Fi,hlo\\'. :\ , (; win. C. Hai.:".ml. S, Roclrik. D anel \\'arlc. R. 1~!H . .llimde or DtJ~~11?

- LLSso
/mm tlw l:.iot . /iian E\ptri111n . \ \'a, Jiington. DC:. (), l'N ' ª ' DcTl'iop nwn t C ou ncil. llJ
hin11a11.J anel Sth.:lit/..,I. 19911. ·Econnmic C:ri,n: E\·idcnn: .111d ln•ii.:hh from E;ISl Asia•
llw11ki11p f't1/1t111111 En1110111i1 . lcti:t!l. 19!1fl. 110. 2. '
j o hn,011. C:. 1911'.?. .\llT/ 11111/lf1t } 11p1111111 .\liuulr. S1.111ford . ~ tanf(mJ l ; nin-r~ity Pn·s;.
.Jt111"'· 1. anel Sakong. 1. 1!1110. (;,,;, 1111111111. /f111i111 " mui E11trf/lfmrt1,.hi/1 in l:r1momit Dn tfopmrni:
'/711 Ai1Ta111 (.(111 . (;;1111lu idgc. \ l;i,,,1ch11'l'l l'. l lar\·ard l ' ni\ n ' ity 1'1e".
Ki11dil'lll·n.:cr. C:. 1!JltG.. \la111a1. l 'm1in. 11111/ <:1a./1t'1. 3rd nl.. l.o mlon anel B;i.,ing:.tokc
~lanuill.tn. '
Kruc·"cr. . \, 1~IHO, ·T1·adc l'ulic~ ª' a n l nput to l)""dopnwnt '. . l111t1ira11 l·.'m11om1c /fo:iew
\oi. ili. IH>. :i.
.
Krugrnan, I'. 1 ~)!J1. 'Thl' \ lytl1.. r East :hian \ 1ir.tdl·'. /-i111 Í!;it. lffai11. ::\m .!Dt.:r. 199 1.
1! l~IB. •\ \ 'hat l lapprnl'cl to . \~ia, .. 111i111l·o., )).. p.11 mwrn uf Eco nomics,
\ la"achthct t> l 1i-tit11H· ofT1·l' h11ol11;..~-.
l.all, S. 1!J!J4, ·))nn tl1 t· lkll Toll foi l ndti-trial l'olit ~ .''. li i1r/d IJ1nlop111111/. vc>I. 22. nn. 4.
l.ittlc. 1, 1!!82. f:'cu110111ic /)c;./o/m1111/. ::\\·\\' Ym k. Ba,il' lltJuk,.
l.11t'dch·-::\1·11rath. R. l 9HG. l111/lfl1/ <.i1111,.,/1 mui E'fl(11t-(hi1111td /J11.,/o/1111mt: .1 Rrrn11 u111t111 efllu
Suulh l1Õ11m1 G11c. Bouldn and Lundnn, \\'nt,·icw l'rc"''·
\ laddi,011. :\ . 198!1. ·n, 11 i1rltl l:l cmmt!l in 1/11 :.!Oth (.111111~1. l'ari,. OEC:D.
\ la"a,dna. 1 ;md 110111. T. 1!1110. }11pa111" /11d111tri11/ /'11lit:r. l .011do11. l'oliry Stndit·, liNitutc.
\l rni;;hima. \(. 1~112. Jl 7n 11111 ]11/11111S11r111·d1d.' . C:a111liridgc. C:arnbrid~c L'11iH·r, ity l'rt.:~s.
l'olan~ i. K. 1!I~> i , ·n11 G11 al ·1 11111~/11111111111111. Bos tt>n. lkal·on 1'1\'''·
Rackkt, S ;11111 Sad1,, .J, 19!Jll. ··1 hl· E.1, t ,\,ian Financia l Crj, j,;: Di.1g110-i.;, Rcnwclil-., anel
l'nhJ>t'<' h ·. /Jruul.ii~t;.1 /'11/111 011 l:i /Jl/u111i1 :l1IÍl'Í!r. 1!J!JIL 110. 1.
Ra11i,, (; .11ul Fci .J l!Ji.'i, ',\ \I odei 11f(;n"'1h anel Employnw111 in1h1· Op<'n Duali"ir
En11111my: Tlw ( ::ht'' oí Kurc·a and ·1·ai\\',11t' in F St"" .1rt. 1!li :1, l·d .. l-.'111/1lf.!l'lll111/. lnumu
/)i 1ttil1111i1111 1111111>i1dop111111/. Lrn1d1111. f 1.111k C:a'' ·
RnrlriJ... D, 1!)9·1. · Kin ~ K on~ \ k <'t' God/.illa · in .\ Fi,hlo\\ cl ai. .. \ limtl1'<11 lk11.1~11! IL110111
Jio111 lh1• /:.i111 :l1in11 /~\fl11Ífll1e, \\'a,hin~um. DC:, lhn,ca' Dn·.. lcip111e111 Co1111cil.
S.-1111h;(1·, C. 1911:). ·111d1"11 ial l'olil·~: . \ Di""m ·. ·1111 1!11111/.111.i:.1 Rni. 11·. Fali. 1!l!l'.-1.
S in ~h .. \ . 1~J!J:"1. ' H11\\ Did E:1, t . \ , i.t Gn"' S11 Fa, t ~ Slnw l'ro~rl·>s To\\'ards . \ n
.\11 alyt ical Con' l'll'll''. l)j,< u"ion l'apc1 110. !17, (;clll'\'a. L'::\C:T.\D .
. 19!1!1. · '".\,ian C.1pit.tli, 111.. anel th (' Finanl'ial Cri,is' in.J \lir hi l· andj ( ;rin-.· Smith.
19!l9. nk (;/ofml 11/\lflhtfi!J '/711 l'olilnal f.io111111!r r!f Jlf11/d l-.l111111111ic G11m111m1 .. IA111do11.
Routlnl""'
Stiglit'l . .J. l'l9li, ·Sorne l.l·,,,,m fro111 thc Ea, t .\ , i.111 \l ira(k'. '//11 ll i1rld /Jm1I. Uu1rtrd1
0/11, '" r, \oi. 11. nn. '2 .
S\\lT1..1y. 1'. c·t ai., 19iíi. '/711' '/1m11iliou/iu111 !-i111/a/i1111 Ili <.n/1Ílali1111, IAmdon. ::\"" l.di Bo11b.
Th111111 ho11. (;. l'lH'I. ' l11 tr11ducti1111· in C . Th.,m1 M111. l!Jll!J. 1·cl., !111/t1111i11/ l'r1fi1_r l X I mui
{ ·1,· 1J,b11/11. l.0 11do11. Rrn1tkd~c.
\\'.tck. R , 19!HJ. (;111'1'1//Í11,~ tlt1• .\l111!.cl. l'1 i11n·1w1. l'rim·..11111 l'nin·r,ity l'n·.'·' ·
\\·,.,llh'\', E. l!JBi. /111ita/ÍtJ11 nr11/ /111wrnli1111: 'flu '[11111':.f1rt1/ ll i11'171 (hp,1111i111/Í111111f l'a/11 1111 /11.\lfiji
}a/1rt11, CarnlJrid~c -. C.1111hrid~\· L'11iwr,ity Pr"''·
\\'oo-Cu 1 11i11 ~'· \1. 1 ~l!J9.1-ck. '!71. /),;cfu/1111t11/11/ .\ta/1, lt11ac.1. C.:orndl L'11i1·1·r,i1y l'n·"·
\\'11rld Bank. Ellli. JI urld IJ. :,/u/11111111 Uc/m1t. 19117. :\,·" · Yurk. Oxf(ml Lniwrsity l'n·" ·
\\'11rld Bank 1'l'H. 'f/11 /:'1111 .hi1111.\liu11fc. ::\1·\\· York. ( )xli1rcl L11i,·1·r,ity l'rl·'s.
 6

LA TI N AlVIERIC1\ D URING THE

SECO ND H t\LF OF THE
T \1\ EN--f IETH CEN'TU RY:
From thr ·age of rxlrr mes' to thc age of
·cnd-of:.hisLO rv·
, uniformitv.

Gabriel P aln1a 1

'ITlll' ln1sin('ss o fhisto rians J is 10 n ·nwmb('r \\'hat othcrs fo rgct.'

E H ohsba\\'lll

1. lntroduc tion
T hr cconornic and poli1ical his1ory ofl .atin :\11wrica during tl ll' sccond half'of
thc l\\'l'lltic1h n· n wry is di,·idt'CI by ~ lc-xiro \ 1982 lkfault, a cri~is that not
onl y t' alcd thn·c drcadcs or unpn:ccckntl'<l gni\\'t h . lm t a lso don1ina1cd lhl'
political cconomy of thl' subscqucllt ' neoliberal' pcriocl.'!
Bc t\\ l't'll 1950 anct 198 1, Latin :\111nica ·s outpu1 inncascd fi\Tfold (5. '.{~ ..
annually) anel, dcspitc ha\'ing thc \\'orlcrs fos1rst popula1ion growth (2.7 1111).
inrn111c per capita m o re than doubkd. La ter ( 199 1 2000), (; DJ> on ly
incrcascd at 2 .2% annually Gust 1.9% iftlu.: pcriod is cxtcnckd to 2002). whilc
inconw per capita 'ila~1atl'd:1 !t is agains1 this barkgi:ound - a nel th<ll of thc
rcmarkabk ,,·orlei puli1irs of thc l ~J80s that La tin 1\mc rir;ú un settll'd post-
1982 poli1ir al t'('o!lomy mmt hl· cxa111incd.
1lo\\'l'HT, in Latin :\nwrica. ·a,Tragcs· arl' oficn clcccpti\'C, for g ro\\'ing
incqualitics mack it thc· n :gion \\'ith tlw \HJl'SI distribu1io11 of incomc anc\
,,·calth i11 thl' world (Figure !).
ln 1.atin :\merira, poli1ico-i11s1itutional struct111Ts uniqucly Sllff<'l'Ckcl in
co11ccntra1i11g 1hc hcnrfits of dt:wlopmcnt, both during and aftcr import-
~uh~tituting inclustria lization (ISI), in ~ma ll sc~1ients o f d1c population 1ha1
Figure 1. Region al incom e shares of d ecile 10 and log of income per
cap ita, 1990s

income share oi decile 10 (median values)

45% - , - 45%
• L~
i
40% +---------------------- -- -------- 40%

i
1 L@ .
35% T--- ------------- - -- ---------- 35%
-l
1
30% T --- - -- ------ - • - - • - - - - --- - -- 30%
J ~ • _ ~~ ~l EAI • l~~
- t!:•·c2 J •
25% -l- ------------- -~ --- - ------ - 25%

I ~.,,II • [~.!., •
20% L
5.2
---!----
5.7
---1
6.3 6.8
- - . - - - r - - - t - - f - - - -+- -. 20%
7.4 7.9 8.5 9 9.6 10.2 10.7
log oi incarne per capita in 1997 (in 1995 USS)

' LA'= Lati11 Amcrica; ·AF=Sub Saharan Africa; 'EAI · =firs1-1icr-~I Cs; ' EA2'='sccond-
1icr-NICs'; 'SA'=South Asia and low-incomc South Eas1 Asia; ' NA'=i\"orth Africa;
' CA'=Caribbcan; ' oeed l '=non-English-spcaking-OECD; ' o eed 2'=English-spcaking·
OECD; ' ex-e l '=Ccnlral Europcan cx-comnmni t countrics; and 'ex-e 2 '=cx-USSR
communist countrics.

