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Once again Latin America is confusing development with economic growth, and economic growth with increased investments and exports. These same ideas have come up again and again over the last 50 years, and although subjected to criticism to the point of losing credibility, they return again. To get beyond this confusion, it's necessary to review the various debates about development.
Traditional Latin American economists, along with many politicians, insist over and over that economic growth is the key motor behind development and that it leads to poverty alleviation. This idea is expressed not only in over-simplified terms, but also in other more colorful ways.
In some cases, it is thought that economic growth is only reached through foreign investment or through large export flows. One way or another, the emphasis is placed on economic expansion as a necessary condition to get at problems related to poverty.
These ideas are deformed, reduced to the most basic formulas, and some of these factors end up becoming ends in themselves. Throughout the last several decades this oversimplified generalization has been debated and criticized, but it is always reborn.
The Growth Theory
Positions that maintain that Gross Domestic Product per capita (GDP) growth is indispensable to poverty reduction still prevail. The increase would be achieved through some key factors, including two in particular: more foreign investment and increased exports. Both aspects are related, since they also maintain that an increase in exports isn't possible with internal savings and requires significant foreign investment.
International financial institutions have almost always defended the idea that economic growth, boosted by trade liberalization and investment, will end poverty. For example, the World Bank economists David Dollar and Aart Kraay published a highly-promoted article with a very specific title: "Growth is Good for the Poor" (Dollar and Kraay, 2000). The idea was simple: the expansion in trade stimulates economic growth and that permits poverty reduction.
Positions such as these have kept alive the old idea that economic growth is the central axis of development, but now associated with economic opening, to export more as well as to receive foreign investment.
The Search for Investment
The importance of attracting foreign investment to feed economic growth has reached the point of becoming so simplified that it...