Reduced Inequalities
The competitiveness of the small economies of the region
This iiriide explores the changes in sources of competitiveness in the exports of small countries to the industrialized market economies between 1978 and 1988.
Education and changing production patterns with social equity
The underlying basis for this presentation is the proposal on Changing Production Patterns with Social Equity which ECLAC submitted for the consideration of the Governments of the region in May 1990, and which has since been debated in various national and regional forums.
Water property rights and the State: The United States experience
The nature of property rights regimes has great influence on patterns of water and other natural resource development, and hence on economic development in general.
Wage disparities in the urban labour market
A number of studies have confirmed that in all capitalist * economies which have attained a certain degree of industrial development a segmentation of the urban formal labour market occurs, one of the consequences of which is greater inequality in wages and salaries. The author explains this phenomenon by postulating as a general hypothesis that the level of remunerations is determined by the overt or latent conflict between entrepreneurs and workers, and that many of the changes in the industrial structure derive from the efforts of entrepreneurs to obviate its destabilizing effects.
Prices and gains in the world coffee trade
There is now an abundant literature on the need to protect the prices of the developing countries’ primary export products, but few studies trace in detail the evolution of these prices through all the stages of production and marketing up to that of final consumption in the central countries. The purpose of the present article is to examine this process with reference to coffee, a product which is of great importance in Latin America’s foreign trade, and whose final price, as is common knowledge, has risen significantly in recent years. The data considered lead the author to conclude that much of the increase has occurred in the consumer countries, where, of course, a major proportion of the surplus thus generated has remained.
Socio-economic structure and collective behaviour
This article provides an overview of a number of changes that have taken place in the region’s economy, together with their effects in terms of its social stratification, and analyses the different social sectors’ options for political action. A series of economic changes have altered both the traditional heterogeneity of the Latin American economy and the relative weight of its various sectors; this is reflected, for example, In the heightened importance of agribusiness and the reciprocal penetration of the services and production sectors.
The internationalization of Latin American industrial firms
The Latin American countries’ position within the international economy finds concrete expression in the international operations of their business enterprises. Some of these operations, such as international trade and finance in major world markets, are already traditional activities of leading Latin American firms, and at least since the mid-1970s, these firms have been part of a rapid internationalization process which gave rise both to the export boom of the 1980s and also to the heavy private external borrowing seen in the 1970s.
Globalization and convergence: Latin America in a changing world
A new international order which is the result of the recent changes in international political and economic relations is in the process of formation. The initial characteristics of this order point to a world setting in which the centripetal forces seem to be more marked than in the past and arc leading to a more convergent world favourable to greater consensus, in which the actions of each country have repercussions on those of the others, so that concertation and harmonization become necessary. Together with these forces, however, there are others of a centrifugal nature, such as the awakening nationalisms in eastern and southern Europe and the pressures for greater protectionism by those who are having to bear the burden of the adjustment to a more convergent world.
The trade union system: Its background and future prospects
Since the early 1980s the labour movement has had to deal with a series of radical changes in Latin American society and in its own identity. These transformations have been linked to the political changes associated with the termination of dictatorships, the transition to democracy or alternatively the weakening of democratic systems, and to economic changes brought about by the crisis, the external debt, the social consequences of adjustment policies, and the de-industrialization and retrofitting processes.
Trade liberalization in Latin America
A major shift has been observed in the development strategies of most of the Latin American countries in recent years. One sign of this change has been that the countries have increased the neutrality of their trade policy incentives in an effort to give greater priority to the market as a resource-allocation mechanism; it is also hoped that this will result in a more export-oriented production apparatus.
Ecuador: The country’s progress from chronic to moderate inflation
A new stabilization programme has been in effect in Ecuador since September 1992. This article examines the nature of this economic policy, briefly compares it with other stabilization efforts made in the country in the 1980s, and evaluates its achievements so far. By the end of 1993 it had been possible to bring inflation down to 32% per year, after five years in which the rate had averaged more than 55%. It has thus been possible to progress from a situation of chronic inflation to one of moderate price rises, but this has been accompanied by a decline in economic activity, in spite of the drop in real interest rates and the use of the exchange rate as a nominal anchor.
European investment in Latin America: An overview
The macroeconomic policies implemented during the second half of the 1980s and early 1990s to promote economic stabilization and foster changes in the region’s production patterns have, in combination with the external debt renegotiation process, helped create favourable conditions for foreign investment from all sources -including Europe- in a growing number of Latin American countries. However, although the liberalization and deregulation initiatives that have accompanied these policies have opened up opportunities for foreign investment, European firms -whether already established in the region or planning to enter it- will have to make some adjustments if they are to make a genuine contribution to the enhancement of Latin America’s international competitiveness.
