Policy makers in Latin American countries could learn valuable lessons from China in terms of devising proper plans to avoid the middle-income trap, experts said.
Most of the region's 33 nations are middle-income countries, with their per capita gross income standing at between 1,045 and 12,736 U.S. dollars. However, they are now at the risk of being trapped in this earnings range, as they face higher labor costs and a lack of skilled workforce at the same time, a magical combination to stunt economic growth.
China has been grappling with similar problems. In the past few years, it has made effective efforts tackling such challenges and its recently unveiled guidelines for the 13th Five-Year Plan also seek to sustain steady economic growth.
Jesus Valdes Diaz de Villegas, an economist at Mexico's Iberoamerican University, told Xinhua that China's planning allows it to achieve significant growth and help millions of people join the middle class.
Latin American countries should readjust their economic growth strategies to focus on strengthening their domestic markets, just as China did through structural reforms, said Valdes.
To some extent, what's been hindering further growth in these countries is the structural problems within their own economies, said Valdes. "The salaries of the workforce may be rising, but without a corresponding change in technology, competitiveness is falling."
The Economic Commission for Latin America and the Caribbean (ECLAC), a Santiago-based UN body, also suggested that the region follow the example of China, by devising a development strategy tailored to its needs, instead of pursuing boilerplate policies promoted abroad.
"For the last two decades, Latin American countries have mainly followed the free-market policies of the Washington Consensus," said ECLAC, in a report titled "Latin America and the Middle-Income Trap."
"China, in contrast, has pursued a strategy of strategic investments in the expansion of domestic knowledge-based assets and of controlled market liberalization, trade and foreign investment."
David Lozano, an economy researcher at the Center for Multidisciplinary Analysis at the Autonomous National University of Mexico (UNAM), said Latin America will only escape the middle-income trap through true economic discipline as exemplified by Asian countries like China.
Lozano believes structural reforms alone are not enough. What's needed is a true shift in public policy and new economic laws that address the particular needs of each country within a broader international context.
Like China, he said, Latin American countries "should maintain a development plan to pursue vigorous and inclusive growth. This will allow them to safeguard the rule of law and social justice."
