Why Latin America needs to save more
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LATIN AMERICANS are well known for their love of the fiesta and, when they can afford it, their conspicuous consumption. Perhaps that is one reason why they regularly figure in opinion polls as among the world’s happiest people. Yet economists frown when households—and governments—spend with little regard for tomorrow. Latin Americans save much less than the experts think they ought to. Compared with residents of developed countries, and especially those of emerging Asia, Latin Americans stand out for their lack of thrift (see chart).
Foreigners have often been prepared to lend some of their spare cash to Latin America. But foreign capital is not a perfect substitute for local savings. For a start it can be fickle, disappearing just when the region needs it most, as happened in the late 1990s. Second, in some Latin American countries, including Brazil, reliance on foreign savings helped to push up…Continue reading