Women: Productivity and labour in the United States
An attempt is made in this article to gauge the effect on productivity of women’s move out of the home and into gainful employment in the United States during the period 1960-1980, It questions the validity of the frequently-made assertion that women’s growing participation in the labour force has lowered productivity.
Health care markets: Their morphology, behaviour and regulation
This article analyses the markets for health care-related goods and services. Particular attention is devoted to three of those markets: medical services, public and private hospital services, and pharmaceuticals. These three markets -which, taken together, account for between 70% and 80% of total health-care operating expenditures- have structures that are characterized by imperfect competition, marked externalities in terms of the consumption of health care, and a high degree of interdependence.
External finance and commercial banks. Their role in Latin America’s capacity to import between 1951 and 1975
Since the mid-1960s a radical change has come about in international financial flows which has placed commercial banks at the heart of the process. It is they that handled substantial funds deriving from the expansion of the Eurocurrency market and later recycled a considerable portion of the surpluses generated by OPEC; and for several reasons, paramount among which is the expectation of profit, they have channelled a considerable proportion of these resources towards the developing countries. The article analyses the positive and negative effects of this process on the nations in question. On the one hand, it has relieved the external bottleneck, increased the capacity to import, provided incentives to investment and economic growth, made it possible to weather the oil price crises, and afforded freedom from the constraints of official loans. Hut, on the other hand, it has also increased dependence upon foreign capital and debt service requirements, and has ‘commercialized’ development financing, this last consequence generally implies more onerous loans with variable rates of interest, shorter terms, less tolerance, ‘commercial’ criteria for estimating a country’s creditworthiness, and intervention of banks in government policy. In face of these negative effects, the author proposes a series of remedial measures, of which the most outstanding is to augment the available funds of multilateral financial institutions with resources from the central countries and from OPEC.
Indigenous peoples and modernity
Many indigenous leaders and intellectuals in the region are asking them selves how the current rapid spread of free market principles and the process of integration into a single world economy is likely to a ffect their cultures. The answer depends on what we mean by “culture” and what we mean by “modernity".
Basic needs or comprehensive development
In recent years widespread interest has been shown in the development strategy which focuses on the satisfaction of basic needs. However, the sympathy that its content of social justice arouses should be no bar to critical analysis whereby attention can be drawn to the operational and strategic difficulties it entails.
China’s economic reform and opening to the world: A retrospective and prospective view
The kaleidoscope of competitiveness
Competitiveness has become one of the main “standards” governing the ever-changing interplay of interests at the international level. Trade liberalization, structural adjustments, the retooling of production, intelligent coexistence with our natural resources, the struggle to eliminate poverty -all are viewed, in one way or another, through the prism of competitiveness. This has transformed competitiveness into some sort of compulsory principle by which international status is measured and which influences the formulation and implementation of business strategies and national policies. The literature on competitiveness offers a wide array of definitions, ranging from ones that focus on economic aspects to others that attempt to link up the techno-economic, sociopolitical and cultural aspects of the competitive process.
Improving urban transport for the poor
Even though Latin America and the Caribbean is the most urbanized and the least poor of the regions of the developing world, a quarter of the region’s population live, or rather exist, below the poverty line. Many of these are town or city dwellers, Many lower income families spend more than 15% of their income on urban public transport: a proportion which has been rising continuously over the past few decades because bus operating costs per passenger have increased as cities get bigger and car-created congestion has made each bus less productive.
Industrial policy: Where do we stand?
It is paradoxical that during the 1980s, when industrial policy tended to fade as a subject for academic scrutiny and was relegated to the sidelines by decision-makers in most of the Latin American countries, it continued to form the basis for the implementation of important measures and instruments in developed and newly industrializing countries and regions.
Latin America and the Caribbean and the world economy
I should like to begin by expressing our gratitude to the people and Government of Colombia, and most especially to President César Gaviria. First, for their unwavering support of the United Nations in general and the Economic Commission for Latin America and the Caribbean in particular, as evidenced by their active and constructive participation in our forums, their unfailing solidarity with the Secretariat, and their manifest spirit of international cooperation.
