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Developing economies of the East are racing past their counterparts in the West. From 1974 to 2000, East Asia's gross domestic product (gdp) grew at an average rate of 6.3 per cent annually in comparison to Latin America's 2.8 per cent
Three indicators -- investment trends, the industrialisation process, and competitiveness -- reveal why the two regions are not in tandem
At 20 per cent, Latin America's gross capital formation as a percentage of gdp remains below 1960 levels. In contrast, East Asia's investment increased steadily, crossing 30 per cent in the early 1990s
Moreover, investments by Latin American countries shifted to less productive categories in the 1980s, accentuating their problem
Industrial output and employment showed that industrialisation took off in East Asia but stagnated or declined in Latin America
In Latin America , manufacturing employment fell from 15.4 per cent of total employment in 1960 to 14.2 in 2000, while it rose from 8 to 14.9 per cent in East Asia
In the same period, industrial output as a share of gdp declined from 28.1 to 17.8 per cent in Latin America and increased from 14.6 to 27 per cent in East Asia
Competitiveness has failed to improve if labour productivity hasn't. While East Asia enhanced labour productivity across all sectors over the last two decades, no such trend was evident in Latin America
For example, Argentina's labour productivity fell from 122.1 points in 1985 to 85.1 in 1996 with a base of 100 in 1990. In the Republic of Korea it rose from 50.7 in 1980 to 231.8 in 2000
With productivity, poor countries need to increase employment, raise real wages and keep an exchange rate that ensures purchasing power parity. Here too, East Asia fared better
Source: Anon 2003, Trade and Development Report 2003, United Nations, New York and Geneva
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