Treichel, VolkerLin, Justin Yifu2012-12-212012-12-212012-08https://hdl.handle.net/10986/12013This paper discusses the causes of the middle-income trap in Latin America and the Caribbean, identifies the challenges and opportunities for Latin America that come from China's rise, and draws lessons from New Structural Economics and the Growth Identification and Facilitation Framework to help Latin America escape the middle-income trap. Countries in Latin America and the Caribbean are caught in a middle-income trap due to their inability to structurally upgrade from low value-added to high value-added products. Governments in Latin America and the Caribbean should intervene in industries in which they have a comparative advantage, calibrating supporting policies in close collaboration with the private sector through public-private sector alliances. Through continuous structural upgrading in sectors intensive in factors such as natural resources, scientific knowledge, and unskilled labor, the region could achieve dynamic growth. This would require investments in education, research and development, and physical infrastructure. Therefore, industrial upgrading and diversification would be essential to avoid further de-industrialization arising from the competitive pressures of the rise of China, broaden the base for economic growth, and create the basis for further sustained reduction in unemployment, poverty and income inequality. Failure to do so would lead to a loss of competitiveness and risks of further de-industrialization.en-USCC BY 3.0 IGOACCOUNTINGADVANCED COUNTRIESADVANCED COUNTRYADVANCED ECONOMIESAFFILIATESAGRICULTUREBANK OF KOREABANKING CRISESBANKING SUPERVISIONBANKING SYSTEMBANKSBASE YEARBENCHMARKSBINDING CONSTRAINTSBUDGET DEFICITSBUSINESS CYCLESCAPITAL ACCUMULATIONCAPITAL FLOWSCAPITAL INFLOWSCAPITAL INTENSITYCOMMERCIAL BANKCOMMODITIESCOMMODITYCOMMODITY EXPORTSCOMMODITY PRICESCOMPARATIVE ADVANTAGECOMPETITIVE MARKETCOMPETITIVENESSCONSUMERSCONTINGENT LIABILITIESCREDIT POLICIESCURRENCYDEBTDEBT CRISESDEBT CRISISDEMOGRAPHICDEMOGRAPHIC CHANGESDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPING ECONOMIESDEVELOPMENT BANKSDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDEVELOPMENT STRATEGYDIMINISHING RETURNSDISPOSABLE INCOMEDIVIDENDSDYNAMIC ECONOMIESECONOMETRIC ANALYSISECONOMIC CONDITIONSECONOMIC DEVELOPMENTECONOMIC EFFICIENCYECONOMIC GROWTHECONOMIC HISTORYECONOMIC OUTLOOKECONOMIC PERFORMANCEECONOMIC POWERHOUSEECONOMIC REFORMECONOMIC REFORMSECONOMIC STRUCTUREECONOMIES OF SCALEEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSENERGY RESOURCESEXCHANGE RATEEXCHANGE RATE REGIMESEXCHANGE RATESEXPORT BASEEXPORT MARKETSEXPORTSEXPOSUREEXTERNALITYFACTORS OF PRODUCTIONFINANCIAL CRISESFINANCIAL CRISISFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL SECTORSFINANCIAL STABILITYFINANCIAL SUPPORTFINANCIAL SYSTEMFINANCIAL SYSTEMSFISCAL CONSOLIDATIONFISCAL DEFICITFLEXIBLE EXCHANGE RATEFORECASTSFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN FIRMSFOREIGN INVESTMENTFOREIGN TRADEFUTURE GROWTHGDPGDP DEFLATORGDP PER CAPITAGLOBAL ECONOMIC LANDSCAPEGLOBAL ECONOMYGLOBAL EXPORTSGLOBAL MARKETGLOBAL OUTPUTGLOBAL RISKGLOBALIZATIONGNPGOVERNMENT DEBTGOVERNMENT INTERVENTIONSGROSS DOMESTIC PRODUCTGROWTH OF MULTINATIONALGROWTH POTENTIALGROWTH RATEGROWTH RATESGROWTH THEORYHUMAN CAPITALINCOMEINCOME DISTRIBUTIONINCOME GROWTHINCOME INEQUALITYINDIVIDUAL FIRMSINDUSTRIAL COUNTRIESINDUSTRIALIZATIONINFLATIONINFLATION TARGETINGINFLATIONARY FINANCINGINFORMATION TECHNOLOGYINFRASTRUCTURE INVESTMENTINFRASTRUCTURE REQUIREMENTSINTANGIBLEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL TRADEINVESTMENT CLIMATEINVESTMENT DECISIONINVESTMENT POLICYJOINT VENTURESLABOR COSTSLAWSLEGISLATIONLIBERALIZATIONLIVING STANDARDSLOW-INCOME COUNTRIESLOW-INCOME COUNTRYMACROECONOMIC STABILIZATIONMACROECONOMIC VULNERABILITIESMANUFACTURING INDUSTRIESMARGINAL COSTMARKET ACCESSMARKET FAILURESMARKET PARTICIPANTSMARKET SHAREMARKET SHARESMIDDLE-INCOME COUNTRIESMIDDLE-INCOME COUNTRYMIGRATIONMONETARY POLICYMONOPOLYMULTINATIONAL CORPORATIONSNATURAL RESOURCENATURAL RESOURCESNEOCLASSICAL MODELSNET EXPORTSNEW MARKETSNONPERFORMING LOANSOUTPUTOUTPUTSPER CAPITA INCOMEPER CAPITA INCOMESPOLITICAL POWERPOWER PARITYPRIVATE CAPITALPRIVATE CAPITAL FLOWSPRIVATE INVESTMENTPRIVATIZATIONPRODUCT MARKETSPRODUCTIVITYPRODUCTIVITY GROWTHPROTECTIONISMPUBLIC DEBTPUBLIC ENTERPRISESPURCHASING POWERRAPID GROWTHRATE OF RETURNREAL EXCHANGE RATESRESOURCE ALLOCATIONRETURN ON INVESTMENTSAVINGSSAVINGS RATESSCARCE CAPITALSEIGNIORAGESOCIAL CAPITALSOCIAL PROTECTIONSTABILIZATION POLICIESSTATE ENTERPRISESSTRUCTURAL CHANGESURPLUS LABORTARIFF BARRIERSTAXTAX COLLECTIONTAX SYSTEMTELECOMMUNICATIONSTRANSACTIONTRANSACTION COSTSTRANSPARENCYTRANSPORTUNEMPLOYMENTUNFAIR COMPETITIONVALUE ADDEDWAGESWEALTHWORLD DEVELOPMENT INDICATORSWORLD ECONOMIESWORLD ECONOMYWORLD MARKETWORLD MARKETSWORLD TRADEWORLD TRADE ORGANIZATIONWorld Bank10.1596/1813-9450-6165