Why Latin America went from boom to bust

Latin America enjoyed a golden age in the 2000s, a decade defined by sustained economic growth and decreasing levels of inequality, with around 50 million people escaping poverty. At one point, experts believed Latin America would become a largely middle-class region. Now, it has once again become home to economic turmoil, social unrest, and growing disparity. 

Protests have erupted in Ecuador and Chile. Argentina faces another economic collapse of its own. Bolivia is on the cusp of civil war—with tensions remaining high after former President Evo Morales left the country following a military coup. And Venezuela continues its descent into full-scale socioeconomic chaos.

The International Monetary Fund has lowered its growth projections for the region to just 0.2 percent this year and 1.8 percent in 2020. In a recent report, the Economic Commission for Latin America (CEPAL) said that the slowdown is likely to continue.

So, what went wrong?

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Behind the Latin American “miracle”

The so-called “commodity supercycle” was a rare moment in the 2000s during which, for about a decade, many physical commodity prices—such as food, oil, metals, chemicals, and fuels—grew spectacularly after steady decreases in the preceding 150 years.

The boom began with China, a country which enjoyed double-digit growth rates in the years following its integration to the World Trade Organization. The appetite of China and other industrializing Asian countries for basic products had an instant impact on Latin America—a region home to some of the biggest reserves of natural resources.

“China’s influence across global commodity markets is without parallel,” said consultancy firm Wood Mackenzie in a report earlier this...