growth in every single country under analysis. On average, the 1980s would have detracted more than .7 percent _per year_ from the 46- year average growth rate. In other words, if the 1980s are seen not only as part of the past but also as part of the future, then estimates based on the first column of table 2 are likely to be appropriate. However, if the 1980s are just seen as part of the past, then growth estimates based on the second column in table 2 may be more appropriate.

**<u>Table 2. Per capita consumption growth rate calibration</u>**

||Aver|ages|Proje|ctions|M|ix|
|---|---|---|---|---|---|---|
||1961-2006|1961-2006*|FCT|FDC|FCT1|FDC1|
|Argentina**|1.4|1.4|1.5|3.9|1.5|2.7|
|Bolivia|0.6|1.1|1.6|5.5|1.1|3.1|
|Brazil|2.3|3.2|3.7|4.7|3.0|3.5|
|Chile|2.7|3.4|4.0|4.3|3.4|3.5|
|Colombia|1.8|2.1|1.7|2.4|1.7|2.1|
|Honduras|1.0|1.5|0.9|3.2|1.0|2.1|
|Mexico|1.8|2.4|3.1|3.7|2.4|2.7|
|Nicaragua|-0.1|2.1|2.8|5.4|1.4|2.6|
|Peru|1.1|2.2|2.2|3.0|1.7|2.1|
|Average|1.4|2.1|2.4|4.1|1.9|2.8|

* Excludes the 1980s to compute the average growth rate. ** Data from 1980-1993 are missing. FCT. Projections of growth under a continuous trend of reform scenario. FDC. Projections of growth under a dramatic change reform scenario. FCT1. Projections of growth resulting from merging FCT1 and average growth over 1961-2006. FDC. Projections of growth resulting from merging FDC and average growth over 1961-2006. Sources: Own calculation using data from WDI and Loayza et al. (2005).

A second reason of why past growth rates in per capita consumption are a poor proxy for expected growth rates in the Latin American context is because of the potential role played by the reforms implement by the region in 1990s. Comparing the situation in the early 2000s and early 1990s, Latin American countries have better macroeconomic frameworks, are more open to trade, have more developed financial sectors, and in virtually all countries public spending in education has increased. All these elements are usually considered in the growth literature as growth enhancers. Moreover, per capita consumption growth in the region over the past three years has been at a four decade high. Figure 1 indicates that whereas the per capita consumption growth rates were on a declining path between the early 1960s and the mid 1980s, since then they have been trending up. Thus, is it possible that as a result of the implemented reforms the region’s growth prospects<sup>15</sup> have improved?

> 15 Strictly speaking when talking about growth prospects we are referring to _GDP growth_ prospects. Moreover, most of the analytical studies looking at the evolution of growth focus on GDP growth, something that in principle could pose a problem in this context. However, it is worth noting that, at least in the countries under analysis in this paper, per capita consumption and per capita growth rates are extremely similar. Beyond the fact the average consumption and GDP growth rates over 1960-2006 are the same,  the regression line in the scatter plot of annual per capita consumption growth rates against per capita GDP growth rates has a slope of .92 (s.e. .06). In this regard, below we base our per capita consumption growth projections on per capita GDP growth projections.

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