It is common in talking about 1980s to refer to it as a “lost decade” for economic growth, when many developing economies around the world were trapped in destructive patterns of debt and inflation. But William F. Maloney, Xavier Cirera, and Maria Marta Ferreyra make a stronger claim about growth in Latin America, which is that the causes and patternsof slow growth go back a century or more. They make the argument in the book, Reclaiming the Lost Century of Growth: Building Learning Economies in Latin America and the Caribbean (World Bank, 2025).
Consider some long-run patterns. This figure shows the countries of Latin America as a group with the orange line. The vertical axis shows Latin America and various high-income countries as a share of US income. Back in 1850, Latin America was at 30% of the US level; 170 years later, it’s about 25% of the US level. Meanwhile, countries like Sweden, Japan, Korea, Spain and Portugal have all experienced meaningful catch-up toward the US level.
This figure shows individual countries of Latin America, compared to Germany and France. As you can see, Argentina and Uruguay start out in 1850 above the levels for Germany and France, but have slumped since then.
The authors write: “Viewed through this lens, LAC did not lose two decades in the 1980s and 1990s; it lost the 20th century. …. [T]he LAC superstars hit a middle-income trap around 1900, while the poorer group grew well, but just not better than the frontier countries in other regions.”
The essential pattern here, argue Maloney, Cirera, and Ferreyra, is that the countries of Latin America have been systematically slower in assimilating and diffusing new technologies throughout their economies.
As one of many examples, the author point out that some countries in Latin Ameica had technological leadership of certain industries in the late 19th century: for example, Chile in copper mining and Mexico in mining of gold and silver. Indeed, the first technical school in the America’s, the Royal Mining College, was founded in Mexico in the late 18th century. But by the early 20th century, new techniques for mining were almost completely being developed outside Latin America. The authors write:
Further, mining had very different development impacts in other countries. Stanford University economic historian Gavin Wright cites the US experience with copper as an example of “how nations learn.” Exploiting copper gave impetus to schools of mining, for instance, at Columbia University and the University of California, Berkeley, which would later morph into major research universities at the frontier of metallurgy and chemistry, which in turn would lay the foundation for diversified industrialization. “The United States did more than passively live off the rents from these resources, but this unique resource base served as the foundation for an advanced national technology and applied science oriented toward this particular bundle of resources” (Wright 1987, 168). Similarly, Japan, perhaps contrary to its image as a manufacturing miracle, leveraged its position as a major copper producer in the same period into broader-based growth: high-tech conglomerates Fujitsu, Hitachi, and Sumitomo all began as copper mining companies (Maloney and Zambrano 2022).
Latin America lacks any comparable legacies. In fact, by 1900, mining across the continent had passed almost entirely into foreign hands, leaving the host nations with an acute feeling of dependency and a limited indigenous technical base upon which to diversify their economies. As late as 1952, Chileans had no capacity to monitor, let alone run, the giant foreign mines in the Norte Grande, and would not until 1965. By 1945, 96 percent of investment in the Mexican mining industry would be in foreign hands (Maloney and Zambrano 2022).
Multiply that example many times, and you have a picture of the economies of Latin America, for some decades now not catching up to the US standard of living, and not falling further behind. Stuck. The authors trace these patterns to a lack of engineering talent being trained in economies of Latin America; a lack of broad-based education that hindered the use of new technologies; a lack of entrepreneurs, and of capital sources to finance such entrepreneurs; and a lack of managers with the vision and resources to improve productivity in their own operations. In addition, Latin America from the middle of the 20th century often focused less on building a productivity advantage than on protecting domestic industries from the skills and technologies developed elsewhere. In the case of Mexico, the authors write:
Even adjusting for differences in economic structure from the average member country of the OECD, Mexico’s R&D intensity is the lowest, at about 70 percent of the level of Greece, Portugal, or Spain and 10 percent of the level of the highest countries (Austria, Finland, France, Sweden). Further, the share of R&D financed by the government ranges from 60 percent in Brazil to almost 80 percent in Mexico compared to 20 percent in China, Korea, and the United States, suggesting that LAC industries are investing proportionately far less. Mexico may represent the most extreme case of the innovation paradox. Geographically it sits immediately below the largest generator of new technology progress in the history of humankind yet somehow invests very little in the human capital or R&D needed to access it.
What is to be done? The discussion in this book focuses on incentives of existing firms to improve, the need for an expanded role for enterpreneurs, and the role of research institutes and universities. This all seems directionally correct to me. But I also find myself thinking that sustained and ongoing economic growth is also a process of sustained and ongoing social and economic change. For governments, firms, and people in countries that lag behind the technology and productivity frontier, catching up will require accepting and embracing an environment of change that will need to happen at a faster pace than change in countries that are technological leaders.
