Many economies in Central and South America have lagged behind the rest of the world in recovering from the pandemic. The World Bank has provided billions of dollars to help the region’s economies recover.
This week, in our Barriers to Entry: The Cost of Crossing the Southern Border series, we examine the multiple forces – particularly economic forces – affecting migration. William Maloney, chief economist for Latin America and the Caribbean at the World Bank, spoke to Marketplace Morning Report host David Brancaccio about what the current economic climate in Central and South America means for employment and migration. The following is an edited transcript of their conversation.
David Brancaccio: Now that the world is facing inflation, interest rates have risen. And that doesn’t help Latin America, but it doesn’t really help anywhere in the world either. Why is Latin America lagging behind in this post-pandemic phase?
William Maloney: In the medium term, there are about four things driving Latin America’s growth. One of them is exactly what you just mentioned, which is interest rates, which are somewhat flat right now. But commodity prices are rising, and they’ve fallen. Growth in the G7 is crucial and it has been rather slow. And then growth in China is really uncertain. And all of these things mean that growth in Latin America will be rather slow in the short term. The bigger concern for us is that over the longer term, we also have these slow growth rates. So this suggests that we have deeper structural issues that we need to work on.
Brancaccio: By the way, there is an irony in that at the beginning of your answer you mentioned that you are very concerned about inflation, but actually some commodity prices, for example oil, were not as high as before. And for countries that produce goods to sell elsewhere, that becomes a problem.
Maloney: In any case, there are basically two groups of countries in the region: those that export commodities, and they suffer a little when commodity prices fall. And then those who import food and oil, for example in the Caribbean, and they suffer a lot.
Brancaccio: Any thoughts, given your understanding of the situation regarding low hanging fruit that might help the region boost economic development.
Maloney: In the short term, there could be more active measures, such as FDI, a little tougher, or just removing barriers to trade. If you compare the cost of cross-border trade in Latin America, it is about four times higher than in the OECD, which is working to reduce these costs by developing so-called deep trade agreements, in which there is greater harmonization of trade rules on both sides Borders can really help facilitate trade and make foreign direct investors more open to using Latin America as a trading platform.
Brancaccio: It’s difficult to talk about immigration without thinking about the economic context in people’s countries of origin.
Maloney: Absolutely. And we’ve done research in the past that has shown, for example, that in areas where American companies have settled in Mexico, migration has decreased. So we’ve had the idea for a long time that if we could help Mexico grow faster or Latin America grow faster, there would be less migration here. And there is evidence that this is happening. So that remains a good strategy.
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