Sourcr. P:ilma 2002a.

achieved particularly high living standards. Thesc groups coexisted uneasily

with a swe lling undcrclass that c ndured preca rious living conditions, often
bclow basic minimum subsistencc leveis. T hro ughout the Third \Vorld,
political oligarchies woulcl uncloubtedly aspire to such a hig h incornc share,
but the crucial question that still rcquires an answer is: why is it that only in
Latin America do they gct away with it?
Figure 2 re inforces thc uniqueness ofLatin America's income polarizat ion.
Unsurp1i sngly (not only in tcrms of income but a lso in wealth anel power)
Latin America's extrem e inequalities have been a major source oftension anel
in mány countries lrnve required repressive military dictato rships for tJ1eir
pcrpetuation.
Ties bctwccn Larin Amcrica and thc world economy incrcascd during the
late nineteenth-cemury trade boom, consolidating a production structurc
bascd on raw materiais for expon. However, during the l 930s, Latin Amcrica
Figure 2. Regional r a cios ofdecil es 10 and 1 and log ofincom e per
capita, 1990s

:e
ratios oi income share of deciles 1O and 1 (harmonic means}
50

• LA

40

1
30 T----------- -l 30

20 l ___ -- ------------ - -- -t- 20

J • fAFJ
1o t---- - -- - -..~ ~ -
• [E [ e~ ~
• ÍEÃ2 J

•
fCx-e 1]
EAl
-.~~·•
[ oocd _:_
-
o-l-----t--+---1- -+-+------- o
5.7 6.3 6.8 7 .4 7.9 8.5 9 9.6 10.2 10.7
log oi income per capita in 1997 (in 1995 US$)

Abbrruialions: as Figure 1.

switched to IS I; irs most crucial characteristic - common also to the l 990s'

' neoliberal' model - was that it was implcmentecl in a more ideologícally-
d1iven (and lcss 'Schumpete rian') m anner than in othcr Devcloping
Countrics (OCs), for examplc in Easl Asia.
J\Jthough ISI dicl detiver a manufacturing growth that had no precedem (or
conúnuity) in La tin America - 6.5% annually in the period 1950 81 - it be-
cam e increasingly associa recl with cumber o rne policies anel foreign-currency
sho rtages. These problcms progressivcly Icei to constrained invesrment, lower
capacity lllilizatio n, 'sto p-go' cyclcs anel eventually to excessive foreign
borrowing. Althoug h easy access to cheap fo reign capita l afcer lhe 1973 o il-
hock did rclax short-term constraints, debts accumulatecl while currrnt-
account defi cit reached 40% of expon s of goods ~md services in 198 1 (70% in
oil-rich l\llcxico). D espite continuous hig h inílows, the game was ovcr when
rhe FED rrebled nomina l rates (1977- 8 1).
ln sum, betwecn 1950- 81 IS! did clcliver a growth rate in Latin America
úrnt was not only higher than in other dcvcloping rcgions, but also - and for
the first time cvcr - highcr than that of thc OECD (4.2 %) .~ Howe,·er , as ISI
becamc more mature, it incvitably requircd continuo us readjustments anel
changcs. Thc crucial problcm was lhat Latin Ame rica 's capitalist and political
elites - nevcr rcnowned for their versatilily and foresight - raL11c r than
making the required cffon , opteel for rclaúvcly mina r moelifications to pro-
lo ng JSI fo r as long as pos ible. Evemually, a combination of elomestic and
inte rnational fa ctors maelc these elites bclievc tha t a change to a d iffercnt
devclopment path was p ractica.lly inescapablc.
Paradoxically, history i~ rcpeating itsclf in the ncw 'neolibera l' modcl
which is closely foUowing a simiJarly myopic political anel ccono mic cycle. '

2. The rise and fali of the OECD 'Golden Age'

Between 1950 anel 1973, the OECO enjoyed unprcced enced prospcrity: out-
put increased threefold anel incom e per capita 2.4 times. This was twice the
rate of any prcvio us p eriod. ~
The collective memo ries o f the J 930s anel o f thc war playcel an essencial
role in shaping this ' Golelen Age'. K eyncsian de mand-ma nagemcnt, a grow-
ing wclfare state, powcrful traele unions, eliffcrcnt policies to strcngthen prop-
cn y rights ovc r human capita.l, a nel thc compatibility o f U S internai policy
goals with externai lca dcrship rcquircmems helpcel the OECD achicve t.11is
unprecede nted performance. At first these arrangeme nts worked smoothJy.
D omestically, they combined to m aintain elTective clemand. 'anima l spirits',
capacity -u1ilization, stable profits anel low inAatio n. Internatio na lly, the US
recycling trndc-relateel clollar surpluses remo,·ed OEC D's foreign-exchange
bottlenecks.
1 0 1 surprising ly. the Keyncsian 'revolution' in the orth hael powc rful
icleolot,rical, politico-institutional anel economic n.:pcrcussio ns in thc SouLl1. 6
Alt.11o ug h thesc repercussio ns were as significant as those of the J 980s'
Reagan- Thatchcr neoliberal 'cou11te r-rcvolutio n', they were ccnainly
absorbecl in a mo re crcativc way. Thc lo ngest lasting o f thesc was the shifting
away of La lín America fro m its 'Ricardian' position (which hacl again been
strengthe ned alte r the Kemmerer missions o f L11e l 920s), scekíng new com-
pa ra tive advamages with greater productivit)'-growLh potentíal, higher 'tech-
nology-ladders', bener ba lance-of:-paym ents prospects anel increased chances
of 'catching up'.
Thc fivc fundam ental propositions upon which Laün Amcrica 's structural-
ist thinking was built werc that: (i.) manufacruring is the best cngine o f growth;
(ii .) ISI is thc way 10 achieve it in midcllc-incomc Latin Ame rica; (iii.) com-
moclities ca11not provicle a dyna mic cxport sector; (iv.) inílation rcsulcs mainly
from 'structural' supply-bottlenccks a nel, (v.) only 'discretionary' governmcnt
policies could tackJe these problcms (which includc urgently neeclecl 'complc-
mentary' investment}.;
 ,Jeanwhile in thc OECD, proble ms began to emerge wcU before Lhe 197:5
shock: in panicular, therc occurrcd a 'fuU-employm ent profit-squccze' -
jrnbalancc bctwccn productivity and wage growth. Thcsc wcrc mainly thc
uh of diminishing 'animal spirits', incrcasingly rigid job sccuriry (in thc
8
1(eckian sen e) and a change in cechnological paradigms. The l 970s o il-
:>cks. of course. exaccrbaced thcsc problems but wcre 1101 thcir original
u e.
As thcse problcms appearcd first in the USA. thcy undc rmincd thc founcla-
ms of the 'Brcuon \ r oocls' systcm (bascd on US hegcmony). \ \·hcn the
, uar was tran formed from an undervalucd into an o\·er\'alued curre ncy.
ixon fi rst rcscindcd gold-convcrcibility and then (whcn the US tradc balance
1 raincd the first major deficit of the ccn1u11' in l 9i 1) he unilaccrally aban-
oned ú1e fixcd-paritics systcm.
ln thc abscnce of effccti\'c coordinatio n, thc new 'floaúng· . ystem was in-
apable of re o hing increasing g lobal financial disequilibria; and whcn in
977- 8, Carcer Lried to stimula te aggregate dcmand - anel {.; tradc deficits
·cachcd 1/4 of cxports - the rc t of the OEC O was no longcr willing 10
tbsorb ·exccss· doUars. Thc rcsulting dollar wcakncss, in tandem with rising
J1ílaúon. sct 1hc stagc for the ' olkcr) FED radical monc tarist era.
Thcrefore, thc re trcat fro m K eyncsianism was ba cd on bo ú1 domcstic anel
intcrnatio nal considcrations, including thc poli1ical wcaknesscs ofthc K cyn es-
ian camp, characcerized by ú1c incompctent Caner- Callaghan duo. \ \"hat
followed was a generalized volte-face in both 1he cconomic and the politico-
institutio nal ' pa radigms' of the OE.CD - rhe Rcagan Tha1cher ' neoliberal
coumer-i·e,·olution'. Once again. both domcsric a nd internationaJ considera-
tions wc re inextricably linked in a 1ransforma1ion of 1his nature. Once again,
suclt an icleological shift in the l\orth, at 1hc ,·e1y time whcn a vulnerable
La1in America was làcíng ma sive internai a nel externai shocks, had power-
ful influcnccs on Lhe region ·s iclcology, politics. insütution-building and
cconomics.

