Reduced Inequalities

This article analyses the implications for the Latin America region of the dispute settlement procedure approved in 1994 by the Marrakesh Agreement Establishing the World Trade Organization (WTO). These implications are important because the region has become involved in a growing number of commercial disputes as its international trade has increased. The procedure applies to disputes between any of the 148 member countries over matters covered by the Agreement and the 29 multilateral agreements annexed to and forming an integral part of this. The present article highlights the ways in which the procedure differs from the old GATT rules and other international dispute settlement procedures. It describes the agreements that have generated the most disputes (anti-dumping, subsidies and countervailing measures, and safeguards), discusses United States policy in this area and details the disputes in which the Latin American countries have participated, with particular reference to Brazil.

This article identifies areas of agreement and disagreement among Mexican economists in relation to key issues of economics, on the basis of a survey of 360 members of the profession. The propositions eliciting the greatest consensus included: equity in income distribution, vigorous use of antitrust and consumer protection laws and the use of countercyclical fiscal policies. The most contentious issues were: private investment in the energy sector, the determinants of inflation, the minimum wage as a cause of unemployment and the objectives to be pursued by an independent central bank.

This study examines institutional changes in Chile and Uruguay between the mid-1960s and late 1990s. It seeks to tie together the macro and micro levels in order to observe how institutions working with local and global issues interact or conflict from the perspective of two industrialists’ associations, the Manufacturers Association (SFF) in Chile and the Chamber of Industry of Uruguay (CIU). From this vantage point, the study analyses how the organizations’ ‘logic of appropriateness’ has altered since the 1960s, with the expectation of identifying changes in the way sources of legitimacy interact at the global, regional and national levels. To make the process of change more visible, the study concentrates on two years, 1966 and 1998. It also tries to identify new dimensions of comparison between the development processes of Chile and Uruguay.

Cash transfer programmes have become very important in Latin America. Concerns about proper targeting have centred on excluding people who do not meet eligibility requirements. Less attention has been paid to the failure of programmes to reach the whole of their target population, partly because there are people who do not even apply. The present article analyses the determinants of non-take-up of social benefits. The case studied is the National Social Emergency Plan, an income transfer programme implemented in Uruguay between 2005 and 2007. It is calculated that over a fifth of eligible households have never enrolled in the programme. A probit model is used to estimate the determinants of the decision to apply. The evidence obtained is highly consistent with theoretical and empirical research into the subject.

In this paper we argue that Argentina, Brazil and Mexico must focus economic and social policies on creating employment if they want to provide decent work (i.e. formal jobs with social security coverage). During the 1990s, financial and trade liberalization and the associated laissez-faire policies did not deliver in terms of growth or employment in the countries under consideration. We assess the macroeconomic, trade, investment and labour-market policies of the countries during 1990-2004 and then propose a series of recommendations that give employment growth the priority it deserves.

This article argues that the local and regional governments of Latin America, in an increasingly globalized world, must face new challenges that include establishing or improving their competitive strengths and transforming their local production systems. These two aspects must be linked to territorial policies and, more specifically, to the development of a territorial culture that embraces both. While it is true that enterprises are the ones that actually compete, their competitiveness may be enhanced if the territorial environment encourages this dynamic and if they themselves realize the importance of being enterprises “of the territory” rather than “in the territory”. This objective may be thwarted, however, by the existence of territories that are unequally prepared to meet these challenges. Different types of intervention need to be used, therefore, in terms of local and regional policies, to enhance the competitive strengths of such territories.

It is an accepted fact that the process of internationalization of the world economy has expanded considerably in the last few decades. The author begins by examining the historical background of this process, and after emphasizing that it is not limited to the economic sphere —since it is also seen in the international dissemination of ideas, institutions and ways of life— he goes on to analyse in particular the economic internationalization recorded since the Second World War. After thus defining his subject, he reviews various expressions of internationalization in trade, capital movements, investments, the activities of transnational enterprises, and so on, with special attention to the way in which this process has influenced the periphery.

Youth employment problems affect not only the welfare of young people themselves but also some key elements of socio-economic development in general. This article examines the circumstances, origins and consequences of these problems and reviews the statistical information available on recent trends in youth employment variables. The figures show that the occupational position of young people has deteriorated in absolute terms along with labour markets generally and that, contrary to some expectations, it has not improved in relative terms either. Working conditions are also found to vary greatly by education level, gender and household characteristics, among other factors. The article then identifies a number of tensions between the subjective perceptions of the young and the reality of the labour market, and reviews options for improving the youth employment situation with regard to the issues of employability, equal opportunities for young men and young women, entrepreneurship and employment creation.