Capital flows and their effect on the monetary base
The large capital inflows into some Latin American countries since 1990 are a mixed blessing, for they widen the trade-off between disinflation at home and competitiveness abroad. A large part of the flows seems to be temporary rather than permanent. Permanent flows should be accommodated by an upward float o f the currency, temporary flows by sterilized intervention on the foreign exchange market. Recent evidence suggests that sterilized intervention is more effective and carries lower fiscal costs than is often maintained. Asian policy practice suggests ways of sterilized intervention even with underdeveloped securities markets.
The challenge of industrial competitiveness
Latin American manufacturing industry has undergone various changes in recent years. It has registered a favourable performance as far as exports are concerned, but production and investment have grown only slowly in a context of sluggish recovery of domestic demand and greater foreign competition. Other features are greater specialization in natural resource-based intermediate goods characterized by the importance of economies of scale, relatively long lead times for the heavy investments required, and the presence of privatized and transnational enterprises.
The modernization of bank supervision
This article analyses the main challenges involved in modernizing bank supervision in the light of recent banking crises and the changes currently taking place in the financial system at the international level. Within a highly dynamic environment -rapid technological development in the field of informatics, stiff competition within the capital market as a result of liberalization, the increasingly prominent roles being assumed by financial conglomerates in an effort to achieve economies of scope, and the high degree of volatility of the main economic variables, which sharply increases the level of financial risk- the supervision of the banking system needs to be flexible in order to permit financial institutions to take advantage of opportunities for increasing their profitability and efficiency.
Informal-formal sector interrelationships
The essential object of this article is to put some order into the discussion of the informal sector. Since the ILO adopted the new term, there has been a spate of somewhat entangled discussion which has at least served to reanimate the debate on underdevelopment and give a better grasp of the relevant problems and solutions. The aim here is to study the limited but crucial question of the relations maintained by the informal sector with the rest of the economy.
Financing decentralization
The financing of a State’s sub-national levels of government, in federal and other systems alike, is an instrument of decentralization; first, each State has to decide what area of responsibility to assign to each governmental level and then it must design a suitable financing mechanism. If these sub-national governments’ degrees of fiscal and administrative autonomy are not kept in alignment, then eventually the initiative may fait as the bodies at these levels gradually lose decision-making power within their sphere of responsibility.
International finance and development: Opportunity or threat?
The volume of assets traded on international financial markets has reached gigantic proportions. The question must arise, then, as to whether international finance might play a decisive role in the provision of stable resources in the quantities needed to fund development. This article analyses the function that international finance might perform and that it actually has performed, focusing specifically on the analysis of private capital flows, official development assistance and external borrowing. It concludes that there need to be far-reaching structural reforms in the workings of the international financial system and in development financing instruments and mechanisms if these are to be placed at the service of long-term development goals.
The competitive real exchange-rate regime, inflation and monetary policy
This article argues that in a stable and competitive real exchange-rate (SCRER) macroeconomic regime, the exchange-rate component can drive up Inflation through the very mechanisms that stimulate high rates of gross domestic product and employment growth: to offset this pressure, fiscal and monetary policies will have to be used to control aggregate demand. It finds that in an exchange-rate regime of this type, monetary policy has a degree of autonomy that can be exploited to apply active monetary policies. It analyses the degree to which monetary policy can be used to control aggregate demand and concludes that it cannot bear the main responsibility for this, which means that fiscal policy ought to be the main instrument for controlling aggregate demand.
José Medina Echavarria: An intellectual profile
José Medina Echavarría is one of the most important sociologists of Latin America, and he was the sociologist who has exerted most influence in CEPAL, where he worked with minor interruptions from 1952 until his death in 1977. This article seeks to give an overall view of his work, with the central purpose of showing the mainstream that is to be found by the serious reader of Medina’s work.
Brazil: How macroeconomic variables affect consumer confidence
Identifying which macroeconomic variables underlie consumer confidence is an essential step towards implementing sound economic policies. This article contributes to the subject by way of an empirical analysis based on ordinary least squares (ols), generalized method of moments (gmm) and vector autoregression (var) techniques for the case of Brazil. The findings indicate that following a loose fiscal policy which increases public debt and taking measures to increase the volume of lending to the private sector does not represent a good strategy for improving consumer confidence. Moreover, the credibility of inflation targeting is a very important driver of consumer expectations. Working to enhance credibility is thus a key step for economies seeking to attain a high level of consumer confidence.