3. T h e increasing dive rs ity of pe riphe ral capitalism

The ·Golden Age· 1101 only providcd the OECD but also devcloping coumircs
DCs) with unpreccdentccl pro periry: thcir outpuL rreblcd between 1950 anel
1973, ncarly doubling income per capita. Their i:,rrowú1 rate was fo ur Limes
fo.ster than thcir prc\'ious best performance anel fo r Lhe firsL time was similar
10 tha1 of rhe OECD. The sLrong performa nce of many D C is most signifi-
canl in manufacwring (6.6% in D Cs and 3.9% in OECD) a nd manufactured
cxport (12% anel S~o) . La1in Amcrica performed bcsL as a rcgion; howcver,
1he :\'ICs grew fasLcst as a subgroup.
 .\lthough DCs· cxpons incrcascd by 5.7°0 annually. thcir world sharc
11
by [ /3 and: as Latin t\mcrica ·s commodity cxpons ~cw at .IC'ss than 3%, r~:
by half. Th1s pcrformancc compares unfan)urably wnh Laun America's pr •
vious commodi1y-cxpon rcrnrd. and with its O\Trall growth. LHin Arnerica:
!S I \\·as implcmcr1Led in ;.urh an inward-looking \rny. anel absorbed sueh s
propo nion of rcsourrc~. that commoditics for cxpon and agricuhure for tJia
e1omc~uc · mar k·c1 1)l·camc 1ts
· ma111
· ca!>ua 1ucs
· .'' e
.:\ftn_ 1973 . thc . c~ rrcnt-accou m deficit i.n ,thc a\T~agc oiJ:imponing,
nmld lc-111romc DC.s 111crcascel from 1ºº o i ( ,DP ( 19131 to :.>~o (1975).
H owcn·r. thc mixcel hkssing ofcasy acccss to forc ign borrowing hclped their
'irnmuni1y· to thl· oil-shock. ln fact. tlwir cxc<..,~ bmTo\\·ing Icei rnany non-oil
ClllTC11Cic~ to rc,·alue, lcading thc real cnmomy (cenainly in Latin ..\merica) lo
adjusl in the oppositc elircrtion to that reciuircd by thcir currclll accounts.1º
One reasou for J.<llin :\me rica·s O\T r-ho rrowing was fina ncial incentives
("oHT. m eaning accumulating more risk than was pri,·atdy, lct alone socially,
cfficic-111 1: ewn if dcflatc-d by l.atin . \me rica ·s 11011-oil-rxpo n priccs. the
Lo nelo n lntcrbank Oller Rate (LI BOR) was nc-gati,·c for sn-r11 ycars bctwecn
1972 ~W (-S .3'X, 011 an-rage).
Thus, on thcir ow11 tc rms, thc l1oati11~ cxc hange-rate regime anel financial
·dncgulation · wcrc tcmporarily abk to accommodatc lhe 1973 -1 financial
discquilihria . OPCCs surplus was ·rccyckd. to halancc-of-paym c11ts-
co11st1-:1i11cd coumrics: ·rccycling · c11abkcl DCs to 111aintai11 f,'T O\\ th 111omcn-
tu111 thu'> ,,upponing \\·orlei ag~rl·gatc ckmand): low LI BOR aJlowcd DCs·
foreign liabilitics 10 pl·rlorm: anel by 1978, OPEC's su1vlus had itsclí d is-
apprarcd (cluc to incrcascd abso1vtion).
H O\\C\-Cr. 1101 only had tlw lir:-.t o il-shock 1-c,·cakd more O EC:D rigidities
tha11 antiripatnl kadin~ to ·smgfla1 io 11· · but whc11 OPEC adelcel a scco11d
~hock. tht• thrcat of a ll C\\' illlc rnational orckr with SOllll' ·pmwr to thc
Southnn1 peoplc. had major political repe rcu~sions. Fi11ally. thc LS trauma
aftn thc hostagc crisis in lra11 is dilliruft to OH'rrstimatc. H rncc . thl· political
a nel tT0110111ic sccnes \\·erc sct for thc Rcaga11 Thatdll'r neoliberal ·coumcr-
re\·olution '. in which littk distinction \\";b madc bc t\\·crn thr rru~acks against
thc ·n·il cmpirc-'. domcstic trade unions. anel the ·ayatollah~· or the Third
\\.orld. ' I.hc hasic idca was that ·cither you an· with 11s, ur yo11 are against us'.
'.\ l osl nc,, :-.tood up lO hc coumcd. anel Latin :\mnica quiály ofü:rnl (.\ post
puhlic ~uara11 t1.·c:. on unpayabk pri,·atc dcbts. acrcptcd a onc-sidccl post-
1982 ckbt - n·sda·dulin~ proccss and lxgan thcir lo ng march towards ·11co-
lilwrali,,m'. Thosc that did not paid dcarly for it.
lt i.~ thi~ nwnacing Ítlll'ma1io11al cm·iron mcnt. together \\·ith thc fan that
the l 982 de-ln cri~i~ wa~ uniqudy tonuring for Latin Amcrica ratl1cr tha n
thl' pmHTS or persuasio n of Frn:dman or llaycck. or Latin :\mcrican p uliti-
 . suddcnly sccing ·1hc light' on thcir road to Damascus - that are crucial
cians dcrstanding not only thc d cgrcc of onhodoxy o i" Lat in 1\mcrica 's ncw
~o u~ ·cal, politico-institutional anel cconomic ·ncolihl'rar paradigrns, but
ideO º(fllo\\;n g thc rcmarkablc rnllapsc or thc Sm·ict Lnion) its ·l'nd-ol~
·J SO 10 , . . .
' . ry' uniformllv and s1andarchza11on.
htS!O
It secms that at• a 11mc
. of 111g. Jl cconom1c
. • 1 ,. 1 ,. . 1
u11ccrta111ly anc rac ica po 111c:1
cbangc, simplistic discourscs tc ncl IO strikC' a chorei with largc sq~mc nt s of
sociccy.

