Latin America, opportunities and challenges after the crisis

Sebastián Edwards, one of the most influential economists of Latin America, predicted that the region has great potential if it faces the challenges posed by the global economic situation. The key is to advance in modernization and efficiency.

“I am concerned about the effect on incentives resulting from separating contributions, as is being proposed in Colombia. There would be a breakdown at the minimum wage level.”

Edwards sees the existence of the individually funded systems as an opportunity for achieving social equity. It is an industry that thinks about the future.

Improving the quality of education and ensuring a more equitable distribution of income are some of the key challenges for Latin America.

In the opening session of the 6th Asofondos Congress and the 11th FIAP International Seminar, 2013, Professor Sebastián Edwards assessed the present and future of Latin America in the global context, providing an in-depth analysis of its opportunities and major challenges.

The expert said that the region survived the international crisis well, with drops in GDP lower than those of European countries, the United States and Japan, among others, which has expanded its business opportunities providing significant opportunities in this and other areas. The financial sector, for example, could triple its growth.

Opportunities, challenges and recommendations.

Professor Edwards mentioned that in addition to the crisis (which will continue in the next couple of months), the situation in China, with the appreciation of its currency and the rising cost of its workforce (making it less competitive), opens opportunities for export-orientated Latin American countries (with a strong manufacturing industry), good geographical location and a developed infrastructure. According to Edwards, strong countries that can continue to export, that understand the importance of their macroeconomic stability, that are innovative and have a well-structured capital sector, could use these opportunities to best advantage.

He highlighted the individually funded systems as driving motors for the development of economies and an opportunity for achieving greater social equity.

“It’s an industry that thinks ahead because it thinks about the people who are going to retire. If all our industries and politicians took a long-term view and thought about coming generations, by 2063 we could say that we had 50 boom years that took us out of poverty and moved us in the direction of social harmony.”

On the reform of the Colombian pension system, he said:

“I am concerned about the effect on incentives resulting from separating contributions, as is being proposed in Colombia.  There would be a breakdown at the minimum wage level, resulting in systems grouping into two antagonistic segments instead of smoothly and gradually moving towards one another, and that is not positive.”