In earlier studies, the author showed that the type of development adopted by Chile differed significantly from that of the successful East Asian countries. Up to 1986, the Chilean economy had a relatively weak and technologically unsophisticated manufacturing base, and the penetration of imported inputs was mainly at the expense of the scanty domestic productive intermediation. Therefore, neither manufacturing industrialization nor industrial interdependence appeared to facilitate the type of manufactured exports that might sustain dynamic industrial development based on external markets. The present paper analyses changes in Chile’s production structure from 1986 to 1996, generally extended to 2000, using methods similar to those of earlier studies. The conclusion is that, despite the outstanding growth rates over the period, the economy still appears relatively weak as a basis for a sustainable increase in economic and technological sophistication.

This article explores some of the changes that Argentina’s agricultural sector has undergone in the past decade, before going on to analyse the structure of the production sector for a non-traditional crop, the blueberry, in the province of Entre Ríos. This crop is unusual in that it has been adopted chiefly by entrepreneurs from outside the local area and shows alternatives in terms of diversification of production and vertical integration. Capital investment is more important in blueberry production than investments of land, and information and management technologies play an important role. These are also features of the recent development of traditional crops in non-Pampas areas. The role of capital from outside the sector is worthy of consideration, given the flexibility and versatility made possible by some of today’s production methods.

This paper develops and tests a model of growth that emphasizes the introduction of new exports as the main source of growth in countries that are well within the global technology frontier and depend for growth on adapting existing products to their economic environment. It seeks to capture the stylized facts behind growth in countries as different as the Republic of Korea, Taiwan Province of China, Mauritius, Finland, China and Chile, all of which have relied on export diversification. The widening of comparative advantage is thus seen as the main driver of economic growth. The export diversification hypothesis is tested using an empirical growth model. Controlling for other variables that affect growth, export diversification —both alone and in interaction with growth in per capita export volumes— is found to be highly significant in explaining per capita gdp growth over the 1980-2003 period.

Average real family incomes rose in Costa Rica in the late 1990s and at the start of the new decade, but poverty rates did not fall. Here it is argued that economic growth in the country did not translate into reduced poverty during this period because of changes that took place in household structure and in the labour market, and that these changes had an important gender dimension Specifically, a rising proportion of female-headed single-parent households led to an increase in the number of women with children entering the labour force, many of them for the first time. Many of these mothers were unable to find or unwilling to accept full-time work in the higher-paying formal sector and ended up unemployed or working part-time as self-employed workers. These labour market phenomena contributed to low incomes for vulnerable households, especially single-parent households headed by women.

During the past two decades, trade regimes in Latin America have been reformed to facilitate export-led growth, in the expectation that the benefits of this growth would eventually trickle down and thereby help the poor. These goals have been achieved to differing degrees. Their accomplishment has depended not only upon the effectiveness of the trade policy reforms but also upon exchange-rate policy, external shocks and remittance inflows. Technological change has also been crucial when it comes to capitalizing on the benefits of the reforms. These assertions are substantiated using simulation results from a computable general equilibrium model solved with data for Costa Rica, El Salvador and Honduras. The model is combined with a microsimulation methodology to capture the full distributive implications of simulated policy and external shocks.

This article analyses current attempts to interpret the factors underlying long-term economic growth, paying special attention to the Latin American case. It discusses both the interpretations whose advocates claim that geographic conditions have a decisive role in shaping the development process and those according to which colonization is seen as giving rise to an institutional framework ill-suited for development. The author -based on his own estimates- emphasizes the importance of market access and the effect of social fragmentation on the establishment of an efficient and credible institutional framework. The article concludes with a discussion of the impact of inequality on both the quality of institutions and the dynamics of growth.

This paper depicts the changing international landscape of investment rule-making from a Latin American perspective. It does so by looking first at the recent evolution of investment rules, pointing out differences and synergies between these closely intertwined processes and the role that Latin American countries have had in shaping them. Against the backdrop of repeated failures to develop a comprehensive set of investment disciplines at the multilateral level, the paper reviews the main arguments that have been recently advanced in favour of and against global rules for investment. The paper dissects the main reasons why investment fell off the negotiating agenda of the Doha Development Agenda of the World Trade Organization (WTO). It concludes with a number of policy lessons regarding the most optimal institutional settings in which to pursue various elements of investment rule-making and sketches a few forward-looking scenarios on investment rule-making at the multilateral level.

The transition to democracy in Chile has been achieved in an unusually rapid and successful manner. Its consolidation is only just beginning, however, and is faced with serious challenges which will call for extensive and complex efforts in the years to come.