Urban segregation and school backwardness in Rio de Janeiro
This article analyses a dimension that is almost completely absent from studies on the socio-territorial mechanisms that reproduce inequalities in Brazil: differences in the risk of school backwardness among children and young people between 7 and 17 years of age, based on residential segregation in Rio de Janeiro. Data from the 2000 Population Census were used to construct two sets of multilevel logistic regression models to quantify the risk of school backwardness among primary school students in fourth and eighth grade, according to individual characteristics, family socioeducational conditions and the social setting of their place of residence. Apart from showing that residence in a ghetto (favela) is associated with a higher risk of school backwardness, the results show that the risk of backwardness and school dropout is higher among inhabitants of favelas located in wealthy neighbourhoods. Possible explanatory mechanisms for these findings are reviewed.
A historic turning point. Political change and the socio-institutional situation in Latin America
Latin America is going through a time of political crisis, reconfiguration and change in which the relationship between institutions and equity will be crucial to future democratic governance. In particular, this crisis and this reconfiguration are first and foremost sociocultural in nature. Politics and political actors would be in no position to resolve politico-institutional problems if they were not capable of confronting society’s problems, particularly those of equity and poverty. This article synthesizes and reviews a number of socio-historical trends, formulates some observations aimed at illustrating and disaggregating its main findings, considers the medium-term outlook and suggests a road map for improving democratic governance in Latin America.
The impact of the global financial crisis on Latin America
This essay argues that while the complete lack of liquidity characterizing the most severe phase of the financial crisis unleashed in September 2008 is now a thing of the past, lending and production activity in the industrialized countries are both contracting rapidly and the financial system is still undercapitalized. Of all the external channels through which the crisis has been transmitted to Latin America, the drop in remittances is the least important. The most widespread negative effects will come from the decline in the volume of international trade and the sharp deterioration in the terms of trade for commodities. In addition, a period of very restricted external private-sector financing lies ahead. The region’s economies have entered this crisis in a stronger position than in the past, mainly because public debt is lower and international reserves are large, but this will only partially mitigate the repercussions of the worst global economic crisis since the Great Depression of the 1930s.
Institutions and public policies for rural development in Guatemala
This article reviews the formal institutional framework for implementing rural development policies in Guatemala, which originated in the State modernization process promoted through the Peace Accords. The main thesis is that rural development policies will be more efficient if they are based on the institutional framework that the Peace Accords provided, which distinguishes between three levels of government: central, deconcentrated and decentralized. While the two sub-national levels execute 43% of total public investment, central government needs to target the budget on poor zones, cut subsidies to the private sector and increase the supply of public goods. At the deconcentrated and decentralized levels, the territorial approach has proven effective in generating policies, but land-use planning needs to be based on political-social covenants between local stakeholders.
The bigness of smallness: The financial crisis, its contagion mechanisms and its effects in Latin America
This paper has two purposes. First, it seeks to explain the reason why a relatively small shock (in the subprime market in the United States) had a systemic effect on the world economy. It is argued that this responds to the combination of off balance sheet funding and pro-cyclical leverage management. Second, it analyses the transmission mechanisms and the possible effects of the crisis on Latin American economies. Past crises had generalized, deep and enduring effects across the region, and restricted access to external finance and the disruption of international trade turned out to be their main channels transmission. In spite of specificities, the current episode and its manifestations are not an exception to the pattern of previous crises. The final outcome will depend on the type of recovery that takes place in the developed world and on the effectiveness of the counter-cyclical policies applied in Latin America.
Mexico: Total productivity changes at the principal container ports
Port performance is commonly measured using partial productivity indicators obtained by relating an output to an input. To ascertain the overall productivity of a port, however, it is more helpful to employ the concept of total productivity, which considers all the inputs employed to obtain the totality of outputs. This factor has been measured using the Malmquist index, which gives the change in total factor productivity (TFP). The present study uses this index to determine the change in the TFP of the principal container ports in Mexico. According to the results obtained, productivity gains were greater at medium-sized terminals such as Progreso and Ensenada than at hubs such as Veracruz and Altamira, even though the latter are more efficient.
International migration and development: The socioeconomic impact of remittances in Colombia
Remittances to Colombia have grown rapidly over the last few years, and their economic significance is increasing apace. This article provides a detailed analysis of the economic and social effects of these currency flows and draws attention to the potential long-term risks involved. Accordingly, it analyses trends in remittances in Colombia over the last few years, paying special attention to their importance to the country’s economy and the socioeconomic characteristics of their senders and recipients. This analysis is followed by an assessment of remittances in Colombia which indicates that, while they may help to improve the situation of the country, they also entail a number of costs that may, in the long term, be detrimental to its economy.
