Reduced Inequalities

The greater openness to the outside world exhibited today by rural, peasant and indigenous groups is particularly notable among the young people in those populations, whose behavioural patterns, referents and expectations differ from those of preceding generations. At the same time, living conditions in the farming sector have improved very little, and agricultural producers’ self-images have worsened; both of these factors prompt young people to leave the sector. Today, only half the people born in rural areas in the 1960s still live there. Not enough attention has been devoted to this situation, which leads, among other things, to the types of problems associated with lack of preparation and difficulties of adaptation on the part of migrants. In those areas from which emigration is the heaviest, the ageing of the population is quite marked; this hampers any attempt to pursue a dynamic form of development and in some cases even leads to the dismantling of existing infrastructure and services (and, hence, an even greater loss of population).

This article analyses the concept of systemic competitiveness by examining its determining factors and the way in which they interrelate. The author puts forward the view that industrial competitiveness is the product of the complex and dynamic interaction between four social and economic levels in a national system, namely: the micro level, consisting of enterprises, many of them interlinked in mutual assistance networks, which aim to achieve simultaneously efficiency, quality, flexibility and speed of response; the meso level, corresponding to the State and social actors, which develop specific support policies, promote the establishment of structures and coordinate learning processes at the level of society; the macro level, where pressure is exerted on the enterprises through performance requirements; and finally, the level referred to in this article as the “meta” level, which is made up of solid basic patterns of legal, political and economic organization, an adequate social capacity for organization and integration, and the capacity of the actors to achieve strategic integration.

Up to a few years ago, wages policy was a central instrument of macroeconomic policy in Latin America, and there was a great deal of State intervention in it Now, in the early part of the 1990s, however, the countries of the region are mostly in a more balanced macroeconomic situation and have gone a long way in their process of trade openness. Both these factors heighten the importance of costs, in view of the need to maintain the competitiveness of national production, so that the search for instruments to facilitate control over costs, including labour costs, is now a constant concern.

The small, open economies of the Central American countries have all, to a large extent, been subject to the same determinants of inflation. The oil shocks of the 1970s brought the era of stable prices and steady growth in the subregion to an end. External factors continue to have a significant influence on price movements. In addition to the direct impact of international prices, the availability of external resources, which cases supply and demand pressures, also plays a role. It is true, however, that the nature of the national economic policies adopted to deal with fiscal imbalances have led to a progressive differentiation of the inflationary processes experienced by each country.

The Caribbean countries are acutely conscious of their small size, whether judged by one or all of the criteria of land area, population or gross domestic product (GDP). Paradoxically, this impels them to join a larger trading group for fear that they might otherwise be denied a place in the mainstream of international activity. This article analyses several characteristics of small countries, with particular attention to those that seem especially relevant to the Caribbean. The paper notes that small size does indeed place greater demands on the national leadership as regards appropriate and consistent economic management, while the citizens of small countries live at higher levels of risk, whether due to the vagaries of the weather or to the turmoil of international markets.

This article adopts the premise that development is endogenously driven by innovation mechanisms, of which the economic elite is an eminent vehicle in that it efficiently fulfils the function of generating innovation by seeking technological quasi-rents which creative competition permanently erodes. In order for this to happen, the necessary conditions must be present so that the search for technological quasi-rents predominates over other types of profit-seeking. The interaction between the Argentine economic elite and the institutional system has enabled it to acquire non-technological quasi-rents, being essentially quasi-rents from scarce natural resources, combined with political quasi rents.

This article analyses the evolution of regional investment within the context of general macroeconomic trends. First, trends in the macroeconomic context of investment between 1980 and 1994 are examined, and it is concluded that the economies’ vulnerability to external shocks was crucial to the decline in the rate of investment and its subsequent slow recovery: in countries where indebtedness and external account imbalances were lower, investment levels and rates fell less sharply. Next, the factors determining trends in private investment are reviewed, and it is concluded that over and above those traditionally taken into account by economic theory, a further three also played a part: the stability of policies and their consistency with structural reforms, which ensures the sustainability of regulations over time; access to the infrastructure, where public sector investment has traditionally been supplemented by private investment; and the availability of Financing.

CEPAL, the Director of the Review commissioned from Professor David Pollock an article analyzing the changing attitudes of the United States towards CEPAL since its establishment. Mr. Pollock is in an excellent position to write such an article, because of his knowledge of the subject and his long and important career in our organization. A Canadian, he joined CEPAL in the 1950s and has worked in Washington, Mexico City and Santiago, in addition to cooperating closely for some time with the Secretary-General of UNCTAD in Geneva.

This article defines the stages of development reached by industries that account for half of Brazil’s total output and identifies the competitive challenges they face, including those associated with the country’s industrial policy. Between 1980 and 1994, Brazilian industry experienced persistent macroeconomic instability as the country’s trade liberalization efforts proceeded. By means of a series of adjustments, however, the sector did manage to adapt to this hostile environment; in fact, it not only survived but actually succeeded in maintaining its ability to help cover the existing deficit, meet domestic demand and aid the country in achieving balanced linkages with the external economy.

