CEPAL Review - Volume 1999, Issue 69, 1999

This paper argues that the agenda for international financial reform must be broadened in at least two senses. First of all, it should go beyond the issues of financial crisis prevention and resolution, to those associated with development finance for poor and small countries and to the “ownership” of economic and development policies by countries. Secondly, it should consider not only the role of world institutions but also of regional arrangements and the explicit definition of areas where national autonomy should be maintained. These issues should be tabled in a representative, balanced negotiation process capable of overcoming some of the adverse political economy features that characterize the current debate. After some initial considerations of the nature of the problems that the current system faces and some political economy aspects, the author addresses the following issues: i) the reforms relating to the prevention and resolution of financial crises; ii) the role of development finance, including the use of multilateral development finance to support increased participation of low-income and small middle-income countries in private capital markets and the financing of social safety nets during crises; iii) the need to reach a renewed international agreement on the limits of conditionality and full recognition of the central role of the “ownership” of development and macroeconomic policies by developing countries; iv) the role of regional and subregional institutions in increasing the supply of “global public goods” and other services in the area of international finance; and v) the need to maintain several realms of national autonomy, including capital account regulation and the choice of exchange rate regimes. The author argues that regional institutions and national autonomy are particularly important for the smaller players in the international arena, who would gain significantly from competition in the services provided to them and from the maintenance of freedom of action in a context of imperfect supply of global public goods.

This article takes stock of the situation caused by the Asian financial crisis and analyses the various proposals made for dealing with it so as to avoid its repetition; it is concluded that financial globalization has destabilized the potentially favourable effects of the process of opening up to international trade and productive investment. It notes that while the 1997 financial crisis did not have the deflationary consequences of the 1929 crisis, thanks to the institutional changes made when policy-makers reacted to it, the generalization of export-led growth strategies tends to repeat situations of over-production, further aggravated by the volatility of international capital flows. There is now a feeling that the twenty-first century should mark a dual turning-point: on the one hand, a better balance should be sought between domestic growth and outward-looking policies, and on the other hand –and above all– a number of reforms designed to avoid further great financial crises should be put into effect. A debate is currently under way on the relative merits of various options in this respect: negotiation of a new international system; a Brady Plan for banks; stricter application of prudential regulations; greater transparency of short-term capital movements; the expansion of new options markets, or even the establishment of a Tobin Tax. It would be dangerous to make major structural changes in the productive and social organization of the world’s economies solely in response to the pressures of the international financial markets. Lastly, the formation of regional integration areas represents a middle way between internationalization in all directions and a protectionist withdrawal behind national frontiers. At all events, notable changes may be expected compared with the 1990s.

This article analyses the reduction of labour costs as a factor which helps to raise the competitiveness of industrial enterprises. It first reviews non-wage labour costs, both for workers with permanent contracts and those with only temporary contracts, or with no contracts at all, in order to show the differences that exist in non-wage labour costs according to the type of contract of the workers or their unregistered status, and the impact of these differences on the labour costs for each type of worker and the average labour costs. It then goes on to consider the evolution of labour costs in industry and the different levels they assume according to the deflator used, because of the changes in relative prices which accompanied the early years of the economic and trade openness process which has taken place in the region. It then analyses the evolution of labour costs in industry by type of contract and the changes in the average labour costs in the sector brought about by the dual strategy of reducing non-wage labour costs and changing the contract structure of industrial employment; describes the effect of exchange-rate lag on average labour costs and competitiveness, and calculates how the latter would have evolved if there had not been such a lag. Finally, some proposals are made for raising the competitiveness of labour in the countries of the region.

This article explores the potential of social capital and culture for contributing to economic and social development. It centers its attention particularly on the situation of Latin America: a region with serious problems of poverty and lack of equity which affect vast sectors of the population, so that it has been considered the continent with the greatest levels of inequality. It is argued here that although it is true that the integration of the questions of social capital and culture into development discussions makes the search for suitable strategies and designs more complex, it is equally true that policies based on designs which leave out such aspects have proved to suffer from serious limitations. The article first of all explores the general idea of social capital, with emphasis not so much on theoretical analysis as on the concrete presence of such capital in actual situations. It then goes on to examine social capital in action in specific Latin American cases and finally formulates some considerations on the possible contributions of culture to Latin American development.

Social capital means the set of norms, institutions and organizations that promote trust and cooperation among persons in communities and also in wider society. In those formulations of the social capital paradigm (and of the neoinstitutional economics on which they are partly based) which focus on its collective manifestations, it is claimed that stable relationships based on trust and cooperation can reduce transaction costs, produce public goods and facilitate the constitution of social actors and even of sound civil societies. Community social capital is a particular form of social capital which comprises the informal content of institutions that aim to contribute to the common good. Even some of the foundational authors of the social capital paradigm have doubts about the feasibility of creating such capital in groups where it does not already exist. The peasant communities of Chiquimula (Guatemala) covered by the anti-poverty “Support Project for Small-scale Producers of Zacapa and Chiquimula” (PROZACHI) displayed a relatively individualistic culture of dependence and domination yet at the same time had a broad and dynamic repertoire of various norms, including some which could serve as a symbolic support for solidary and reciprocal practices. Chiquimula seemed to lack social capital institutions, but with the recovery of institutional practices of the past and the emergence of new contexts and opportunities for developing new group strategies it has been possible to create social capital in these communities, with external support and training, and thus turn an excluded sector into a social actor on the micro-regional scene.

This article analyses defence and security spending (DSS) in Colombia, on the assumption that in order to gain a better idea of the effect of such spending on economic growth and the public finances it would be desirable to analyse its internal composition, since this would make it possible to infer its impact on the production of defence and security. In order to do this, various theories on the repercussions of military expenditure are reviewed and defence and security spending in Colombia is analysed on the basis of information from the Office of the Comptroller-General of the Republic. The efficiency of spending on the armed forces and the National Police is then examined, especially as regards the relations between combat and support and attack and defence, and it is shown that the military forces need to be reorganized. In the conclusions, various ways of securing savings on the defence budget are proposed. The most important of these are connected with personnel management, as payroll expenses represent 73% of total spending. The proposals made in this respect are to modify the system of pay and allowances, increase the retirement age, reduce the number of personnel and restructure the proportions between combat forces and support and administrative personnel.

The reforms made in the early 1980s profoundly changed the structure and functioning of the health sector in Chile in both the private and the public subsectors. In spite of the considerable advances made since 1990, however, the public-private configuration resulting from those reforms has not allowed the shortcomings in terms of resource allocation and the access of the population to health services to be overcome. A proposal for reform of the sector should be aimed at developing mechanisms to raise the efficiency and efficacy of the resources allocated to it, as well as incorporating and improving solidarity-based mechanisms which will help to tackle and solve the problems of health service access afflicting a substantial part of the population. This dual challenge is by no means easy, since it is necessary to cope with growing demand in a context of shortage of resources. The article describes the Chilean financing model and proposes that the present public-private configuration of the health sector must be redefined in order to make possible greater solidarity in financing, reduce the problem of adverse selection of risks, and permit better linkages between the private and public subsectors, both in the field of financing and in the provision of health services.