Income distribution and poverty through crisis and adjustment
Public-private alliances for long-term national development strategies
Few developing countries have succeeded in consistently closing the income gap with the world’s richest nations without proactive government action in pursuit of economic transformation and a dynamic role in the global economy. Two factors are crucial here: the development and implementation of a medium- and long-term strategy to achieve rapid economic transformation, and the support provided to this strategy by a public-private alliance forged by means of a social process suited to local conditions. This article analyses the way alliances of this kind operate in 10 countries outside the region deemed to be successful because they have achieved a process of convergence with the developed countries or performed better than those of Latin America and the Caribbean, despite having similar resource endowments. One element that is lacking in the region, or at best is only incipient, is public-private collaboration. Thus, the aim of the analysis is to prompt reflection about the kind of alliances we ourselves could form to underpin strategies aimed at creating “Latin American tigers”.
Determinants of world manufacturing exports to China, 1990-2006
The international financial crisis: Its nature and the economic policy challenges
This article discusses the origins of the international financial crisis, emphasizing the instability of the financial system as a leading cause. Although monetary policy in the early part of this decade may have helped to inflate the property bubble, it is far from having been the decisive factor. This article also argues that the function of controlling excessive asset price rises is one for regulatory policy rather than interest rates. What is proposed, accordingly, is the creation of institutional arrangements that facilitate the implementation of countercyclical financial policies during periods of strong economic growth. After considering the characteristics that economic policies in developed countries should adopt, the article then analyses the effects of the international crisis on the current accounts of the region’s countries and the difficulty of applying countercyclical policies in the absence of a global lender.
Styles of development in Latin America
The discussion of styles of development has been complicated by the improper use of this and other associated terms. In order to avoid misunderstandings, this article starts by examining the concepts of system and structure and on this basis, goes on to define a style of development as “the way in which human and material resources are organized and assigned within a particular system with the object of solving such questions as what goods and services to produce; how; and for whom”. More specifically, it notes two sets of features of such styles: (a) those which make up the structural basis of the production apparatus, especially the sectoral structure of the product and employment, the various technological strata, and the predominant type of external relationship, and (b) the dynamic elements of the system, which are revealed by analyzing the level and composition of demand and its underlying basic factors, namely the level and distribution of income. These two sets of features are closely linked by a circle of mutual cause and effect.
Socio-economic and geographic profiling of crime in Chile
Many empirical studies of crime assume that victims and perpetrators live in a single geographical unit, the implication being that the socio-economic characteristics of victims’ places of residence can be treated as determinants of crime. This study offers an alternative approach which consists in measuring crime by the proportion of alleged offenders in the whole population and treating the characteristics of their home communes as socio-economic causes of criminal behaviour. The conclusion is that those charged with crimes present a high degree of geographic mobility. In the case of economically motivated crimes, the evidence partly supports Becker’s propositions. Lastly, we show that the number of people charged with crimes tends to be greater in communes that have low incomes, a larger police presence, a predominance of urban areas with higher levels of education and a geographical location in the north of the country, which to some degree bears out the findings of other studies on Chile.
Towards a theory of change
With the present article the author rounds off the series he began with “A critique of peripheral capitalism” (published in Review No. 1), and continued with “Socio-economic structure and crisis of peripheral capitalism” (No. 6) and “The neoclassical theories of economic liberalism” (No. 7). While in all the preceding articles his main concern was to offer a critical interpretation of the functioning of peripheral capitalism and to show the inability of neoclassical theory to comprehend it in depth, in this one he seeks to trace the lines along which that system should be changed.
Globalization and the new international trade environment
The combination of profound technological change and the emergence of powerful competitors such as China and the other bric countries has led to dramatic shifts in competitiveness and a tendency for production to be structured around global value chains. Against this background, traditional protectionist threats have reappeared and others have arisen in connection with new security requirements, private-sector quality standards, good practices and climate change. These issues are integral to the new competitive environment but could turn into protectionist barriers in the absence of the right multilateral approach. In view of this and of the current global crisis, the present paper offers some policy proposals oriented towards the adoption of an internationalization strategy in the region’s countries, emphasizing the importance of innovation and on issues that can be addressed from a regional cooperation standpoint.
What schools teach us about educating poor children in Chile?
