So why does this volatility matter? Firstly, increased volatility is associated with long-term reductions in growth, decreased consumption, savings, and investment (Loayza et al. 2007; ECLAC, 2014). Secondly, it harms the already low productivity in the region (Cariolle, 2012). Lastly, temporary shocks very often have permanent effects on human capital accumulation. A robust body of literature provides evidence that economic downturns have negative impacts on child mortality, education, and poverty. Even when countries recover, the human capital accumulation of specific cohorts is permanently corroded (Fernandez and Lopez-Calva, 2010).  

The resilience of countries is closely tied to the robustness of their institutions and economic policies. Key factors, such as the degree of economic diversification, the ability to implement counter-cyclical public policies, the maturity of financial institutions, and the quality of governance, will determine the volatility of growth. LAC has made significant progress in establishing institutions that mitigate the impact of external economic shocks in the last few decades. Strong central banks and monetary policy, for example, lessened the impact of recent inflationary pressures. However, more needs to be done to withstand shocks without reversals in development progress. Strengthening social protection systems, promoting fiscal and monetary policies that are coherent with the economic cycle, and diversifying productive sectors are key aspects for building resilience against future adversities.