4, The unique 1980s in Latin America

Thc 1982 crisis hacl a singularly prrnir ious dfcct i11 La1i11 :\mcrica. \ Vhik
Laún Amcrica was cxpcricncing a ckdi11ing incomC' per capita (-0.9% a11 nu-
ally), Asia cloubkd its prc,·ious grm,·1h rate. K orca (7.8º:,), China (7.G'X•).
Thailand (5 . 9 ~ o ) anel I11dia (3.6'!u) shO\H'd a particularly s1rn11g l 980s per
capita growth rate. Latin Amcrica 's poor rclatin· pnformanrc among DCs
was unprcccdcntcd, \\'ith incomc <liíl(-rcntials bet\\'tcn Latiu :\mcrica an el
Asia dcclining for thr first time sincc 1820. 11
Almost tTcry i11clicator rdkcts Latin America·s l 9l30s' siag11a1ion. ~lanu­
facturing gro\\'th fdl from G.6% ( 1950 l3 1) to 1. 1% (198 1 ~lO) ; rnmrnodity
cxpons fro m 3 .9"-0 to U.7"-0; dcbt-SnYicc ratios incrcascd to ahout 50'{u or
cxpons (a lcn:l (\\'O lO thn.:c times g rcatcr than thosc round in Eas t :\ sia);
ncgaún· tran,fcrs a broa d (cxcluding 1.\ 1F loans) reachl'd (in l ;S dollars or
2000 rnluc) SG50 billion ( l 9l3'.2 90): per capita i1wcstnwn1 elccrcascd by 2/3
( 1980- 90); in some countrics urba n uncrnploymcnt cven t·xcct·ckd 20 1!0: anel
=
inflaúon of thrcc, lour anel cwn fi\'c-cligi ts "·as comlllon: if l 9BO 100 , Latin
Amcrica ·s 1 9~)0-price ln·cl was 4·.5 million, whik Argentina ·s was 887 million
and Brazil's 70 lllilliun. 1"! b -e11 Sub Saharan :\frica had at kast managccl a
stagnant per capi ta i11co11w and lm,· i111Iaiio11.
Not surprisingly. !SI anel thc wholc 111ockl ur :.tatc-kd dcn·lopmn11 ,,·crt·
undcr l't10nnous strain throughout Latin :\n1c rica; thc tcnsion was rom-
pounded by fragilc transitions tn clrmocrary (fo1· 1·xampk. in Brazil and
Argentina). furtltermorc , thc l'arly recO\Try from a massi\·c l 3"u CDI' fa li
in 198'.2 in (already ·11colihcrar, anel 1.\ 1i:·s farnurite) Chile was takrn as
furt ltcr n ·itlt-nn· of 1hc 11ecd liJr anel diratio11 of r hangl·.
HnKr, hi;.tory rcpcatcd itsd t: as i11 the 19'.ms. when a 111assin·. pu·, i-.,1c111
anel u11iqudy painful cx11-rnal ' hock found Latin .\11wrica in an t·xtrcnwly nil-
ncrahk po, ition , hot h l'Conomically anel pol itiro-inst itut iona lly. a nd ,,·hrn tlw
X onh ,,·as simultam·ou,ly 1111dcr1.1ki11g a paradigrnatir ch anl(c. Latiu :\nwrica
not onl y undcn ook a \Try arduous internai and cxH-rnal rnarrnn·n1101111r
ac!ju..,tm t·nt. but also a radical r ha11ge in l'Conornic thi11ki11g.
 .""'"'"'~ , 011H.T lh:m ín C:hík, Latín ,\rnnícan lc:adcr~ ª.Clually prcscntcd
tlu:. chan~c ª" a lcmporary. but ·unfortun atcly ncCC''i!>ary. stcp to rcvcrs
capital fli!!;ht. finamT l·xploclin~ forci~n dchi:-. rcdun· runaway inllation an~
c~capc from rccc~sío11. H1l\\c\'l:r. 011n: startnl. thcrc \'ª" 110 ~oin~ back. and
tltc lon~-lastin~ d1(·n ''"'" a ~1· 1ll'ralizccl ,-oltc-fan· in I.atin . \ mcrica 's cco-
11omic~ anel politic:. .. \ s h apprnccl ín tltc :\'onlt. panicularl~ in r\nglo-Sa:.;on
counu·ic~. 'horn-a~a in · rwolibcrali~111 "'ª" charancrizcd b~ a mas~i,·t shift in
llll' balance of po\\'tT tmrnrds capital. 1• tradc anel financial libcralizaiion
\\'hoksak pri,·a1ization. 111ark1·1 dnq.,•1.1lation \C'pc1·ially lalmur. anel a sub~
~tantia l rcdunion in tlll' option-1 opcn to ckmocratic in'ltitutions and ccon-
omic policy. 11
ln fon. llCJ\dwrr dsc in 1111· \\'orld dicl ·m·olihcralism · !.prtad so quickly, in
!.ud1 a rn11.:-dinw nsional \'crsion. anel ,,·ith ~urh an ·1·nd-of-hi,w1:·· uniformity
and -1ta11dardization. lts cliscuurse had a compas:. who~c ·mat,riwtic nonh· was
!:>imply dw rcn-rsal ur as ma ny as1we1s of dw prn·ious dn·dopmcnt stratcgy as
po!>sibk. 1' Tlw llllT« icka that ahnnati,·cs c-ould cxist mct '' ith a mixturc of
amusc1111·11t anel «<>nH:mpt. 1'•
Tlw neoliberal 'manil(·:.10· nimpri~cd !:>ÍX basic propo:.itions: ti track and
financial liberalization \n11ild ~\\'Ítd1 tlw cni.,rine of gro\\'th tm,·ard!> clrnrn: ,1irally-
fi11ann·d pri,·atc inwstnw111 in trackahks: fii) hud~1·tary halanu· anel uncli -
lorted markct signals wo11ld prow ~ullic ienl cunditions for macroeconomic
cquilihrium anel mi tTCJlT0110 111ic dlicicnry: (iii) the l'nd ol"gmTrn1m·n1 «liscrc-
tio11a1:.. policit'!. \\'ould not only climinalr s tatl'-neatc:d 1-cnt-3ccki11g aC"lÍ\ itic~,
hui also ma~sin·ly rcdun· opponunitics for corrup1io11: (i,·) pri' ate i111habnccs
\\'ould hc sdl~corn-cting: ,.) markc·1 dercgulation anel lrark lihcralization
wuuld pro111ott· privatt· imTst1111·111 and drn11c-11ic sa,·ing: anel. (\·i) !iscai bal-
ance:. \\'ould rekase sa\·in!!;'i for more p rodunin· use in thc pri\-:1tt· ~cnor. :\s
. \ rge11tina lias yt· t again de111omtra1cd. the proco-; oi" rdorrn 1urncd out to be
far mon: rompkx a nel its rcsults cn1ainly more mixcel than anticipatccl.
ln :.um. Latin Arm-ril«I ·1Jirc" in thc (!SI) towcl'. mm·ing w a :.tandardized
em·ironnwnt i11 which the o nly is~nl· at ~1akr \\'as who \\'ould lwst ,anel 1110. l
faithll1lly' i111pk111c111 tlw ·1ww· morld.1; :\ s ar1-,'1Kd in my chaptt·r 011 financial
ni~c.; k hap1rr IG. d1i:. contrasts sha1vly \\ith Ea~t .\ sia. wh1·re 1-conomic
n·forms \\trc impk11w11tt·d mainly as a pra~111atic nwd1anis111 to strc-11~th1·11
tlw 1 Ú1ti11g den-lop1111·11t modd.
Thl' rcM or tia· chapltT w ill l>ridly elisnis.; the folio\\ ing p1-riucb: thc 19.)U-;:
1%0 7 '.~; 197 :~ 8'.l: and 1~JH :Z 90.W
 'fhe J950s : postwar instability , ISI, regional divcrsity and
s. erate d'-ª
ulllation.
a e:: e e l
\l'th 1hr brncfo or hi11d~ight. thr 111ain d1ar.ineri~1ic or tht• 19.)0s \\';\:, thc
\ I · · n" 't\\'Íll-COllt'ClÍ\'l'-lllL'lllOf\'. of thl' 1~nlJ~ anel of lhl' \\':ti': a (historicallv
crSIS11 b • •
~ustifiablr bul extn·1t11' ) pcssi1nism r('gardi11g primary rn111111odi1y-l'xpun-kcl
J owth, and (1hc a lso intdknually~justiliahlc IJul t'Xtrenw) op1 i111is111 rq~ard­
fig thc prosprc1s for IS I. ~\ccordin~ly, 1111'. pl'riod is charar1nizl'd by a
rogrci.::.Í\T di Tnga!.(t'llWlll frmn thc lllltTna11011al ecrn10111y a11d tlw 1111plt·-
~cnia1 ion or amhitÍOlh indu~• rializa1 io11 pro~r:1111nws.
E\'cnts in 1ht· l'arly 19.íOs did 1101 hdp. Extcrnally, tlw OEC :n dc11 1a11d for
conunodities gn·\,. ,·1·1y slo\\'ly (in pan cl1ll' to tlw nTm·ny of domcst ic pro-
duc1io11). and i1s market:-\\'l'l'I' doseei H> l .a1i11 :\111nira ·s llH>rt· prorcssecl com-
moditit'~: thc Korl'all \\'ar dkn 011 ci1111111ocli1y pricl's \\'as :-.ho n lin·d: anel
Latin .\n11Tica·s 1c rn1:. of tradl' fdl hy 1111ire than '.W"o. Furthl'rn10n.:. Latin
Amrrica had no accl':.-. to intcrna1io11al li11a11n· dul' to rontinuous dcfault. 1''
(ntcrnally. pulitiral -.uppon fi1r ISI abo i11tT1·;1 ~nl rapidly among groups \\·:1111-
ing to limit thc po\\'1T oftli t· traditional rnral ;111d 111i11i11g oligarchil's.
HO\\'t'\'LT. C\ T ll 1h1·11 , Lati11 i\nwric:1's post\\'ar rl'artion 10 (11011-oil)
primary-commodity 1·xpons Sl'L'llls disproponio11a11· (Figu1T :3).
(ncit-ccl. llL'~l1 ·ct of cxpons \\·as such tl1al , \\'lll'll dc111a11cl fi>r C'OllllllOdÍIÍl'S
pitk1·cl up la1c 1~GO,.). Latin . \111erica had li11ll' proclurtÍ\'l' capacity IO
rcspond . Thus. whrn OEC:D dc111and inrn·a~t'cl fro m 1.9"., (19505) 10 6°0
(1955 7'2). L'xpons rnuld only risc frrnll 1. 711 11 to '.?.90:. that is to say. from
kcepi11g up with 111ark1·1 sharcs to g rnwing al haf/ thl' 1narkl'l ':; pacc
Thl'rdi>rl', as 1rack 1h1:ory poin1s oul, l .atill .\mcrira \\'as ca uglll in thc \,·orst
oí both \\lirlds: l'xpnn' g'l'I'\\' !-lmdy in a slow-grnwing lllitrkt·t.
Sim, expon g'l'O\\ th anel ckclining ILTlll" or \rack llll'<llll that (\\'ltik GDP
grt'\\' l>y '2/3) Lhl' purcha,.ing f>O\\TJ' or l'X(>Olb (H>lllll1l' or L'Xpurts lllt1hiplil'd
by tnm~ or tradc) n·mai111·cl s1agna111 cluri11g tht· 19:-iOs. C:on~t·qm·ndy. tlll'
track surplus íell li·on1 :~.9", ,. o i' GDI' lo 0.7'!:,, \\'hik tht· n11-re1\l account
swi1cl1l'cl li·om a surplus of S0.7 billion 111 a ddicit oi' S:>.:, bi llio11. :\ s La1 in
Anll'rica had lit1ll' al't'l'Ss w international fi11a11 ct'. a fi:1r!'ign-exc h:u1gc con-
:.lrai111 hn;an 10 hincll'r output gTO\\"lh. inn·:.tllH'lll anel fi -cal n·n·nm·s.
\la11y rnuntrit·s {t'.g'.. \rg1·11tina. Brazil. anel C:hill'J usccl ddi1·i1-financing w
ke1·p up gn)\\·th munwn111111. thus adcling a11 intl'rnal imhalann· lO an c111erg-
i11g- l'X lnnal clist·quilibrium. l ligh inllatÍ(Jll kd lo thc lirs1 l\I F stabilization
pla11s; lill' n mdi1ionali1y \\':tS 1ight-11Hmt·1aris1 111acro-pol icíe;,, \,·1tid 1 \\'l'l'l' thc
s ul~jcn oi' lwatcd contro\·t·rsy therc \,·as IH> ' rt'!{inn·n tal' i111dkn11al atmos-
phen· in those da~:.!:.>º
St run uralists \\'l'l't' r1111n·nll'd that ti li' 1\1 F t'mpha:-.is 011 compl't itiw
Figure3. LAT IN AMERICA (18): Sh ares ofManufac tures and
Expor ts in GDP (%), 1945- 2000

30% - 30%

26% 26%

22% - 22%

18% 18%

1 4~~ 14%

P·C X --
10% - -- - - 10%

6~ó 6%
1945 50 55 60 65 70 75 80 85 90 95 2000

'nú =111an11fa1·111ri11g .; cctor; ·x' =11011 -oi l-nqJm1~: a nd ·p-c x ' = no11-u il-prin1ary-crnn111odity
1·xporb. 1~flO crnNant-prin·s. '.~·yl'ar mu,·i11g ;n'1Tag1·., , Excl uck.- \ \ ·1wzuda (and .\ lc.:x ico
f!fi1'T o ii-cfi;cm·1·rin} oil j, l'xcfmft-d to õl\"OÍ<l tfw hig hly dÍ,lOl IÍ11g l'ffrct o(" prÍCÍ lll{ oi l
thn 111~ho111 at 1~JHO prin·s.

