MIAMI — Should numbers be able to tell us the future of countries we must conclude that Latin America has a rather somber outlook. Indeed, beginning with economic performance the figures paint a grim view of the region. Latin America experienced a greater contraction in 2020 and a smaller rebound in 2021.  

To be sure, according to ECLAC Latin America’s GDP contracted by 6.8% in 2020 while growing 6.2% last year. The region thus has yet to reach pre-pandemic performance levels, which will very unlikely materialize before 2023 at a growth rate of 3% or 2.1%, as forecast for this year by the International Monetary Fund, ECLAC and many more.

Worse, as the digital economy gains ground links of the value chain will be nested in emerging markets to keep costs under control and through price competition conquer markets for renewable energy and electric vehicles. Investments in these ventures are high and demand regulatory stability over the long run to be able to properly train the workforce and develop the up and downstream links to the local economy.

This means that such investments will flock to regions where rule of law is uncontested. In Latin America only Barbados, Costa Rica, Uruguay and until very recently Chile uphold and preserve rule of law. Together they represent about 5% of Latin America’s economy. And while Mexico may end up receiving investments related to the development of electric vehicles it will be on account of the existing free trade agreement with the U.S and Canada.

Finally, there is the development impetus rooted in public policies. According to Investment Monitor, the countries to watch this year are Costa Rica, Dominican Republic, Colombia, Chile, and Uruguay. All these nations are benefiting from market friendly no-nonsense public policies that are triggering their GDP growth rate above 4%. But together these nations only account for about 8% of the regional economy.

In short, the large economies of Latin America are trapped in a development stage that cannot be overcome without serious reforms aiming at liberating market forces, attract foreign investment and enhance trade. Without the establishment and enforcement of the rule of law and policies that foster domestic competition and technology transfers the region will continue to slip away in terms of economic and geopolitical weight. The ascent of populist options to the seat of power in countries like Chile and Peru tells us the region is walking the slippery road of decline.