In terms of equity of educational opportunities, the region displays great problems, and El Salvador is no exception to this. The analysis given here of the shortcomings in respect of equity of education in that country begins with a general description of the fundamental lines of action proposed in the educational reform process. A study is then made of the differences in access to education, the intergenerational transmission of educational opportunities, and disparities in the quality of education. It is noted that education has an instrumental function -economic reproduction- but it also has a function of promoting change in pursuit of a more equitable society. It is asserted that the contribution education can make to development has its limits, and the effect of poverty on educational opportunities and hence on individuals’ real possibilities of getting on in the world is highlighted. Finally, some ideas are put forward for maximizing the contribution of education to the development of El Salvador.

The Latin American railways faced serious competition from another means of land transport for the first time in the 1930s, and one of the results of this was a significant loss of income from the transport of products of relatively high unit value. This income had covered their fixed costs in terms of management and infrastructure. The financial difficulties of the railway companies drove them to seek aid from the State sector, but in subsequent decades governments gradually lost interest in them because of their financial deficits and dwindling importance in the national economy. The services with the least volumes of freight and passengers were steadily eliminated, and rail services had already become quite sparse when governments decided to return the railways to the private sector as from the late 1970s. The growing tendency of railways to devote themselves to the transport of bulk cargo between a limited number of points means that in corridors without navigable waterways almost the only competition comes from heavy trucks. The subsidies for the transport of goods by such trucks have been reduced, but not impeded, by the granting of highway management concessions. Within a few years it will be technologically feasible to charge heavy trucks tolls that really reflect both the external costs of their operation and those deriving from the wear and tear on the infrastructure. In the meantime, rail and road transport could be placed on an equal footing in terms of competition by compensatory subsidies for the former. This would channel each type of traffic towards the means of transport that could move it at lowest cost. In order for the benefits to be received by the community in general rather than by the private-sector concessionaires of railways and highways, however, the policy on compensatory subsidies should be laid down before the award of the concessions.

This article aims to make a “walk-through” in the virtual reality of budgetary and fiscal matters in order to identify the possible leew ay for achieving a higher level of convergence betw een the public discourse on equity and the real content of public policies aimed at that goal.

The allocation of expenditure on training for the small enterprises of Latin America is a matter which requires clear guidelines. Increasing resources for this purpose is a necessary but not of itself sufficient strategy. The shortage of resources, their faulty allocation and the inefficiency in the use of those currently assigned to this class of enterprises are factors which make it necessary above all to take measures to ensure better use of the available resources, especially those of public origin. Likewise, it is necessary to find new sources of financing for training and upgrading the labour force, making use of suitable incentives. At the same time, it will be necessary to develop training techniques in keeping with the conditions of the countries of the region, to reform the existing institutions, and to establish new forms of relations among the actors concerned.

The author of this article concludes that the quality of the public sector can be assessed only against the role of the State. In general, an efficient public sector should be able to achieve the State’s objectives with the minimum degree of distortion of the market, with the lowest burden of taxation on taxpayers, with the smallest number of public employees, and with the lowest absorption of economic resources by the public sector. The public sector must be transparent in its processes and in its outcome. Corruption should have no part in the decisions made by bureaucrats and political leaders, and the resources in the hands of the public sector should be put to a use that maximizes their social rate of return. The quality of the public sector is also important for pursuing the objective of equity, which is now seen as one of the fundamental goals of the State. A high-quality public sector should make possible the pursuit of equity with the lowest costs in terms of efficiency. Finally, the so-called “first generation reforms” do not necessarily improve the quality of the public sector even though they may improve the quality of public policy. The pursuit of “first generation reforms” has, in fact, highlighted the need to improve the quality of the public sector, and for this to occur, “second generation reforms” are necessary.

This article analyses the work of Albert Hirschman from the standpoint of two basic concepts: trespassing and self-subversion. Hirschman turned these exercises into an art, pleading his case in a manner which combines curiosity and intellectual humility. In a world accustomed to think and think of itself through totalizing models, in a continent where so many ideological models which sought to open up (or rather, force open) the realities of countries were put together and taken apart, Hirschman’s works and intellectual attitude represent a healthy and beneficial invitation to take a different view. This is not his only merit, however. From Chile to Brazil, from Mexico to Argentina, he passed on his passion for the possible to more than a few admirers. In the last few years, a great many ministers, academics and leading members of international organizations have repeatedly praised his contributions. Likewise, many of the concepts developed by Hirschman -his “exit, voice and loyalty” triptych, the notion of the “tunnel effect”- and above all his propensity to think in terms of the possible and his efforts to trespass over and subvert theories (including his own), paradigms and models, and all the cubist and minimalist mental exercises that are constantly created and recreated, are healthy sources of inspiration and interpretation for rethinking the never-ending quest for development. Lastly, notions like community participation or social capital, which are now major subjects of discussion, can also be better appreciated, subverted and self-subverted in the light of Hirschman’s work.

