Economic stagnation, deindustrialisation and inequality: different trajectories in Latin America

Abstract

Why do Latin American countries suffer from long-term economic stagnation? The tendency to stagnation is not explained in the same way in large countries. In general, reprimanding accentuated the pre-existing rentier behavior of entrepreneurs. The investment rate is low, leading to greater financialization and deindustrialization, with long-term effects on growth. This particularly affects Argentina, Brazil and, to a lesser extent, Mexico, where labor is raw material for export. The binomial industrialization-deindustrialization in Mexico does not produce the effects that would be expected in terms of growth points. The reason is the withdrawal of the State and, therefore, the small effects of clusters, which do not benefit from imports. Industrialization based on “assembly” for export does not compensate for the deleterious effects of deindustrialization on the domestic market. The very high volatility has negative effects on growth. The “stop” leaves deep marks and the “go” is not sustained, which concerns all countries, more particularly Argentina. Finally and above all, the most important factor is the high inequality in both income and wealth, which Celso Furtado showed in the 1960s. These inequalities are the main cause of the trend of economic stagnation and, therefore, of low social mobility in Latin countries Americans in the long run, and explain the growing marginalization of these countries in the world economy.