Productive Development

We believe that Latin American countries should seek to overcome their natural resource dependency.

It is an empirical fact that countries which have reached middle income GDP levels rarely manage to generate levels of economic growth sufficient to overcome the income gap between them and developed countries. This problem is generally referred to as the "middle income trap" and is closely associated to a development phenomenon of addiction to ex ante comparative advantages known as the "commodities curse". Of course, there are some exceptions to this rule, such as some of the newly industrialised countries in Asia. In the Latin American region, however, not one country has managed to close the development gap yet. In fact, those Latin American countries that came close at different points in history have ended up regressing.
Unfortunately, there is no over-the-counter prescription of development policies that can help Latin American countries overcome the middle income trap. Yet it does seem that some common elements can be gleaned from countries that have industrialised successfully in recent years. These include strategic development thinking, a well thought through strategy of export diversification that overcomes natural resources dependency, and high levels of investment in education, vocational training and human capital.

The Centre for New Development Thinking is committed to contributing to development thought on the middle income countries from an international perspective, focusing in particular on the role of the state in the process of overcoming the middle income trap.