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 analyses the impact of public investment on private investment. Apart from purely ideological aspects, two opposing interpretations may be distinguished with regard to the relationship between these variables. The first is that there is competition between public and private investment, so that the former “crowds out” the latter. The second is that public investment is complementary to private investment in so far that, by generating positive externalities, it creates favourable conditions for the latter. In view of the relative scarcity of empirical studies on this matter, this study deals with the case of the Brazilian economy in the period from 1947 to 1990. Its main conclusions are that private investment is indeed crowded out by public investment in the short term, but in the long term the cointegration vector coefficients indicate that these two variables complement each other.

This article analyses five types of international trade based on the competitive advantages afforded to under-developed countries by their environmental resources endowment. First of all, specialization of such countries in the production of highly polluting goods and services is studied, recalling the conventional specialization in the production and export of goods making intensive use of natural resources. The commercial exploitation of the recreational services of natural parks and the exploitation of biodiversity in pharmaceutical research is then referred to. The use for profit of some environmental services involving these resources which are in the nature of public goods and which would require some type of bilateral or multilateral international agreement is addressed. The access of these countries on an equal footing to a number of global and common resources is then considered, and finally some conclusions are presented. According to these conclusions, it is hard for trade relations between developing and developed countries, based on specialization in the use of the endowment of environmental and natural resources, to provide any solution to the problems of poverty and environmental degradation. However, more efficient, more imaginative and, in the final analysis, more equitable exploitation of these resources could make a much bigger contribution to the solution of these two serious problems. In this case, in order to attain economic and social efficiency it is necessary to receive the collaboration of the advanced countries, in view of the fact that environmental resources are in the nature of public goods.

In 1991, the Government of Chile began to pursue a new business development strategy. The Small and Medium-sized Enterprise Support Programme (Programa de Apoyo a la Pequeña y Mediana Empresa) provides for a number of instruments to correct market failures and improve the efficiency, productivity, competitiveness and international trading position of Chilean products made by these firms. The importance of small and medium-sized enterprises (SMEs) in the national economy is illustrated by their number and by the share of jobs they create. The particularly adverse experience of the economic crises of the 1970s and 1980s, and the difficulty these companies had in adapting to the new ground rules of the open economy model, were what led the Government to decide on this new development strategy. The objective of this article is to identify and analyse the policies applied and the effects of the different actions undertaken and instruments used. Although the strategic development framework has included new instruments that have made important contributions to the SME sector, the overall impact of these is less encouraging. The challenge now facing companies of this type in Chile is to find ways of applying successful experiments on a mass scale and reformulating strategies that have not worked as well as hoped.

This article analyses the export offensive made by Mexico, Central America and some Caribbean countries since the mid-1980s. Notwithstanding the differences between them, in all the countries in question this offensive has been aimed mainly at the United States market, has been stimulated by import tariff privileges and other incentives, and has been based on poorly-paid assembly operations: i.e., it involves the in-bond assembly or “maquila” industries. This study seeks to determine whether these industries contribute to local technological development. The answer, based on a questionnaire sent to 75 maquila firms in six countries, must be “yes”. The maquila industry uses production techniques close to the best international practices –something matched only in a very few domestic manufacturing firms– and it helps to train human resources and introduce modern concepts of organization and management. Moreover, it makes intensive use of unskilled labour. Consequently, in order to progress towards sustainable development with social equity it would appear to be necessary to turn the maquila industry into an increasingly competitive activity by increasing its productivity and the added value of its products. The evolution of maquila industries in the direction of activities using a more highly skilled labour force is perfectly possible, as the case of Mexico shows, and it will become unavoidable when pressures on the labour market cause real wages to rise, as in Costa Rica. This will not happen automatically, however, and even less so in countries that lack institutions to support that process.

This article seeks to analyse the effects of globalization on the financial systems of Argentina, Brazil and Mexico, which were the countries that received most of the foreign investment in the region in the 1990s. This capital was mostly made up of portfolio flows and investments in shares traded on the local financial systems. The movement was not homogeneous in all the countries, because of their different degrees of openness and differences in macroeconomic policies. In the case of the portfolio investments, the effects of the openness were concentrated in different segments and they therefore had different impacts on the financial systems in question. The recent experience of these countries shows that there is still some room for national economic policies to take action in the context of financial globalization, even though their capacity to reduce the perverse effects of financial flows is limited. Foreign firms are observed to be assuming growing importance in the countries studied, as a function of the degree of openness of the local financial systems. This tendency is due to the liberalization measures adopted in order to make possible capitalization of the banking systems and competition among banks to find new sources of profits and strengthen their position in globalized markets. Although the predominance of foreign companies has given a more solid capital base to the national banking systems, it could have an adverse macro- economic impact, especially in Mexico and Brazil, which still maintain relatively independent monetary policies.