A great deal of effort has been put into education reform in Latin America since the early 1990s. Extending the coverage of educational opportunities and improving the quality of the education delivered in schools are crucial for the countries of the region, where education in State schools has often been of a low standard. It is not enough just to study macro education policies as they are formulated by governments and implemented by centralized ministries of education. What is promised or envisioned on paper is often quite different from what actually happens in school establishments. It is important to understand, at the micro level, how schools are functioning in practice as they implement educational policies. Educational policies and social reality come together in school classrooms and schools can teach us a great deal about achieving quality in basic education. The focus of this article is on poor children in poor schools and the continuing challenges of educating children in poor communities. Chile’s national programme to improve the quality of education and educational outcomes in 900 of its poorer primary schools, known as the P900 programme, provided an ideal framework for identifying and studying the challenges faced by schools in poor communities in trying to deliver a high-quality education to their children and for understanding how and why they are struggling to meet national standards. This study is concerned with learning from schools to achieve a better understanding of what they see, in the context of their community and the student population they serve, as the practical realities of educating poor children. At the national level, a macro research methodology was used to identify the worst-performing schools in the P900 programme on the basis of their results in standardized examinations and the trends seen in these results over the 1990s. A small purposive sample of the worstperforming schools was drawn from this group and quota sampling techniques were used to ascertain their main characteristics. A micro study of each of the schools selected was then carried out, involving school visits and interviews to understand school and pupil performance and to identify critical factors that might be amenable to change. In-depth reports were prepared on each school. This article synthesizes the lessons learned from these micro studies.
Institutional reform and government coordination in Brazil’s social protection policy
This study, now being published posthumously, examines Brazil’s recent experience in formulating and implementing government social policies and assesses the prospects for establishing a “social authority” for centralizing and coordinating such policies. It describes the complex pattern of exclusion and vulnerability against which social reforms must be instituted in Brazil. It then goes on to review the social development strategy adopted as part of the Plano Real in 1994, which seeks to restructure the financing, outlays and benefits of the social protection system in order to increase its effectiveness, coverage and redistributive impact. Finally, it analyses the coordination of federal social policies, especially at the macropolitical and intergovernmental level, drawing special attention to the creation of sectoral chambers and policy integration mechanisms to replace former bureaucratic coordination structures.
Employment trends in Latin America and the Caribbean during the 1990s
The economic reforms applied in the region during the 1980s and 1990s created expectations, for which there was theoretical justification, of strong job creation and greater equity in the labour market. This article analyses developments in the quantity and characteristics of employment during the 1990s. It concludes that today’s labour market problems are due to insufficient economic growth and to less intensive use of labour, resulting mainly from changes in tradable goods-producing activities. Modernization of production methods in companies and sectoral restructuring that increased the weight of tertiary activities contributed to segmentation of the labour market on the basis of people’s level of education, as the demand for labour shifted towards those who had passed through intermediate and higher education. People with less formal education had less access to wage employment and wage differences between skilled and unskilled workers widened. At the same time, wage differences between microenterprises and larger ones increased and, with employment relationships becoming more flexible as well, employment quality indicators tended to worsen. All these tendencies were contrary to what had been expected from the reforms. Sectoral restructuring of employment helped trigger a trend towards increasing heterogeneity in the labour market, and this took a variety of forms: substantial and simultaneous job creation at the top and bottom of the employment structure, a widening of the gap between formal and informal activities, differentiation of working conditions within medium-sized and large firms, and internal differentiation among microenterprises and own-account workers.
The Spanish banks’ strategies in Latin America
After more than ten years of a broad-ranging and extensive process of financial liberalization and deregulation, the Latin American picture in the banking, insurance and pension fund markets has been significantly changed by the massive presence of globalized financial institutions. The major Spanish banks have been among the main actors in this respect and have become leading figures in most countries and business segments. From the Latin American standpoint, the entry of foreign banks, especially those of Spain, has helped to invigorate and modernize the financial systems of the region; has brought in new instruments and technologies; has increased competition, with direct effects on access to credit and its cost, and has given the local financial systems greater strength and stability. However, it has also given rise to some difficulties, such as greater concentration and only a very slow process of handing on to clients the benefits of the greater competition and efficiency achieved in the Latin American financial markets. This extensive presence of Spanish banks, together with the active expansion of Spanish non-financial companies in the main Latin American markets, has revealed the limitations of the local regulatory frameworks for coping with the growing globalization of international markets. Thus, decisions taken in Europe affect users in Latin America, causing reactions at various levels whose results will only become evident in the future.