The 20% rise in the value of exports clearly led the recovery of the economies of LatinAmerica in 2000, with growth reaching 4%. The export boom was facilitated by the rapidgrowth of the United States and rising international prices for oil and minerals (unlikemany farm products). Regional expansion was also compatible with additional progresstoward reducing inflation. Most countries now have one-digit inflation, the best record inhalf a century. Similarly, governments were able to reduce budget deficits, in some casesby considerable amounts.

Mexico, which had an extraordinary year, together with Brazil, led regional growth.This was the first time since 1994 that expansion phases coincided in the two largestLatin American economies. Other countries with significant growth included the DominicanRepublic, Belize, Chile, Cuba and Nicaragua. In contrast, during 2000 several SouthAmerican countries were unable to recover fully from the 1999 recession.

Although the external environment favoured exports, capital markets did not fare aswell. Once again, direct foreign investment provided most of the resources, but was downcompared to the extraordinary amounts of 1999. Similarly, three and a half years after thefinancial disturbances generated by the Asian crisis, it is clear that internationalcredit markets remain unstable, costs high, and average maturities low. The idea thattoday's international financial crises are intense but short has thus beencontradicted by the facts. For the second year in a row, capital flows were not enough tooffset interest payments and profit remittances.

'...growth at 3.5% to 4% annually...(is) clearly insufficient to reduce poverty, unemployment or the income gap with respect to industralised countries...' The main concerns arising from economic conditions during 2000 are found inunemployment and investment. Unemployment stagnated at high levels: about 9% on averagecompared to 6% a decade ago. Latin America's experience indicates that growth of over4% is necessary to reduce unemployment rates. The investment rate remained low, underlevels for 1994 and 1997, and well below figures for the 1970s, the most recent decade ofrapid growth in Latin America. Uneven access to external credit and unfavourableconditions have been decisive factors in this performance, as is the caution that domesticfinancial intermediaries have shown when it comes to lending. This is particularly intenseafter domestic financial crises, which, unfortunately, were all too frequent in the decadethat is coming to a close.

According to ECLAC's projections, 2001 will see a slight drop in the region'sgrowth, to 3.8%. The slowdown of the Mexican economy, after its rapid growth in 2000, willnot be offset by a significant acceleration in the rest of the region. Of course, thisperformance will depend, above all, on the materialization of the much-desired 'softlanding' of the US economy and conditions in which that process does not unleash newsources of international financial instability. If these assumptions fail to materialise,the probability of a stronger deceleration of growth in Latin America is high.

Results in 2000 and projections for 2001 raise three fundamental issues for LatinAmerica. First, growth has stabilised after reforms at the rather low levels ?3.5 to4% annually?, clearly insufficient to reduce poverty, unemployment or the income gapwith respect to industrialised countries at an adequate pace. Prior to the debt crisis ofthe 1980s, growth ran for three decades at 5.5% a year: this should be the region'sbenchmark. Second, the generation of employment has remained weak and biased towardsskilled labour, generating high unemployment and rising income gaps. Third, externalvulnerability, particularly to capital account shocks, has remained extremely high. Theseare the three basic weaknesses in the growth process that must be the focus of attentionin the immediate future.