This paper by Sebastian Edwards sounds about right to me:
In this paper I use historical data to analyze the relationship between crises and growth in Latin America. I calculate by how much the region’s GDP per capita has been reduced as a consequence of the recurrence of external crises. I also analyze the determinants of major balance of payments crises. The main conclusion is that it is unlikely that Latin America will, on average, experience a major improvement in long run growth in the future. It is possible that some countries will make progress in catching up with the advanced nations. This, however, will not be the norm; most Latin American countries are likely to fall further behind in relation to the Asian countries and other emerging nations. Not everything, however, is grim. My analysis also suggests that fewer Latin America countries will be subject to the type of catastrophic crises that affected the region in the past. Latin America’s future will be one of "No crises and modest growth."
Here is a non-gated version.
Latin America’s future will be one of “No crises and modest growth.”
I guess that depends on how one define “crisis.” If a crisis is the sort of guerrilla warfare we saw in Nicaragua and El Salvador during the 80s, then maybe so. If a crisis involves the collapse of a currency, like the peso, I would say that is hard to predict over the long run. If a crisis is the rise of populist, quasi-Marxist autocrats like Hugo Chavez, I would think twice about that. In any event, I would be wary of predicting too much stability for Latin America. Stability has never been a particular hallmark of that part of the world over long periods of time.
As the Latin American shantytowns that Tyler has called for in the U.S. emerge, we will be able to share even more in the blessings of Latin American cultural-political tendencies. There’s so much vibrancy our children have to look forward to!
Steve,
The main reason there are favelas in Latin American countries is primarily due to a lack of mortgage availability. This is rapidly changing. Mexico has set the example for the region by adopting a US-style MBS market which has dramatically increased the low end housing stock, like somewhere around 750,000 homes last year. Brazil is about 5 years behind but is moving quickly in that direction. Ten years ago the best mortgage you could get in Brazil was 38% interest with a maximum life of 3 years. Now you can get around 12% and 20 years. Multinational banks like HSBC and Citibank have moved in and are aggressively growing there mortgage loan book. Lulu de Silva came to power as a populist but has yet to do anything that is very populist in nature. He will likely move reforming the mortgage industry to the front as a more prominent agenda as he is half way through his term and this would be low hanging fruit. There is a Brazilian company Gafisa that is gearing up to do 400,000 low-cost homes a year. Equity Partners has a 28% stake in Gafisa as they also invested in Desarrolladora Homex S.A.B. de C.V. (NYSE: HXM) in Mexico. They made a ton of money off the low end housing boom there and see the same trend starting to happen in Brazil. The estimate is that around 8 million households in Brazil need housing so the need is huge. Hence it is likely that Latin America will start to increasingly become more like the US than the other way around. Besides in the US we tear down housing that doesn’t conform to building codes. We prefer our abject poor to be homeless – better to have no house than a crappy house.
Both are gated.
Very annoying.
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