Financing investments in urban water supply and sanitation has been a perennial problem in all countries of Latin America and the Caribbean. The issue has increased in significance with the need to provide sewage treatment to reduce the gross pollution of many water bodies and to lessen the threat from waterborne diseases. In this paper, the authors explore, through a statistical analysis, the practicability of financing water supply and sanitation services from income generated by the tariffs. Particular emphasis is placed on the possibility of the whole population paying for sanitation services: an issue of some importance given the unequal distribution of income in most cites of the region.

The idea of regional integration is deeply rooted in Latin America. It has been part of the proposals for the region’s development for decades past, and now, through a combination of domestic and external circumstances, it occupies a leading place in the regional economic debate. It was a novel idea which, through being applied only partially in so many cases, gradually became an issue of the past: an empty prospect and a contradiction in its own terms.

The production, trafficking and abuse of drugs has attained enormous magnitude all over the world. In Latin America, the problem has taken on very special implications, because that is the region where the countries which are the biggest producers of coca leaves, basic paste and cocaine are located.

This article examines the thesis -posited in the book entitled “Changing Production Patterns with Social Equity” published by ECLAC- that no country in Latin America was successful in achieving high overall economic growth with a reduction of income inequalities in the 1980s. As compared to the experience of many countries in South East Asia, this was a lost decade for the region. This situation in Latin America has been referred to by Fernando Fajnzylber as the “casillero vacío” or “empty box” syndrome. The examination presented here is based on a comprehensive set of 33 variables related to economic stabilization, structural change, overall economic growth, and the standard of living. It is shown that many Latin American countries did indeed score relatively poorly as compared to Asian countries.

Regional integration has once again become an important issue for Latin America and the Caribbean. Compared with previous experiences, however, recent integration commitments have a number of new aspects in such areas as negotiating procedures, the issues involved in the various agreements -some of which are as unprecedented as the adoption of common currencies, the creation of binational companies, common labour laws, etc.- and the actual timing of these steps.

The renewed interest sparked by the potential for intraregional cooperation in Latin America and the Caribbean today has been reflected in numerous agreements regarding trade preferences and in attempts to establish free trade areas, customs unions or common markets. The possibility has even been discussed of setting up free trade arrangements on a hemispheric scale.

The petroleum-based production pattern has ultimately proved to be a dead end as the deteriorating quality of natural resources -owing to the way they have been used and appropriated- has begun to cast doubt upon the pattern’s viability. Repeated soundings of alarm on this score have increasingly sensitized the population, thus creating a level of ecological awareness that has moved society to voice its ever more vehement rejection of a system which bases itself on the destruction or degradation of natural resources and, in so doing, jeopardizes the sustainability of the development process.

The purpose of this study is to analyse the major characteristics and consequences of State-owned enterprise (SOE) reforms in Latin America so as to derive conclusions useful for guiding future reform programmes. Three countries at different stages of the reform process were identified for in-depth study; Chile, Mexico and Argentina. The underlying rationale for SOE reforms in Latin America has been both economic and political. In most countries the need to reduce the public sector deficit was a primary motive for initiating reforms. In Chile, Mexico and Argentina public sector deficits hit historic highs in the year prior to the initiation of reforms. Chile initiated the first major reform of sons in the region in 1974.

The models that dominated economic science and policy in the first three decades of the post-war period have broken down and there are no consummate replacements. The outlook seems to be conservative. The late 1970s turned back the clock which was moving for two centuries in the direction of morally justifying Stale intervention Intended to moderate or correct the social inequalities produced by market operations. Part I of this article explores these trends.

The import-substitution strategy was entirely justified in the 1930s and continued to make sense until the late 1950s, so long as export opportunities were being dampened by the Great Depression, the Second World War and the reconstruction of Europe. From the 1960s on, however, it afforded diminishing returns as international trade burgeoned. During the 1980s, the macroeconomic instability caused by the debt crisis compounded the problems associated with this development strategy, which had begun to become apparent in the 1970s.

In this article, it is argued that only a small fraction of social expenditures actually reaches the poor. Diverse social policy weaknesses which account for leaks and ineffective use of resources are reviewed, and the authors maintain that it will only be possible to overcome those deficiencies if serious ex ante and cx post evaluations of social programmes and projects are made.

In 1975 CEPAL submitted a request to a distinguished Uruguayan intellectual, Carlos Real de Azúa, for a study on the special economic and political development problems that small nations have to face, The author prepared a first draft in that same year, but, for various reasons, never completed the final version. Now, when all who knew him are lamenting his untimely death, we wish to pay him the modest tribute of publishing part of his study in the form of an article.

