Contingent on the global economy’s resilience, economic trends in Latin America appear favorable. In the medium-term, however, a number of structural challenges persist.
With the global economy on unstable ground and little economic space remaining for additional policy support, world leaders must focus on preventing a catastrophe in Europe.
Plagued by high or rising inequality, the world’s largest emerging economies must preserve the pro-growth policies introduced in recent decades while improving economic and social mobility.
Although Cannes provided the United States and the broader G20 with an opportunity to rescue Europe from its current economic turmoil, the G20 did not make the tough decisions necessary to end the Eurozone crisis.
Given the severity of the challenges facing Italy today—stagnating productivity, slow growth, and rising debt—and the country’s systemic importance, it is not unreasonable to ask whether Italy should stay in the euro.
Though the global recovery is weakening, the world economy is not likely to head back into recession unless the sovereign debt crisis in Italy and Spain intensifies.
The G20 should consider a bailout of Italy, which would also serve as an intervention for the euro and euro zone itself.
Encouraging developing economies to import capital simply because they are poor not only ignores the economic realities surrounding international financial flows but can also be highly destabilizing and dangerous.
The assumption that capital should flow from rich to poor countries is not only overly simplistic, but it also encourages developing economies to attract dangerous capital flows that they do not need and cannot absorb.
The dramatic increase in official foreign exchange reserves in developing countries has prompted accusations of protectionism, but developed countries are equally to blame for the recent increase.
Tackling the worst effects of inequality requires increased investment in crucial public goods, including education, a more progressive and simplified tax system, and increased international cooperation to avoid a race to the bottom.