Latin America’s Economic Struggles: A Century-Long Gap with Global Peers
Washington, D.C., 2023 — A new analysis based on the Maddison Project Database (2023) highlights that Latin America and the Caribbean (LAC) have consistently underperformed in economic growth when compared to their European and Asian counterparts over the past 170 years.
The data, which measures regional incomes relative to the United States from 1850 to 2020, reveals a persistent stagnation in LAC’s trajectory while other nations such as Finland, Spain, Sweden, and Japan experienced significant progress.
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A Century of Divergence
In the mid-19th century, income levels in LAC were not drastically lower than those in parts of Europe. However, while countries like Finland and Spain steadily closed the gap with the U.S., and Japan achieved remarkable growth after World War II, Latin America remained trapped at relatively low levels.
The chart shows how Japan surged ahead from the 1950s onwards, climbing from near LAC levels to exceed 80% of U.S. income by the late 20th century. Similarly, Spain and Finland maintained strong upward momentum, achieving robust convergence with advanced economies. By contrast, Latin America hovered between 20–40% of U.S. income, rarely breaking out of its stagnant trend.
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Factors Behind the Weak Performance
Economists point to a range of structural challenges in the region:
Dependence on commodity exports, making economies vulnerable to price shocks.
Weak institutions and governance issues, which undermine investment and long-term planning.
Unequal access to education and opportunities, limiting productivity growth.
Low levels of innovation and industrial diversification, compared to Europe and Asia.
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The Global Implication
The data underscores that while much of the world achieved rapid economic convergence with advanced economies, Latin America has remained an outlier. For policymakers, the challenge lies in addressing deep-rooted structural barriers to unlock the region’s growth potential.
As the 21st century progresses, the question remains: can Latin America break this historical cycle of underperformance, or will it continue to lag behind rising powers in Europe and Asia?