The author of this article contends that, as a consequence of the debt crisis, macroeconomic goals and social goals have become relatively dissociated from one another and that the latter have tended to be reduced to the provision of special attention to the needs of the poorest groups in the population.

The economic crisis suffered during the present decade by the Latin American countries reduced the wages and incomes of many families, with a consequent deterioration in the living conditions of the affected population. Homes which had previously met the minimum conditions for ensuring the social integration of their members sank into poverty, thus increasing the heterogeneity of this phenomenon.

How a collectivity deals with nature discloses as much about its internal social relations as the other way around. The present inquiry is a prologue to more detailed study of ecopolitics, to the study of the political philosophy of relations between human beings and nature, exploring the feasibility of integrating the knowledge of the social and of the natural sciences on the interchange between human activities and the cycles of nature. It is also an introduction to the study of a specific type of public policies, those that address issues of resource use and conservation, and the quality of life, especially in the so-called developing countries.

This article addresses concerns relating to the promotion of the advancement of women within the framework of ECLAC’S proposal for changing production patterns with social equity. Virtually all the countries of the region have ratified the mechanisms set up by the United Nations to help attain truly equal treatment for women.

This paper reviews some of Prebisch*$ ideas on Inflation and comments on the article by Felipe Pazos which appears in this number of the Review.

Macroeconomic policy cooivlination is a new topic in the Latin American integration debate. In the light of pronounced macroeconomic instabilities in many Latin American economies, the recent efforts to revitalize regional integration schemes have led to an awareness that differences in national macroeconomic performance, as well as the instability per se, could frustrate advances In regional integration.

Recent proposals aimed at furthering equality of opportunities for young people are often not backed up by detailed empirical information. This article takes issue with some contentions made in diagnoses on this subject, especially regarding formal education and integration into work, and contrasts them with recent information in this respect.

Two disequilibria are intertwined in the Mexican economy: incomplete modernization of institutions and production, and external imbalances that have made the country unable to service its external debt. In a context of liberalization, this combination has been conducive to sharp depredations, as evidenced by recent events. The success of the adjustment exercise will depend on the progress of the retooling and expansion of production. This article analyses the main objectives of the National Development Plan for 1995-2000 and the policies that have been implemented to realize them, and shows that the current situation is a patchwork of progress and setbacks.

This article gives a broad overview of the social structures on which democracy will have to be based in the 1990s. These structures continue to be heterogeneous, and the crisis has made them more unstable, as previous aspirations are falling by the wayside and most of the groups are living in conditions of greater insecurity and poverty, although some new possibilities of upward mobility are emerging, even among the most seriously marginated strata. The political parties and movements are in a process of evolution and are unsure of the forces they will be called on to represent and the validity of their traditional ideologies; for the most part, however, they have attained a higher level of realism and a willingness co temporize with a view to the consolidation of broad social pacts at the cost of a reduction in their aspirations and an inability to offer their followers an inspiring mythology.

This article examiaes State intervention in the Brazilian economy, in an attempt to elucidate why the State ceased to play a decisive part in the country’s development. The primary explanation lies in the cyclical nature of State intervention. In the beginning, intervention tended to be very successful, especially when the country was launching its industrialization phase. Gradually, however, the distortions inherent in intervention without some form of market control began to accumulate, leading the State into fiscal crisis. The current neoliberal wave and its success in advocating privatizations can be understood in these terms.

Inflation was a major concern for Prebisch from his time in central banking np to the end of his career, when he stressed the need for new thinking by Latin American economists about stabilization policy. The topic is of vital importance, not only for Latin America, but also for the world in general, for specialists in industrialized countries have also been unable to elaborate policy recommendations for their governments that will resolve the dilemma between inflation and monetary restriction.

This article presents in some detail a general conceptual framework intended to provide guidelines for the study of negotiations between governments and transnational corporations in connexion with export-oriented primary commodities. If the developing countries have greatly improved their bargaining position vis-á-vis the transnational corporations during the past few decades, this is due not only to changes in economic and political power relations at the world level but also to the pooling of increasingly detailed knowledge of all the factors which strengthen the hand of the governments in their dealings with the corporations.

In the 1990s, there has been a growing split in Cuba’s economy between the traditional socialist peso-based component and the internationalized dollar-oriented and marketized component. This schism has been caused by a conjuncture of circumstances, including the expansion of tourism and foreign and mixed enterprise; the contraction and loss of confidence in the socialist economy; the weakening of the monetary role of the peso (owing to the rapid inflation arising from the financing of the fiscal deficit through money creation), and a grossly overvalued exchange rate. This dual currency and structural bifurcation of the economy shaped the pattern of income distribution, thereby influencing the economic behaviour of the Cuban people.