dC'valua tions anel rcduC'tion of cxpcnditurc \\'Ot1lcl a t b1·st n mtrol in Aation at

thl' COSI of both dctcr iorating COJnlllOdi1y·terms of traclc (fa lJacy or COlllpOsi-
tio n) a nel of slo\\'ing elo" n IS !. Thcrcfore. m onc tarist-IZ\ IF cn.:atl'd a false
clikmrna l>l't\\'l'Cll prin· stahilization anel ccono mic grnwth (a nel wo uld prob-
ably bc unabk to cldin·r c ithc r).
Strunuralism instcad sough t to rccluce inlla tio n by a ttacking i t ~ root causc~ :
inclast ic supplics, pa n icularly in agriculwrc . which constraincd IS I anel
increased conflict O\ ' lT real wa.~cs. Thus. thl' rnotk rnization of agriculturl'
(panicu larly land-tc·n urc sys tcms) anel public Íll\Tstmcnt \\Tl'C cunsidned to
he as important in thc long·tn m fig ht aga inst inflatiun as tlw control of
11101)('\ary aggn·ga t('s anel thc cxcha ngl' ra tc.:! 1
T ht· 19,j()s' IS I dicl succecd o n its own tl'rtns. T ltt· manufacturing g rn\\·th
rate n·;1chcd G.6'!u (stcd l '.~ 0 ~ .. anel cdlulosc and oil-dni,-.Hin·s 11 ' ~ u ) , C D P,
:·>. J ";, , n 11 cl inn·stmcn t. 7.H"I,. Hm,·cnT, tlwrc \H'tT lm th lt igh pcrlêirm a ncC'
d·vcrsity amo11g Lati11 t\mcrican cou n t ril'~ - whilc thc GD Ps of \ ·cnczucla.
B~«ztl anel !\ kx ico grc\\' a i 7.6º:•: 6.8% a nel G. l r<'spccti,·cly. :\rgcnti'.1'.1's
'.º.
did 50 a i only ~.8°o anel ca~uah10. sud1 as 1rachuo11al cxpo n -co111111oel1t1l'S
d doin csiic agricuh urc.
;in fu rthcrmo n:, tJ1e dkctl\'l'lll'S~
· · · po1·iry 1
o f any l·co1101111C ·s as muc11 a 1·une-
• of its rationalit,·. thr i111cTna1io nal environ111e111 :111cl the ccmsc nsus th at it
ºº' 1
.
rnustcrs. as of thc c llicaçy oi' its i111pkml·111atio11. Thereforc. anothn casualty
was ISI i1sd l': in the long run it sulli:rccl greatly fro m the frict that Lra dc :rnd
industrial policies became unnLTl'~<arily complicated. ohscurc and .-ubject LO
burcaucratic ma nipu latio n.2!
Su-uc1urali~1:- tried w 'linl'·tum: ISI: domestir markl·ts wcrc too small, and
Europ c was rcaping tia: lil'lld its oi' i111 q~ra ti o11 . ln tlw early J 9GOs, L:\ FT:\
(Latin . \merican Fn·1· Track. \~~oc iati on) anel thc C:l'ntral :\ nwrican intl·gra-
tion (lóllowed by tlw :\11cka11 Pan) \\'l'J'l' taki11g sha p c .~ 1 T hese initiatin·s
achicn·d :>OlllC' resuh'. hut tlwy \\T rt' 111oclrst cmnparcd \\·ith original cxplTta-
iions i11 du~1 r i ;tl di11·., \\'1Tl' o nly 1011 happy 10 contimw n.:111-srC'king on
captin· 11a1io nal mark1·h. anel t:m·1Tnm1·1its \\' l'l't ' 100 \\'l'ak w act.
Thc C uhan re,·olutiun \\'as a lso havi11g a n impact. Politiral prl·ssurc .for
bcttcr distrilmtion oi' incon1t·. \\'C'alt h and powcr gatlwn:d mo ml'ntum.
Paracloxica lly, mil: inccntin · fo r cha ngc c 1111e for thc llrst (a nel last) time from
thc US.\ it ·dr thro11 ~h K1·11nc<h-\ '.\llia11tl' li>r Prngrcss': thc likclihood of
Rcagan or Thatclwr impo-,ing financial conditionalities on Latin . \ nwrica
!ater in thc l 9BOs hasn l 011 agraria n rdcmns \\'as as ~ 1 ro ng as thc likelihood of
their com·cr!>ion to 1111ilatrral cli~an11anll'nt. I .ikn\·is1-. to say that Kennt'ely°s
'\\'eltansd 1auu11g' \\'as a fa r cry fro111 prn ·ious. :111d la tn, ll'vl F thinking woulel
be SOllll'thing of' ali llntkr:-l:ttl'llll'lll .

6. Thc c conomic b oom ofthc 1960s a nd e a rly 1970s

Thc 1960 7:~ p1..-iod j.., tlw most ely11a111ic n·c·r for O ECD rnuntrics anel DCs
alikl'. Thc :\' IC:s a nel some l .atin :\ 111crican u n111tries (c.g. Brazil, .\kxicn a nd
\ ·l·nczuda po,,tn l tlw hc:-1 ))(: performance. Thr lo rt11l'r lw11di1n l frum tl1c
OEC:D's gr o\\'ing ck111a ncl li>r n1a11 11fonu 1Td impon s ( 12%), \\'hich more 1han
doublecl thl' pan· or cl1·111a11d for ro111111odities.
l.a1i11 t\111L'ri1·a·s gro\\'l h pron·":-. i11.-11·:1d had to k1·1-p struggling agai11•;t a
~ l'O\\·in ~ halan n·-o l~pay1111·ni-, çon•\lrain1 IJlTilt1~1· i1 cuntinul'cl to com111i1 the
twin cr ror" oi' IH>t maki ng a :\1( :-.,1yk cffon IO dirl'CI nt·11· i11elus1ril·s 1011·ards
expun 1narkt·i-. :111d lwi11~ 1111\\ illin ~ l() cle,·01l' 1·nuugh l'l'source!. to inrr1·asr
t'Xport:-. of tradi1 io nal ('OnllllllCfÍt iL':> i11 :>l<'j) wilh L'\'L'll !>hm·-growing dl'Jll:tlld.
This. co111bi11l'cl \\'ith \\'l·ak tnm-; 01'1rack. 111t·an1 tha1 1IH' purchasing pm\·1-r of
ll<m-oil-expon.., ha rcll~ grt '\\ :tl ali 1Fig un· 1).
Figltre 4. OECD: imports of m a n üfacturcs and ofprimary
commodi ties. LATIN AMERICA: exports ofprimary commo dities
a nd purch asing powc r of c xports

1500 . 1500

1200 1200

900 . 900

600 600

300 . 300

100

o o
1950 1960 1970 1980 1990

1= C)E( :1r, man11t:1n11rl'd impcin.,; 2= ( >EC:D' ~ 1HJ11-oil-prin1.11y-r11111111odi1y impons:

3= 1. \ ·s 11011-uil primar y-crn nrnt1di1y <'Xpori-: .md 4= Litin . \n1nka·, purch.hin~ pmH·r of
111111-oil pri111ary-n111111111di1v 1·xp1111-;. ( :1111M:11u ,·alnn. :l-y..:ir 111ovi11g an-ral(t''. 21

During this pcriod. l\\'O major regional tracl<- cirrnits Clll('rgC'd, OllL' within
Europc anel hl'lW<'l'll Europl' anel thl' l"S. thc othn in East ,\ sia: neithcr
induckd La tin t\mnica . t\s thc 111ai11 cnginc or thl'Sl' tradc ZOIH'S wa~ 1rnu111-
litnun·d l'Xports, thcy tncoura~t·cl ·com·L'l'gc11cc· thrnugh tl'chnolo.1..'Y trans-
tá~ frrnn the l"S to Europt· and ti-0111.Japan LO 1ht· :\I C:s. 011 thl' tarifffront.
llw Nl Cs uscd pro tcctiun at ltTcls oft t'll hig hcr than thu~l" or Latili .-\me rica.~'
h111 the c nicial dilli-rcncc \\'as 1hat hugt· dliTtiw protcction anel chrnp
fin amT \\"<IS 1111ly 1,rratllccl jf prochtccr:- \\Tl'I.: alJ(c lO fulfi( !>pt:cific f .\JJOT/
1 argc t s.~r.
111 this way. ISI anel cxport-lccl growth wcrc 11cvcr mutually exclu-
sive aiternativc!> for thc l\IC:s: IS I was simply a platform anel sour-ct· offinancc
(duc t0 ·on·r-pricin1-( a captin· markct} for thc ir cxpon driw. ln turn. export
oricntatio n forccd lcTcls o f im·cstmc11t. produnivity anel product ciual ity that
a purcly imrnrd-orirn tcd lS I rnuld 11(•\·cr ddi\'(T.
[nstcad. Latin t\mcrica ºs ·isolatio ni'm · brought manufoc tu1't'cl-impon anel
commodity-cxpon ratios to almost tht:ir absolutc 111ini111um. Some cou ntrics
rcactccl anel tricd to incenti, ·izc cxpons anel a m o re sckctin· JS! using subsi-
dies. dual l'Xchangc ratt's, ºtTa\\'ling-pq,rs', cxpon znm·s and rq~ional int q~ra­
tion. Thi;, policy had ;,011w su ccc~;,: 111a11ufocturccl t·xpons expandcd by
J 1. 3°;, yca rl y (although a l111ost t· rnirely i11 thc largcr cco11<m1ie~). anel i11tra-
rcgionnl manufacturcd t·xpons incrcasccl by 15'!.. ( 1960- 7'.~). This rnntrasts
with commudity cxport~ (3.'.1"ó).
\\"ithin thc rnntcxt in \\'h id1 !S I was at/11nl{r implt·mc11tcd in Latin Arnc rirn,
figure '.J highlights its crucial foilurc: thc tradt· ddicit in manufoctw't'~ rlid rwt
drop fost cnoug h to compt:n,atc for ckrlining cummuclity traclc suq) l u ~cs.

Figu re 5 . LATIN AMERICA (19): trad e ba lances as a percen tage of

GDP, 1950-90

10% 10~~

5º'' º

0%
ºº'
'º

· 10~o ·10~~
1950 55 60 65 70 75 80 85 1990

'rnf = rrack ddicit in 111anuf:1nt11•·, : ·rrn & o ir = tracl,· <111-phh in r;1w m:11nial< anel oil;
' rm, o il & food '= trade <11rpl11< in r,11\' matl'riak oil a nd :r1,'l·in1lwral pmduch. C:urrt·nt
prin:" :!-y..ar mm·ing an:rag1» .';
 \ Vhat policymakers took time to grasp is that ISI aJ o had a high outp
clasticíty to import manufacturcs (machincry and manufacturcd-inputs), Pa~~
ticularly in smaJI coumrics. Con cquemJy, nct forcign-cxchange savings \vcrc
notas hígh as cxpccted. ln all. tradc balances wcrc rcverscd by more than 6v
pcrccntagc GDP-points to a deficit of 1.2% (1950- 72). e
Funhcrmorc, Latin Amcrica's tcrms of tradc conLinucd to decl ine unti]
1967; by thcn, thcy had fallcn by 30% since 1950. Aftcr a shon recovcry
(1967- 72), thc 1973 oil-shock had an asymmctric impact on oil-importcrs and
oil-cxportcrs (figure 6).

