Business View Caribbean - August 2015 15
due to external and domestic factors. In the exter-
nal arena, the global economy’s slow growth dur-
ing 2015 stands out, particularly the deceleration
of China and other emerging economies, with the
exception of India. The report indicates that global
trade will remain stagnant as part of what has be-
come a structural problem in the global economy;
and in addition to less external demand, there is
also a downward trend among prices for basic prod-
ucts as well as greater volatility and uncertainty in
international financial markets.
On the domestic front, the report says that a con-
traction in investment along with the deceleration
of consumption growth, coupled with other factors,
are contributing to a reduction in domestic demand,
which has been the main factor driving growth in
recent years.
The decline in the investment rate and the lower
contribution to growth of gross capital formation are
worrisome, since they not only affect the economic
cycle but also the capacity for growth and its quality
in the medium and long term, ECLAC emphasizes.
That is why one of the main challenges for resum-
ing vigorous growth lies in vitalizing the process of
gross capital formation, the document states.
“Revitalizing growth in the short and long term re-
quires boosting public and private investment at a
complex time. This can be done with fiscal rules
that protect investment, resorting to public-private
associations and new sources of financing, such
as the investment and infrastructure banks of the
BRICS countries, and alternative mechanisms such
as green bonds and triangular loans cooperation,”
said Alicia Bárcena, ECLAC’s Executive Secretary.
On labor matters, the Economic Survey signals that
the lower growth will have a negative impact on
employment. On average, the unemployment rate
is forecast to rise in 2015 to around 6.5% of the
population, from the 6.0% registered last year.
In its report, ECLAC stresses that the ability of
countries in the region to accelerate economic
growth will depend on the room they have to adopt
countercyclical policies that especially stimulate in-
vestment, which will be key to reducing the effects
of external shocks and thereby averting that these
economies suffer negative consequences in the
medium and long term.
The organization adds that investment does not
only affect the pace and accumulation of capital, but
it also relates directly to economies’ productivity.
For that reason it is necessary to establish a frame-
work of public policies that promote both public and
private investment.
According to ECLAC, public investment can expand
fiscal room for stimulating growth, without that
necessarily implying an increase in countries’ debt
levels. Furthermore, investment in infrastructure
can be central to achieving sustainable develop-
ment. Although this has increased in recent years,
significant gaps persist.
In terms of private investment, ECLAC indicates
that countries must improve small- and medium-
sized enterprises’ (SMEs) access to productive fi-
nancing while also orienting financial systems to-
wards the productive sector and the long term. In
addition, they should shore up their productive and
territorial architecture with industrial policy invest-
ment instruments and technological innovation that
go beyond tax incentive schemes.
