Latin America: Megacities Risk Becoming A Drag On Growth
Once a source of economic dynamism, megacities risk becoming a drag on growth.
Four out of five Latin Americans live in cities, compared with fewer than half of Asians or Africans. The region’s 198 biggest cities—those with more than 200,000 people—account for 60% of its economic output, with the ten largest alone generating half of that. The productivity gains that flow from bringing people together in cities have been one of the drivers of economic growth in Latin America over the past half century or more. But congestion, housing shortages, pollution and a lack of urban planning mean that Latin America’s biggest cities now risk dragging down their country’s economies, according to a report by the McKinsey Global Institute, the research arm of McKinsey, a firm of management consultants.
Until the 1970s, Latin America’s big cities led their countries’ economic development. São Paulo saw annual economic growth of 10.3% from 1920 to 1970 and Rio de Janeiro of 7%, both faster than the 6.8% notched up by Brazil as a whole over that period. But in the decade to 2008 São Paulo’s output grew only two-thirds as fast as Brazil’s, whereas Rio de Janeiro managed a pitiful 37% of the national average. Of the nine cities with the biggest economies, only Lima, Mexico City and Monterrey saw economic growth in this period that was above their countries’ norms. Read full story>>