secretary General of the Secretaría General Iberoamericana, Enrique Iglesias, members oftheBoardincludeCesarAlierta(President,Telefónica),JoaquínAlmunia(EuropeanCommissioner for Competition), Alicia Bárcena (Executive Secretary, United Nations Economic Commission for Latin America and the Caribbean), Guillermo Calvo (Columbia University, Professor of Economics, InternationalandPublicAffairs),JoséManuelCampa(SecretaryofStateforEconomicAffairs,Spain), LucianoCoutinho(President,BancoNacionaldeDesenvolvimentoEconômicoeSocial,Brazil),Pamela LATIN AMERICAN ECONOMIC OUTLOOK 2011 © OECD 2010 ... - tailieumienphi.vn