Public indebtedness -and especially domestic indebtedness- is steadily increasing in a number of countries of the region, despite the major fiscal adjustment processes that have been carried out since the mid-1980s. This article analyses the main problems that this raises for public policy. It first reviews the question of the sustainability of public indebtedness. It then analyses the possible effects of privatization processes, the accumulation of indebtedness against assets, the increase in indebtedness not backed up by prior financing or contingent liabilities, the sustainability of the debt in terms of the acceptable level of inflation, the factors determining expectations regarding the sustainability oT fiscal policy and the effects of those expectations on interest rates and sustainable levels of indebtedness, and the extent to which the management of the debt affects its sustainability, and vice versa.

This article analyses the treatment accorded to foreign investment under the present development strategy. To this end, it looks at the recent dynamics of both direct and indirect foreign investment, including portfolio investment and quasi-equity operations, the latter with reference to contracts for the transfer of production know-how. For this purpose, the main resource flows and their directions are analysed, together with the changes which have taken place in corporate strategies. It is concluded that it is necessary to put together an explicit development strategy in which the main objective of policy on the treatment of foreign investments should be that of enriching the store of technological knowledge of the host economics.

This article analyses the levels and evolution of social inequalities in Colombia over the last 25 years, describing the main recent trends in Colombian social development, comparing them with past periods, and contrasting them with those of other countries. First of all, a recent estimate of income distribution and the rest of the social indicators is given. Next, trends in the distribution of monetary income over the period 1938-1993 are analysed, the impact of social expenditure on secondary income distribution is examined, and on this basis trends in the distribution of income effectively received by individuals are evaluated. The evolution of poverty and other indicators of well-being is then described and compared.

This article seeks to summarize the results of some studies on the structure and dynamics of the big domestically owned industrial companies and groups in five Latin American countries (Argentina, Brazil, Chile, Colombia and Mexico) and presents supplementary elements for placing them in an overall perspective. The studies include individual analyses of 46 leading companies (in Brazil, Chile and Colombia) and 15 economic groups with an industrial base (in Brazil and Mexico), together with aggregated studies of such groups in Argentina, Brazil and Mexico.

Ten years ago the member countries of the Central American Common Market (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) began to turn away from the “inward-oriented development” policy they had been applying for decades. They are now encouraging non-traditional exports by lowering tariff barriers, unifying exchange rates, and giving exporters access to intermediate and capital goods at international prices.

This article analyses the strategies applied by the Brazilian industrial groups during the period 1980-1993: that is to say, before the Real Plan was put into effect. After some introductory comments regarding the debate on economic groups, hypotheses are presented on the evolution of the Brazilian industrial groups in the 1980s and early 1990s; the main elements in the Brazilian economy which conditioned the restructuring strategies of the groups arc identified, and these strategies are categorized on the basis of this analysis and of the hypotheses put forward in the introductory section.

The generation of dynamic competitive advantages in Latin America and the Caribbean cannot be assumed to result automatically from the achievement of the necessary macroeconomic stability and the incorporation of part of the system of production into some dynamic segments (or niches) of the international economy. Recent empirical information on local economic development initiatives in the developed countries indicates that macroeconomic adjustment policies must be accompanied by other specific policies at the microeconomic and mesoeconomic levels.

The system of currency convertibility has shown that it is effective in overcoming inflation in Argentina, but its capacity for supporting a stable growth process and acting as a monetary and exchange-rate system which does not involve intervention and heavy costs on the part of the State is currently being questioned. The present article deals with this aspect on the basis of an analysis of the 1991-1995 period and identifies some key features of the functioning of the system: its reactions to movements of foreign capital; its interrelations with the domestic banking system; the extent to which it is capable of operating automatically without any need for a lender of last resort, as claimed in the theory on which it is based; and the degree to which the currency issued really has effective backing to ensure its convertibility.

The new protecionist policy of the centres is nothing more than the insertion of new instruments and forms of restriction into a longstanding structure of trade relations. In the course of this process tariffs have been losing effectiveness and have gradually been replaced by non-tariff measures. From an analysis of 1,051 tariff headings in the United States, 479 in the EEC and 421 in Japan, which together cover more than 10,000 million dollars of Latin American exports to those markets, the author is able to establish the adverse effect of that new policy on the developing economies, which is worsened by the recent tendency of the industrial countries to arrange international trade in the form of “organized free trade”.