Figure 6. LATIN AMERICA (19): terms oftra d e and r eal interest

rate, 1950-2000

150 ~--------- 150

203
1

1
125 125

100 - - --- ----------- 100

75 j 75

50 J_ _ _ _ _ - - - - 9-- 50

1
25 25

º ~,u~~~'.::u1'~~-.JfillluJ1t....m~ º
-25 ..,___ - - - t- - - - ...,.-- - - - - - - - ·25
1950 1960 1970 1980 1990 2000

•toff= Lmin Amcrica's 1c1ms oftradc; ' tt oil-x'=tho e ofoil·cxponcrs; ·n oil-m'=tho,c

ofoil·imponc13; and ' r LIBOR·=rcal LJBO R (deílatcd by L:1tin Amcrica's non-oil t·xpon-
priccs).
 ... •] Lhe 1960-73 pcriod was the m ost d ynamic in L1.tin Amcrica's
0 VClcU l
. . ivfanufac turing increased at 6.8%, inve tmem a t 9% and GDP at
Jusl~ >• doubling output, and incrcasing incomc per capita by half. Even thc
1

5·9.'º 1divcrsit)' decrcased, as Argentina accclerated its GOP growth 10 +%.

gtººªBrazil and i!exico o nly added one pcrccntagc poim to the ir alread y
~hile
~ ·c growth. H owcvcr, the end ofthc OECD 'Goldcn Age', the problems
d)·nam 1
. a more mature and complcx ISI , the doublc oil-shocks anel the extreme
facingvith
e •
which La un •
Amenca cou11 . way out o f tro u ble a fiter 19-/,3
e b orrow 1ts
case ' . .
. to radically ehangc ns rap1d clevelopment process.
wc1 c

1. The inter-shock period, 1973- 81: the lead-up to financial

crisis
T hc t 973 fourfold oil-price rise carne when Lhe ' Goldcn Age' was wincling
down, anel the ncw Aoating cxchange-rate sys1em had 1101 yet becn firmly
cstablished. The ncw cxchangc system sudelcnly had to strugglc with abrupl
changcs - in j ust o ne ycar, thc OECD's currcnt accoum 1urned from a sur-
plus of S34 billion imo a deficit of $47 billion , and that of Lhe no n-oil DCs
from a deficit of S29 billion into o nc of S66 biJlio n. T oge1her with the imcr-
national financial markcts, thc new Aoa1ing-ratc system was burdcned with
thc largc t cvcr rradc-rclaccel transfer of resources from thc OECD to a gro up
ofDCs (OPEC), as wcll as with thc ' rccycling' ofthcse rcsourccs.
Due to thc rccmcrgcncc of mo necari m, most OECD countrics a ne mptcd
to tacklc ri ing inflatio n with onhodox policies tha t ignored thc fact that
inílationary pressures (both old anel ncw) wcrc of a cost-push naturc. Whm
followed was 'stagílario n' anel incrcasccl socia l tensio n.
ln fact, most OCs adjusted to the first oil-shock bct1cr than thc OECD
while OECD growth fcll from 5% (1960- 73) to 2.8% (bctwecn the oil-shocks),
that of DCs o nly declincd from 6% to 5.2%. Latin Ame rica's oil cxports rose
from S7 billion ( 1972) to SSS billion ( 198 1), but the oil-importc rs' oil bill
increascd from S'~ billio n to $30 billion.
Venezuela followecl O PEC's policy of rcducing output, bm i\Icxico (not in
OPEC) inc reased its sharc ofLatin America's oil cxports fro m prac tically zero
to '~7 % (1973- 8 1).28
Latin America 's oil impo n ers respondcd to thc first oiJ- hock dilfc rently.
Some coun111es, such as Brazil, wherc thc oiJ bili reached 44% of imporn,
borrowcel heavily thinking it had sufficicnt jogo de cintura to continue with fa l
growth. This 'debt-led growth' was a rcspon e to short-term market signals
highJy negative real intcrcst rates, and unccn aimics rcgarding OPEC's
capacity to implcmem strict ouq)ut-quotas. Othcrs, such as Chile, which still
had rcstrictcd acccss to imc rnational financc, had to reduce cxpcnditure.
 nO\\"C\Tr, aflcr thc 1979 shock. thc rcsponsc·i; wc1-e ortcn rcvcrscd. B .
having alrcady accumulatc-d hu~c d cbt:.. had 10 acljust, whilc Chile borr:ld,
hc;n·ily.~'' St ran~dy. oil-ei:porlers also bo1Tm,·cd hc;n·ily clcsp itc rn~i:d
currrnt-acroun t sUt-plusrs O\Trly liquid lcnckr:. nccdcd to push for cv ~
po!-sibk cu<11onwr. Oil cxponcr:. wcrc thus confrontccl with ch cap and ovccr?
abundant limcb. hig hly-ovcn·alucd cxchan~(' ratl'. . unstablc domes/
politiC!. and \H'<lk propcrty right:. particularly o n \\ calth of doubtful ori~~
Thr~l' fanors. curn b incd with thc.: prolifrTation or ·1ax han·n . Icei to highl -~
subsidized capital fligl11s. t\ m azi ngly, thc.: l \l F rq~ardcd thcm (from invcli.
nwnt-constraincd anel highly-indelm·d countrir:.1 as a ·positin" phcnomcnon:
thr rt·sulting n·dunion in n'Sl'IY\'S \n>uld hdp "Herilizc · the cxpansionary
cfkn o i' higher oil prices anel incrcascd Íllll'ntational borro,,·ing.
Ea~r borrowing also encouragl'd p ublic dl·ficits anel impon~ ofluxury con-
-;umcr goods anel rnili ta ry h nrdwa rl'. Howc\"C·r. it abo hdped rationalizc tarilfs
anel cxchangt·-ratc structu1-es. l n ali. Latin .-\ nwrica ·s impo rts incrcascd from
S77 billion in 1972 to S~36 billion in 198 1.
:\n C \'Cr-i ncrc.:a~i11~ foreign ckbt tied tlw iürtrnws of tlw rq{io n cio. dy to thc
policies and pcrfunnancc or thc OEC D. Si11n: 1929. thc links had wo rkcd
rnainly through tradc llo\\·s, wi th ilw OECffs clt:mand for commoclitics bcing
tlw crucial factor. :\ow , a ~trong finan cial link was again ackkd. c haractcrizcd
by a ~rowin~ dcpenclc.:ncy on nrw loan:-. anel tht· 1111ct-rtai111irs oí in tcrcst
ra tes. C ndcr t h c~c circums tann:~, thc sc.:co11d oil-shock. tlll' (Yolkcr) fED
111011etarist rcspons1· and thc.: R eagan T hatcher era wa:. not "hat Latin
:\mnica ncedrd. Thc OECD fisca l positio11 s uílrrnl from rccession. populis-
tic income-tax cu1:>. and ,·a;.tly incrrasing military rxp cnditurc.:: mcanwhilc.
l .at in :\mr rica followcd thc R cagan a nel Thatcher populist kad and more
than doubled its public sc't'tor deficit to S38 billion. By 198 1. Latiu . \ mc rica 's
rurrc·11i-;1cço um deficit (S80 b illion) was as bad as that of thc whok of thc
OECD. yct it could still easily borrow a-; much as it wa111ed: La1i11 . \mcric:ú
fon·i1.,ri1 clc.:bt d(Jubkd to S.533 hillion bct\\ ct·n 1976 anel 1981. :\ot tlw bc t
cxamplc for Summer's bclicf" that 'The log ic o f dlicient lfinancial] markcts is
com pcllin!( m
Thc bq~inn i ng of thc c nd fo r Lt\'i; ·debt-lrd grmnh. "·as the FED trcbling
nominal rate:. ( 1977 - 81 ) in rr al non-oil-rxpon prirc:. ' Fig ure 6 . tlll' 1.IBOR
incrc:u·d from -11.2°11 to 22. l "u. :\on-oil tt-rms of tradc abo dc.:tnior<lll'd
o
( 1BºíJ l)l'I \\'l'l'll 1980 anel 198~). :\.~ oficn happc ns in tilll('S or crisi'i. th t• ECD
not only ha hccl lrnding LO D Cs anel contractccl irnpons. but also 1ra n sf(-rrcd
part ofthe cost ofits own aclj us1111c111 to thc prriphny ,·ia lo,,'Cr prim:try-com -
modity p1·icc.::. anel hi~her interc.::.t rates this time o n a dcbt "·ith , ·;uiahlc
intere~t rates. The rc.:,,ulting fl'Ct:ssio n i11 many o c:~. of niursc. rcboundc·d 0 11
the OECD by lowcr demand for OEC.:D expon s a11d financial instahility. 11
 . lastcd . La t in /\ m e-rica ºs "dcbt-lcd ,"J'Owth'
111., . ll .., ckliven:d rda ti \Tly. fast
\\ .cGDP incrca:.ccl by -1. 7" .. annually ( l\\ ice thc OEC D rate). l nw~tnwnt
gr'l'''1h.d b)' 1/3 anel its (;lJP sha rc n N · rrom 17% ( 19GOs) 10 22" u
• crc<1!iC 1). H.owcvcr. p crironn ;in n : e1I\
lfl · ºtrSll. )' •mn casec1aga111
• , rt'ac 1llllg
. e1ur-
198
1976
u1cse
yc~t"" thc hi!!'.hCSl kn·b ofthc \\'l10k p criocl rrom B'!ú cor i.;rowth
"~ ..
lllg jJ to thc rcrna rb lJk St:1g 11atio 11 u l" o il-rid1 \ 'ell<'ZU\"la .
iu Braz · cuu 1e111 0 1 • t>0 11z1-
,vcvcr, 'post- \ ·o lk·c r · l .a u· n : \ : t\'nca · 1·mane \' • m o un1111g
·
10
~ _ 1 and c:-m·rnal deficit~ fo rc \"lT tlll" deiH-St'IYiCL' ratÍO rcadtcd 11 ":, or
·1111cnim ·
• orts in 198 1. ;\lcx icu ºs l 9B2 d efo ult stoppt·d ·ckbt-hl gruwth · dcad in Íb
rxp
tracks, and clra:.llc· ac1.J·USlllll'llt pron·:-~c ~ e1c=-pl'l"atl' 1y t n·cc1 to rcn·rse ma ·s1n: ·
• , ~ 1 and exte rnai i111 ha lamTs: tl 111s. 1.atin 1\ 11w rica m owcl fr0111 its long\·s t
1111c 01 .. e • •
·riod oí susta inccl ~rn"·tl 1 to o ne ui º its wo rs t pcrfi mna nccs t·vc r. 1n tlw 1wri-
~ !950- 81 , La tin .\ mcrica ·" (; l) p hacl !-,'T O\\' ll num· than fíw lu ld. 111a11u-
facturing productio n Sc\'l' n fo ld a nel m a nufitnurcd l'xpon s t\\'ch ·d ê>ld. I.'
(!urthcrmo rl', as Figu re 7 i11dic 1tl·=-, !S I. anel tlw ·capaliilitil·s· it grnc ratl'd tin
me H irschman s1·wc \. did prO\·ide a uo;rli tl pbtform fo r 1hc \Try ll-w cou ntrit·s

