Reforming Latin America's Economies

After Market Fundamentalism
Ricardo Ffrench Davis
Palgrave Macmillan


During the last decade and a half Latin America has implemented deep economic reforms. In broad terms, they have been guided by the one-size-fits-all recipes, inspired in the so-called Washington Consensus.

This book searches into three major issues that are at the core of the predominantly neo-liberal approaches adopted by reformers during the last fifteen years. We focus on macroeconomic, trade and financial reforms and policies. As shown through eight chapters, the approaches taken by Latin America in these three policy areas have a significant responsibility in explaining the disappointing outcomes achieved with respect to growth and equity. Across the whole text we take a policy-oriented approach, offering alternatives for dealing with macroeconomic, trade and financial challenges faced by the region. In the final part, the ninth chapter illustrates a significant move toward reforms to the neo-liberal reforms, in the return of Chile to democracy in 1990.

Low average GDP growth, high real macroeconomic instability and inequitable income distribution have overwhelmed the positive achievements, such as sharply reduced inflation, reduced fiscal deficits, and expanding exports. Actually, in 2005 as compared to 1990, the economic well-being of the average Latin American is farther below that of the citizens of developed countries and of several other emerging economies.

This book is, principally, a product of the last twelve months. Nonetheless, I have been integrating the valuable knowledge that, I believe, I reaped in coordinating research projects at ECLAC and participating in its institutional reports. Those research projects resulted in collective volumes published by The Brookings Institution Press (Financial Crises in Successful Emerging Economies, 2001), Palgrave/WIDER (From Capital Surges to Drought, 2003, co-directed with Stephany Griffith-Jones), and Palgrave (Seeking Growth under Financial Volatility, 2005). I acknowledge the support of the Ford Foundation and UNU/WIDER in the financing of these projects of ECLAC.

Participating in collective discussions and writing sections during the preparation of the ECLAC biennial reports of 2000 on Equity, Development and Citizenship, of 2002 on Globalization and Development, and of 2004 on Productive Development in Open Economies, and for the contribution of ECLAC on Growth with Stability to the Financing for Development Summit (Monterrey, 2001), were highly fruitful for me. I acknowledge my indebtedment with José Antonio Ocampo, Andras Uthoff, Daniel Titelman, Manuel Agosin, Renato Baumann, Ricardo Bielschowsky, Roberto Bouzas, Robert Devlin, José María Fanelli, Roberto Frenkel, Stephany Griffith-Jones, Daniel Heymann, Jorge Katz, Bernardo Kosacoff, José Luis Machinea, Manuel Marfán, Deepak Nayyar, Joseph Ramos, Helmut Reisen, Jaime Ros, Andrés Solimano, Barbara Stallings, Osvaldo Sunkel, Joseph Stiglitz, Heriberto Tapia, John Williamson, and several unfairly omitted staff and participants in research projects and seminars of ECLAC. I have benefited also greatly from the highly substantive working meetings of the "Macroeconomic" and "Capital Account" Task Forces of the Initiative for Policy Dialogue, launched and directed by Joseph Stiglitz.

The major part of this book was written for this publication. The rest proceeds from two sources. In 1998 I finished preparing a collection of papers, previously printed between 1991 and 1998, that was published by Palgrave Macmillan (Reforming the Reforms in Latin America, 2000). One of its chapters, on trade reforms, is partially reproduced here (ch. IV), duly revised, extended and updated. The other source corresponds to parts of papers published since 1998, written with valuable and generous co-authors. I appreciate the permissions granted by Manuel Agosin, José Antonio Ocampo and Heriberto Tapia, to use and adapt pieces of our joint works. I also appreciate the corresponding authorization from Brookings Institution Press, CEPAL Review/ECLAC, FONDAD and PALGRAVE/WIDER.

Heriberto Tapia has provided a notably efficient and enthusiastic support in all stages of the preparation of this typescript. Finally, I acknowledge the valuable support of CIEPLAN (Centre for Economic Research on Latin America) for this publication. When closing this book, Latin America is back to a sharp economic recovery. I hope to contribute, with this analysis and policy proposals, to a transit away from short-timed recoveries (as they were in 1994 and 1997), and to place the region firmly on the road to sustained growth-with-equity.

Ricardo Ffrench-Davis
March, 2005