Swimming against the tide

China, Latin America and the Caribbean have enough reason to be optimistic about better economic growth prospects

The economic and political mood in many of the world's richest countries has become increasingly somber. Many analysts are warning of a double-dip recession in the United States. Unemployment is rising. The debt crisis in Europe is not getting better. Because the US and the eurozone still account for more than half of the global economy, there is a real risk that these problems will hold back recovery in the rest of the world.

In fact, analysts have already lowered this year's GDP growth forecasts for Brazil and Mexico, the largest economies in Latin America and the Caribbean. China's growth, though still very impressive, has slowed recently, and controlling inflation is now the Chinese government's top priority.

Nonetheless, I prefer to take the long view and to remember that China and Latin America and the Caribbean have faced and overcome worse difficulties. Twenty years ago, Latin America was just emerging from a very deep and long recession, and suffered high unemployment, hyperinflation and slow growth. Thanks to years of hard work and painful austerity, Latin American countries managed to turn their economies around.

Back then, inflation in Latin America averaged almost triple digits; now, it is just 5.4 percent. In 1990, Latin America's foreign debt was 28 percent of GDP; today, it is about 19 percent. Per capita income then was $4,900; today, it has more than doubled to $11,400. And 20 years ago, half of Latin America's population was poor; today, that has fallen to one-third.

China, too, has undergone a remarkable transformation, with an average annual growth rate of more than 10 percent over the past 20 years, which has lifted hundreds of millions of people out of poverty and allowed the country to become the world's second-largest economy.

It's no surprise, then, that two of the world's most dynamic regions have become major commercial partners, establishing closer trade and investment ties. Trade between Latin America and China has jumped from $12 billion in 2000 to more than $188 billion in 2010.

Chinese demand for Latin America's copper, oil, iron ore and soybeans has boosted growth in a number of the region's countries, helping them revive their economies and consolidate a recovery that emerged from a decade of market-oriented reform and sounder fiscal and monetary policies. Together, China and Latin America and the Caribbean are vital new drivers of world economic growth.

Now, China and Latin America must translate those numbers into something tangible: true well-being of their people and sustainable growth.

In my new book, The Decade of Latin America and the Caribbean, just translated into Chinese, I describe the region's dramatic transformation and note that if the region continues to grow on average 4.8 percent a year, it could again double its per capita income by 2030. In that scenario, the poverty rate of Latin America and the Caribbean would drop to 10 percent, and the middle class would expand to include more than 500 million people, or 75 percent of the total population the region will then have.