Figio·e 7. M EXIC O: growth o fm a nufacn1ring investmen t and

employment 1970-81 a n d p r o d u c t ivity 1981- 2000

lnves1men1 employmen l and productivity

16% 10%
investment employment productivity
<< >> >>
1970-81 1970·81 1981-2000
8º'' º
12%

6º• 'O

8%

4~o

2º''º

º º'º'
º~º

2 3 4 5 2 3 4 5 2 3 4 5

:\lan11 f:1n uri11t: ac ti\·i1i1·, are ra11k1·d acrnrcl i 11 ~ 111 l'Xpurb·mt1pu1 r.11 i.,, 1yi11 1!IU 1 (~roup 1
ha, tlll' higJw,1 anci t.,'TOll Jl j tl u· lrn" º'l 1:11io). Ex1 ludl', '111aq uibº.
S1J1mr: l'.ilma '.WO'..!li.
that in Lhe l 980s movcd thcir c ngin e oí growth towards
cxports.
~lcxico's 'non-maquiJa' post-1 98 1 manufacturcd-cxpon orienta tion clear-
ly followed a pattc m or clccting acuvitics with prcviou ly hil{h leveis of both
invcstmenr and employment growth. That i , during thc 1970s, ISI was
alrcady allocaring both capital and labour LO thosc acti\'iucs tha t werc to
achieve the highcst dcgrcc oí compctitivenc s aíter 198 1. FDI may have
movcd into Mcxico primarily for rcason to do with the US cconomy, but lhe
choice oí spccific non-maquila manufacturing ac1ivitic as production plat-
fonns to lhe USA ai o secim cio cly associatcd with thc 'capabilities' buih
eluring lSL Perha ps ISI was nol o itTa tional aícer ali.

8. From boom to bust: Latin Anierica's 'hyper' stagfiation of

the 1980s
As mcntioncel a bovc, both the latc-l 970s oil and FED shocks, as well as lhe
1982 dc bt crisis. had diffcrem d fccts a mong OCs. \\'hilc ma ny cconomics in
Easl anel South Asia we rc ablc LO rcCO\'Cr quickly (anel 1hcn grow faster than
previously), these shocks had a devasta ting impact on lhe cconomics oíLatin
Amcrica.
Eas1 Asia's much highcr cxpon-GDP ratios hclpcd maimain lowcr dcbt-
sen icc ratios a nd higher invc llllcnt lc\'cls; also, thcir cxpon ma rkets
rcmained more dynamic as O ECD' manufac turcd impon s still incrcascd by
11 % annually during the l 980s (Figure +). By com rast, Latin Amcrica was
saddleel "ith huge debt-sen •icc ratios a nel 1hc worsl exte rnai c nvironmcnt
incc the 1930s - a tagna nl O ECD dcmand fo r commoditics (0.3% yearly
growt11 between 1980 anel 1987); a 23% drop in non-oil 1crms oí cradc
( 19 79- 90); a 22.3 perccntagc-point incrca e in real LI BOR in onc ycar
( 1980-1); a nd a ce ation oí \'Olunta ry lcnding. 11 Evcn including 'virtual'
inílows (eluc to elcbt rc cheduling), net private non-FDI Aows switchcd from
S388 bilJion ( 1972- 82) LO a nct outflow of S67 billion (1983- 9). l n fact, as a
ha re of G DP, thc ncgati\'c nct tran fc r of fin a ncial rcsourccs from Latin
Amcrica was cvcn largcr tha n tha t of Gcrmany after \Vorld \Var l.
Funhermorc, thc despcracc cffort to generatc forcign cxchangc for debt-
sc1Yicing was mostly self-elcfcating: a 30% incrcasc in cxport volume of good
( 198 1- 7) resulced in export rcvcnuc ac1uallr dropping by 5% in nominal
tcrms. Thcrcforc, Latin Amcrica had to rceluce irnpons by nearly half in
j u t 2 ycars (198 1 3), convcning thc S29 billion traelc deficit (198 1) into a
S55 billion surplus ( 198-l-); thc rcquircd ma i\·e cxpenditure rcductions and
dcvaluations rcsulting in 'hypcr' stagftacion - up to 5 eligit-inAarion togethcr
"ith doublc-figure GDP declines.
 bi per capita tcrms, incomc fcll by 9 %, private con umption by 12% and
,iestm<'nt by 2/3 ( 1980- 90). Social indicators showcd similar declines: up to
J14/5 drop in minimum wagcs (Argcmina); ·opcn' urban unc mploymcnt in
a
doublc figures, and 'undcr'-employmcnt at a furthe r 1/3 of c.he labour force;
ublic expenditurc in health and educatio n was severcly c unailcd; and over
fiairofhouseholds bclow the poverty linc in most countrics.
The J 980s e ndcd with only four countrics (C hile, Colombia, Costa Rica
and Uruguay) having rccovercd basic macro-balances. ln the others, despite
many ycars of costly adjustment, ' h)1Jcr' stagflatio n anel persistem imbalanccs
wcrc the rulc.

9. Latin America's Complex Political Econom y: the 1990s and

some concluding remarks
Aftcr thc war, L·1tin America imcgrated its cconomics into the world di,,ision
oflabour in a different way e.o East Asia. Latin Amcrica only rescmblcd East
Asia insofar as it refused to acccpt its traditional ' Ricardian' comparati,·e-
aclvantage position. anel strugglcd 10 gain an 'endogcnously-created' o nc.
However. East Asia dicl this within thc 'Aying gccse' paucrn of manufacturing
production anel upgrading. Fo llowing Japan's cxnmplc, this was a chic,·cd
through massivc investmcm and savings effons, coorclinatcd by ~trong gov-
ernments ablc to implcment cffective trade anel industrial policies, anel within
a proccs of regionalization or production that simultaneously aimcd at in u-
lating dom cstic markets anel outwardl)' orienting tradeable production. Their
succcss was hclped by an abilit)' to continue upg rading expores, a process
facifüatcd by a positive intcraction bctwccn productivity anel wagcs growt.h,
and OECD market opcnness, cspecialJy on the pan of thc USA. This opcn-
ncss was not cxtenclecl to Latin Amcrica, with the exccption of ~lcxico aftcr
1982 (thc US fcaring 1ha1 c.hc 1982 debt crisis could tum t11e usual flow of
Mexican immigrants into a tida! wavc).
Instead, until thc 1982 dcbc crisis, I.atin Amcrica tricd 10 improve its
chances of 'catching up' with devclopccl countries by attempting to do o nc
thing at a time. ln contrast to East Asia, Latin Amcrica undcrscoocl ISI anel
manufactured-cxpon-lcd growth as bcing two succcssivc stagcs, anel found it
panicularly clifficult to switch from thc first to thc second. Incvicably, exccs-
sive rcliancc on one particular 'cngine of gro\\'lh · lcads to highly unbalanced
cconomic anel política! structurcs unde r which thc cnginc itsclr not only loscs
its power but also its capac ity to transforn1.
l\lost Latin Amcrican govcrnmcnts (anel economists} carne 10 intcrprct the
1982 d cbt crisis as cvidence that ISI was lcading the rcgion into a cul-cle-:.ac.
The e govcrnmcnts thcrcforc switchcd tO chc ·open economy' moclcl, totalJy
.u.M11uonmg l ~ I. T hl· East Asian modcl of -.imultancow.ly i mulatin ~ lhe
d o11w stic rn arkc t~ and oul\\'arcl l~ ori<'nl in~ tradcabk produnio11 \\'a' as a licn
w La1in . \mc rica ·,, policym a king in ÍI:. s1ru c turali ~t pc riod a-; in ib neolib eral
pc 1iod.
Thu-.. bdo rc thl' 1982 d c b1 crj, j, i IS I ''ª' . imrnrcl-looking·,
almo, 1 rn1 in-h-
or
(ií) t hl' t•n 1.,ri11c JSI wa~ lhe hi ~h propc n ~i1 y 10 COll, llllH'. a11d th c L'WT-grow-
i11g din-r:-.ÍlicalÍOll of l'OllSlllllp l ÍOll palll'l 11' of lhe hi1:1;h-incOl1W p;roups; (iii)
thc rc \\ aS a l"l'lll:lrkahk n q.~it'C I of prÍ111a ry-n 1111111odi1y cxpo rh : Í\" :,horta~cs
or f( >rcip;11 l'Xdlall~\.' . i11dfa·ic1H ~O\"\Tlln1l' lll COOrdinal Íon a nel tlll' lo\\' propc n-
,,jty of lhe uppcr-i11cullll' i!;l"Ollj)" lo Sa\"l' lllOIWY 1ckspi1c ha\·Ín~ lhc \\'O rld's
l;irp;1·,,1 incomr ~han·s) n ms1rai11 t·d im·1·s t111l'1ll: a 11d ,. cll·,pi11· :-.om r ;.ucccss
" ·id1 rq~rio n al intct.,1Tatio 11. it \\'as <'Xpnwd that FDI (ra1hn 1ha11 an i111c rnal
cffort) \\'Oll (d lllO \"\' tlH' '11pt.,•-radim( of l hl' \"(011 0 111~ 011 IO tlw Sl'Clllld . more
o pt·n. s1ap;l'. l n füct. a c rucial frcll htTkin ~ :-.imilari1y b 1·t\\"l'l'1t thc ca pitalist
di1t· d11ring IS I o n thc o nc ha nd. and thr ·m·olihl'rar 1!l9U,, un 1111· o thc r. is
1ha 1 i11 bm h pt·riocl' th t· y n1wc1cd t hal FD I \\'011ld do dw n·q11ircd tra n:.íorm-
a tions: in thr lo nnc r dicy t·xpc n l'<l tha 1 FDI \\'Ould m m T tltt· <'co no my
to\\·a rcl a 111o rr opt·11 stagc. ,,·hi k i11 thc lanrr. 1hcy <'Xpec11·d FD I to pick up
,,·hc rc t hl' :.late had ll'ft oi[
. \ no tlwr <TÍlic ism or !S I j,, 1ha1 tlw rq~io n "'ª~ u11ahk Ili dn·dop an
0

