CEPAL Review - Volume 2002, Issue 78, 2002

The paper explores the two-way links between human development and economic growth in Latin America. Economic growth is likely to advance human development as the resource base expands, while higher human development generates greater economic growth as healthier and more educated people contribute to improved economic performance. Regression analysis shows quite strong connections from human development to economic growth in Latin America, but the economic growth to human development relationship is much weaker than that indicated by worldwide evidence, probably due to the disruptive impact of the debt crisis. Case studies of successful and unsuccessful countries show that human development success was due to good economic performance combined with high social expenditure; failures were associated with conflict, natural disasters and harsh adjustment policies. Exploration of country behaviour over time confirms that priority should be given to human development to reach a virtuous cycle of growth and higher human development.

This article uses international databases to empirically estimate the links between inequality and trade. It looks first at the links between trade openness, income distribution and relative factor abundance. Next, it uses the results obtained to analyse the changing relative resource endowment of Latin America and its distributive consequences. The main conclusion is that, behind the persistent high level of inequality in the region, substantive changes have been taking place. The Latin American pattern of relative resource abundance has changed with the inroads made by Asia, China and Russia into global trade, which have reduced Latin America’s relative abundance of unskilled labour and resources, respectively. The developed countries have expanded their endowment of fixed capital, while Latin America has not been able to accumulate the physical and human capital that would make a stronger emphasis on external trade compatible with greater income equity.

Latin America is going through a simultaneous process of population ageing and growing predominance of precarious employment conditions which poses a challenge for contributory pension systems. The solvency of the basic pillars of the unfunded system is being affected by the longstanding decline in the number of active persons whose contributions finance the benefits of retirees. The benefits of the individually funded systems are sensitive to the density of contributions needed to accumulate capital and finance pensions for members with increasingly long life expectancies. This study describes how this challenge manifests itself at present and examines the responsibilities that society must assume in order to cope with it.

Over the last quarter-century, the distribution of income in Argentina has deteriorated steadily. This article utilizes microsimulation analysis to decompose the impact that labour changes have had on the distribution of family income. In the 1970s, the deterioration was due to real reduction and relative dispersion of wages; in the 1980s, it was linked to growing unemployment resulting from successive crises; in the 1990s, under the new economic order, the deterioration continued as a result of the unemployment generated by the restructuring of production and the increase in labour force participation, coupled, in the last phase, with greater inequality in wage levels. The article concludes that the new economic model involves, beyond currency appreciation and the ultimate collapse of the macroeconomic regime, a lower employment elasticity of growth –thereby generating more structural unemployment– and a larger wage gap between workers at different skill levels.

This article analyses the way in which Latin American bond spreads were affected by the changes in United States interest rates in the second half of the 1990s. Empirical analysis shows that, contrary to theory, in this period the spreads of emerging market bonds and United States interest rates moved in opposite directions; that there was financial contagion; that contraction of liquidity and financial contagion can offset the effects of those interest rates on the spreads of emerging market bonds at times of economic and financial turbulence and thus become the most important factors in the evolution of those spreads; and that the increased financial integration associated with the current globalization process has heightened the vulnerability of the developing economies to external shocks.

Ten years of infrastructure reform in Latin America can teach us a lot about how to make privatization work for the poor. There are macroeconomic and microeconomic transmission mechanisms through which such reform may affect those sectors. This paper discusses policy instruments to increase their access to services and make the latter more affordable for them. The advantages and disadvantages of each instrument are evaluated and examples are given. The ways in which policy-makers should go about setting social priorities in infrastructure reform and choosing the most appropriate policy instruments in each case are then considered. Emphasis is placed on the need for simple and rapid empirical diagnostic tools, and finally it is stressed that a pro-poor reform strategy requires a political commitment from the outset of the reform process and an integrated approach between privatization, social and regulatory policy.

Governments play a central role in the organization and financing of health services, and their actions in promoting equitable health care contribute to their legitimacy. Chile’s system of health insurance and health care has raised concerns about equity in the financing of this care. This research extends the analysis of equity to the question of access to care, with special emphasis on the heaviest users of medical care: i.e., those aged 65 and over. Data from the 1998 Chilean national CASEN survey show that there were substantial inequities both between and within public and private insurance in this respect. The persistence of inequities within public health insurance indicates that even when financial equity and efficiency are improved, additional attention must be given to barriers to obtaining medical care if inequities in access are to be reduced.

The analysis of integration processes between two economies has traditionally focused on identifying the intensity of trade creation and diversion, estimated through a simulation of the impact of the reduction or elimination of trade barriers. At the same time, the literature on multinational corporations has stressed the growing weight of intra-firm transactions in total foreign trade. This paper attempts to compare these two theoretical approaches by analysing the geographical orientation of the leading Brazilian export firms and, on that basis, inferring the potential impact on estimates of the effects of the Free Trade Area of the Americas (FTAA). The hypothesis is that, by taking into account the significance of subsidiary firms in the country’s foreign trade and the geographical concentration of these firms’ external commercial transactions, the results derived from the creation of FTAA may differ from those obtained through simulations based on the reduction or elimination of trade barriers.

This article quantifies Brazil’s loss of U.S. market share to Mexico between 1992 and 2001 as a result of the entry into force of the North American Free Trade Agreement (NAFTA). An expanded version of the constant market share model was used to calculate gains and losses in the competitiveness of Brazilian exports to the United States, by product and by competitor, for subperiods between 1992 and 2001. The model showed Mexico to be the country to which Brazil lost the most market share in the United States between 1992 and 1996. Exchange rate variations and preferential tariff treatment for Mexico on the U.S. market were equally important in Brazil’s loss of export competitiveness to Mexico.