Democracy, the New Left and Income Distribution: Latin America over the Last Decade

Abstract

Since the early 2000s, Latin America has witnessed profound economic, political and distributive changes. While the region experienced slow growth during the period 1990–97, followed by a marked crisis during the ‘lost half decade’ of 1998–2002, between 2003 and 2008 it recorded unprecedented growth in gross domestic product (GDP), of 5.5 per cent a year, the highest since 1967–74 (Ocampo, 2008). Such a steady expansion of output was in part a rebound from the 1998–2002 crisis, but it was supported by a sharp increase in potential output, as investment rates rose by 5 GDP percentage points compared to 2002, reaching 22 per cent of GDP in 2008. From the third quarter of 2008, Latin America was affected by the global financial crisis and particularly by its real effects (a drop in export volumes, terms of trade, remittances, tourist receipts and foreign direct investment, FDI), which reduced GDP by 1.7 per cent in 2009. Yet the region is expected to grow by 4.3 per cent in 2010, faster than any other developing region outside Asia, though still below the average for 2003–08 (CEPAL, 2009b). A second important change recorded during the last decade concerns income distribution. In contrast to the growing polarisation observed during the 1980s and 1990s, between 2003 and 2007 income inequality declined in almost every county of the region.

Section 8.4 of this paper draws in part on Cornia (2010).