Differences between Latin America and Africa

There are many parallels between the development of Latin America and Sub‐Saharan Africa. Recent literature on this is reviewed. It is argued in the paper that the key to long‐term development is the shift from inward (import substitution) to outward (export‐oriented) growth. This shift involves both tariff reduction and significant investment in infrastructure and human capital accumulation. Given that much of Latin America (historically) and Sub‐Saharan Africa (currently) has depended or depends on trade taxes for revenue, an outward orientation poses a significant fiscal problem, which makes it extremely difficult to switch to an export‐oriented growth path. East Asian experience points to the importance of broad‐based agricultural growth in making the fiscal transition.

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