Elections & Energy Policy Brief

ELECTIONS & ENERGY | La Jolla Conference 30 th Anniversary Policy Brief

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decade. The new political leadership moved away from most of the tenets of the Washington Consensus. But neither did they pivot to the Chinese version of state capitalism. Instead, Latin America embraced its extractive dependency by capturing higher rents – directly through their state own enterprises (SOEs), or indirectly by increasing taxes and royalties. Moving average 5 years of GDP for Latin America

Direct transfers and subsidies, in addition to a surge on remittances, resulted in the emergence of a new middle class, mostly low-income families with increasing purchasing power. During the commodity super-cycle Latin America’s poverty declined from 45.4 percent in 2002 to a low 28.6 percent in 2013. Its middle class boomed, with mid-income groups swelling from 27 percent of the population in 2002 to 41 percent in 2017 (Cliffe 2021). The status of this emerging “middle class” was particularly precarious (Kessler and

Benza 2020): most of them were unable to save or invest in long-term productivity improving assets, and the vast majority worked in the informal sector. As a result, while the region experienced a boom in consumption, the same could not be said for investments in infrastructure or improvement in physical or human capital. The region’s health care and education infrastructure remained as deficient as before, and its exports became increasingly dependent on few commodities. This dependency was exposed by the end of the commodity super-cycle in 2015.

ANNIVERSARY POLICY BRIEF | INSITUTE OF THE AMERICAS