Using the World Bank database and Penn World Table as sources we find that despite strong evidence of encouraging indicators, growth is still low and Latin America as a region is still poor when compared to the rest of the world. What explains this apparent contradiction between better socioeconomic indicators and insufficient growth? My contention is that low productivity and deficient productivity growth are at the base of Latin American unsatisfactory growth and lower-than-expected economic performance. Deploying a multi-methods approach (quantitative: linear regression; qualitative: process tracing which is a qualitative research method for tracing causal mechanisms using detailed, within-case empirical analysis of how a causal process plays out in an actual case) this paper presents results and empirical evidence to support this contention. It is divided in four parts. Part one explores the interaction between commodities, wages and economic growth in the region, explaining the dependent nature of this relationship. Part two presents indicators of productivity and productivity growth, using quantitative methodologies to show their effect on insufficient economic growth. Part three compares Latin America to other regions of the world, illustrating it qualitatively with two case studies. There are 4 independent variables, measured in 19 countries of the Latin American region over a period of 10 years (2002-2012). This results in a total of 760 observations, with α = .05. Finally perspectives for the region now that the commodity boom has come to an end and the “party” seems to be over are presented.
The results show that the only alternative for the region to grow at desired rates and break the dependent relationship between growth and commodity prices is to invest in productivity. Changes in the productive structure, investment in capital accumulation, and institutional changes geared towards stimulating entrepreneurship and innovation are a necessary road for Latin America to attain sustained growth.