The economic crisis: a major challenge for Latin America and the Caribbean.

• Author: Barcena, Alicia

"I know all of this by heart.... It's as if time had turned around and we were back at the beginning."

--Gabriel Garcia Marquez, One Hundred Years of Solitude

A LITTLE LESS THAN a year has gone by since September 15, 2008 when Lehman Brothers Holdings Inc. declared bankruptcy and we witnessed, somewhat aghast, the series of events that led the international economic system into today's crisis.

Much has happened since then, and though the crisis has hit hard, both in the United States and in faraway parts of the world, I feel I can say with reasonable certainty that this crisis will not be a repeat of earlier crises in Latin America and the Caribbean.

This is true for three reasons. The first is that the region's economy was going through a historic growth period when the crisis began and is therefore on a fairly sound footing to face it, with a number of positive experiences behind it in terms of public policies for combating poverty.

The second reason is that a global consensus has been forged quickly on how to confront the effects of the crisis and attack its causes. That consensus is expressed very well in the statement that came out of the April 2009 G20 meeting in London: "a global crisis requires a global solution."

And finally, the most important reason may be that this time--unlike the 1980s debt crisis, for instance--the crisis is hitting the region at a time when it has had a good bit of experience with democracy and has established good democratic credentials.

The current crisis surprised Latin America and the Caribbean at a time when the region was experiencing growth rates that it had not seen for four decades. In the five years between 2003 and 2007, annual average growth rates for the region went from 2.1% (2003) to 5.7% (2007), providing the boost necessary to sustain 4.6% growth in 2008. This was the fastest growth the region had seen in 40 years, before the current crisis brought it to an end.

The five-year period was also extraordinary in social terms. Between 2002 and 2007, poverty decreased by 10 percentage points, from 44% to 34.1% of the total population. Extreme poverty fell by almost 7 percentage points, going from 19.4% to 12.6%. Unemployment fell from an average of 11% to 7.5% between 2003 and 2008, and labor income per employed person increased in almost every country. International reserves grew in most countries and, region-wide, averaged approximately 13% of regional GDP. There was also a marked decrease in external public debt; for a sample of 12 South American countries plus Mexico, Honduras, and El Salvador, the external public debt fell from 24% to 8% of GDP between 2003 and...