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How Latin America Misplayed Its Commodities Boom

Latin American countries have used a decade-long revenue boom to boost prosperity and stabilize their economies. But there is a *productivity problem*.

On the right track now?
On the right track now?
Ramiro Albrieu, Andrés López and Guillermo Rozenwurcel


BUENOS AIRES — Economic growth, which was somewhat elusive for Latin America in the 20th century, finally returned at the beginning of this one. In the last decade, poverty decreased by half, and income distribution improved moderately. As a result, the middle class expanded significantly, and by 2009 encompassed a third of the population.

So, are we done? Have we made it? The temptation is to say yes, but not everything that shines is gold, as they say. Maintaining prosperity requires persistence, and potential pitfalls and frustrations lurk along the roadside.

The region's excellent economic performance in the past decade was firmly tied to the bonanza in prices of commodities and natural resources. For an economic development strategy based on raw materials to work, many factors must be considered: an adequate analysis of global dynamics, proper estimates of available natural resources, the monitoring of fiscal revenues, and so on.

To complicate things, a single weak link can cause the entire effort to collapse. In other words, crucial to success is how well we correct the worst of our mistakes so far.

We've analyzed a number of factors for South American countries and have reached some of the following conclusions about the last decade:

Successes and failures

• The region faced another lengthy cycle of expansion in the world economy, though it's been mitigated by the mortgage crisis and readjustment in China. This strongly fueled the global market in natural resources, with greater exchanges and relatively higher prices. In terms of quantity, it had a strong impact on agricultural goods. And in price terms, the effect was significant in areas of fuel and minerals.

• South America has not been particularly capable (or lucky) in transforming its resource potential in natural wealth, and this is particularly true of non-renewable assets. The portfolios and quantities of natural assets differ from country to country.

• The level of natural resource exploitation has markedly increased. Have countries made up for this relative capital loss with the creation of other assets? In general, yes. Genuine savings, which compensate for the loss of one set of assets with the accumulation of others, has increased this decade. On the other hand, using the strictest "strong sustainability" criteria, the human impact on biological capabilities remains relatively low in this region, though again, this varies from country to country.

• While productivity has increased and is advancing toward generating quality jobs, it hasn't been enough to increase aggregate productivity (the ratio of everything produced to its costs). We see a general pattern of low investment in human capital, know-how, infrastructure and technology.

• South American countries show a high recurrence of foreign trade shocks, particularly those that specialize in energy and metals. This meant that the last period of inflated prices fueled a trend in currency revaluation — more or less pronounced depending on national policies — as well as a rise in labor costs and external trade deficits. But current moves toward regional financial integration involve fewer risks than before.

• Governments have significantly increased their ability to absorb part of the profits from the commodities bonanza, both by directly imposing fees and through indirect mechanisms. Where has the money gone? In various directions, but certain countries appear to have spent more than they should have while others have saved it. But deficiencies remain with all of them in areas like basic infrastructure and human capital. So while the forecast is brighter than before, too many dark patches remain.

Lessons have been drawn both failure and success, and innovative new companies have emerged that have a better awareness of environmental risks.

Still, systemic productivity hasn't increased enough, nor has the supply of public goods improved enough. In many cases, the commodities boom appears to be mistakenly perceived as irreversible. It looks like we still have quite a way to go.

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Influencer Union? The Next Labor Rights Battle May Be For Social Media Creators

With the end of the Hollywood writers and actors strikes, the creator economy is the next frontier for organized labor.

​photograph of a smartphone on a selfie stick

Smartphone on a selfie stick

Steve Gale/Unsplash
David Craig and Stuart Cunningham

Hollywood writers and actors recently proved that they could go toe-to-toe with powerful media conglomerates. After going on strike in the summer of 2023, they secured better pay, more transparency from streaming services and safeguards from having their work exploited or replaced by artificial intelligence.

But the future of entertainment extends well beyond Hollywood. Social media creators – otherwise known as influencers, YouTubers, TikTokers, vloggers and live streamers – entertain and inform a vast portion of the planet.

✉️ You can receive our Bon Vivant selection of fresh reads on international culture, food & travel directly in your inbox. Subscribe here.

For the past decade, we’ve mapped the contours and dimensions of the global social media entertainment industry. Unlike their Hollywood counterparts, these creators struggle to be seen as entertainers worthy of basic labor protections.

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