The development implications of external integration in Latin America

This paper analyses the links between the integration into the international economy and development in Latin America over the past quarter century. It argues that external liberalization led to faster export growth but not to faster GDP or productivity growth. Growth also became more volatile, reflecting large vulnerabilities to external shocks. Looking forward, it argues for variable mixes of three strategies: (i) active production sector policies with a focus on technological upgrading existing and new production activities; (ii) growing links with China, while redressing the major asymmetries that characterize Latin America's trade with the Asian giant: and (iii) strengthened regional integration processes.