l'ndogc no11S COrC' of" 1J1allUfal"l11ri11 ~ artÍ\'ili1•s that m i ~Jll ha\'l' Sllffl't'd l'd i11
sti11111la ti11g 0 1h c r S<'Ctor:-. of t hc cco11omy. 11 O thers haq· citcd t he in,,iahility of
donws1ic po lir it·s that hiast·d imT,,lmc n l dfon,. to\\·ards sho rt-ru n o hject-
ivcs. ;·, FDI itsdf ha .. a lso rume i11 for criticism 011 rnrious cou 111s: lil until Ll1l·
19BOs (a nd. again. in ·110 11-maquila · Latin . \ m c rica in thc 1990,,J i111lo"'" uf
FDI \\"lTe 111a inly o ric ntcd to \\ ard,. non-1rackabk:. and lradl'ablc pruclunio n
for thc clo111c,,1ic m;irkels, rl'i n forcin~ IS I-inward orie ntatio n: • ii hi ~h­
impon conte m kd to sm a ll sha n·s of ,·,1!11e-acldcd i11 0 11•;,. 11: a nel 'iii) hugt:
11·, ·d s of d li.·cli\"l' p rn tcnicm h-d to (':\:( l'!>:.i\'C·ly high ra te,, o r profit anel la r~c
p roli1 rl'mitt a ncl':-.. O ddl y r 11 0 11 ~h. FDI justilied this protl'nio n ,,·i1h 1radi1ion-
;il · in fa 111 - indusu~ · - 1~ve a rg-u111c111s; thcrdi>rt:. ·infont" r orpo ra1io 11" :.ud 1 ª'
Grnc r;il .\l oto r,,. Daimkr lknz . IC I. Fo rd. IT r. \"olk..<iwagcn. E.\1 1. (;c nc ral
Eknric. A l'rox. d11 Po nt . lini kvc r. Impe rial T oharco. :'\cstl(-. S il'll1cns a nel
Bayn c ndn l up oprrating "ith l'!li:cti\'l' prott'ClÍtm 1hat o lien r'-·achcd fo ur
l i~un·,,.
Fi11a lly. Fit.,'1tn' B h i ~hli~hl ~ fo ur unique c haranc ri,.1ics in l .atin . \ me rica·:-.
pa ucrn or IS!.
lt i:-. re m;irkabk that LIH· rl'lurn to a ·\Ia 11c hr.,ll'l"-, lyk · capiia)i,-m i11 t hc
1~l9Ck othc r t han ~c nna ting "onw dynamic cxpo n paun11s a nel incrca~cd
productÍ\'Íly i11 a k \\ ~tTlO I':>. ha-. only bl'l'll ahk to ckal \\ ith om· or thl·~t
is~U l'S: i11 fl atio n (sce c hap tn 1G cm finan cial cri,,cs).. \~ li.ir 1lte otht-r:-.. a 11d
 . ,re 8. L atin America a n d D Cs: 'gross' incom e elasticities to
f igt -ume and to invest, d ebt-servicc ratios a n d inflation, 1965-1990
c OIW

'gross' income elasticities debt service I X inflalion

1.6 ~-

prova lo invcs1mcn1
consumplion
40~.

1.3
30%

20%

0.7

.,r
'gro~s· inco11u· da;;ti l'i1i1·,= r.1tio nt' th .. t.,•Tm\lh -1.11<' nf 1h1· 11·,pn·1in· 'ariahk 111 1lzat
n:11io11al in cwn ,·: ·· anel 'cld>t HT\·in·/ X'= cld>1 '"" ice .is , Jt,11t· ofexpe11 1>.
LA= L·1ti11 :\1111-rira: AF=Suli Sahara11 ,\ fril'a : NA=i'\rni lz .\ frira :11ul lhl' :\liddk Ea,1;
EA= Ea~l :\ , ia '1·xd11di11~ tl w :"oí(C, ); SA=Srn11 h .\, ia.

&urcr. \\'orlei lkmk " "' <'ral j,~m·s ; data 011ly :1\ .1ilabk frc utt 1!Ili.->.

indecd !(ir othcr macrnc·co11u111ic imhalann·,, m orl· ~e111T;1 lly. l'\·icknn· :.ug-
gcst~ 1h a1. dr~p itc all thc ·neoliberal' fa11íarl· . th l'~l· are 1H> bct1t·r today - i11
fact in 1na11y rases an· \\'orsc tha11 hdc>rl' thc l VH2 crisis (cxcl'pl fiir more
di\TJ" ity bet\\'l'l'll l'Olllltrics, \\'ith Chih- outpi:Tforntin~ tlH' l't'~l ur
thl' l'l'~ion) ;
for exampk . thC' ag).,'1'l·~atc cu1Telll-al't'ou111 deficit for tlw ckcade hct wecn
1992 and '.WO 1 rrad 1cd S(){)O bill io n this tra nslatcs as almut S:\000 per
cconomically acti,·c· pcrson a figure not so difkrnn from that uf 111w-year
inconw p1T capita. l n cu1Tcncy of'cqual , ·alue. this ªK~regatl' deficit wa:-. morr
th:Jn ha]I' as lllUdl again tha t of' tia· dl'('aclc brfcll'C tlH' 1~JB2 dd>t crisis.
Funhn111orl'. the l 99os· 111urh la 1wT cu tTl'll l acC"ot111t ddicits took plan·
alongsicf1· a rate of grcl\\ th of Output which \\' ilS 0111)' ahout half' that of' thl'
dl'cad c lll'lc>rc l 9B:Z.
l n sum, in adcli1io11 to tlll' wdl-kno\\'n anel olicn tl\'tT-cmpha ~ized -
'<'xtrrnal' fartors. Latin Amcrica·=- dcn·lopmc111 thrnughout this p<'rio d has
ba~ ica ll y licrn rcstrictl·d hy l\\'O intr tT01t11l'l'll'd t·ndogcnous fonors: OIH' is of'
an ideologiral natttrl': tl11· o thn is tlw c h<iracteristi r of ii,, capitalist ditl'. The
formcr rcfc rs lO lhe preclo minancc - anel intcnsificalion of a lcndcncy
tO\\'ards ' funclamcnta list' liclic fs . ch aractcrizcd in bolh pcriods by thc obscs.
sion with bcing in C\T t) ' p ossiblc aspcct tht' ahsolutc opposilc o f thc prcvious
ickoloi.,•y. and by íinding- it pa nicularly cliflicult to c\·oh'c C\'C ll " ·ithin thcir
O\\'ll fra111c\\'ork (c.g. in thc ·ncolilwral' pniod, to bc ahlc lo absorb , in a

pranical \\'ay. thc contrihlllions o f i11forma1 io11, nc\\'-growlh anel ncw-lradc

tlwories.) Thc main dilkn·ncc· is lhat in thc ne\\' onhodo:-.:y - bccausc of its
·cntl-of-history' a niwclc - di ·st'tll i ~ considcred, at bes1. a !>hecr ccc-cnlricity.
1n fo ct, wh at ch arancrizcs Latin America is not only the extreme form in
\\'hi.d1 nc" · ideologics are takcn up. bu t a lso tlw e:-.:tn: mc form in which thcy
are :;uhscq ucntly giwn up: a sort uf ·nrnn ic-dcpressiq·' ickolog-ical cydc ccms
lü bc the ruk Hirschman o ncc rcfcrrccl to Latin t\mcrica's 'fracasomania'.
lt is onc lhing to ackno\\'kdgc diat all ccono mic- policies a re. lo some extcm,
ickolugically drin:n; tht· tcnckncy to takc th\'111 11p a nel !ater. to gin· thcm up
- in a purcly idrnlogical foshio n , is a diffrrcnt thing entirdy. \\"Jwn scrious
truubk IJt'gins. thcrc is a l\\'ay:. ano thcr ·parac.lisc · to re placc t hc o nc j ust 'lost'.
1\ Jaybc Lat in ,\rnerica is in despe rate ncTc.1 of a touch of East Asian
'Conlircia nism': i.c .. 011ce a ck\'C·lopmcnt path has hccn c hosen . a :-.igniíicam
clcgrct' ofpersistcncc. pragmatisrn. d lrcti\'t· lc-atkrshi p anc.1 sdf-rc),pcn can bc
of grcal assistanrc in policymaking succcss. m
l.atin :\mr rica l(1llows ratl1n in thc ' lbcria n' traditio n. onc might say; it
\\'aS not for noth ing that Spain fnug ht a b loocly c i,·il \\'ar O\Tr issues that in
o thtT coumrics \\·oukl h;we kcl to k ss brutal fonns of conflin. Pcrhap s onc
rcasun that 'idcology' is ~o impo nam in I .atin t\merica is beca use 1hL-rc· is littlc
clsr in dw form of social c:oht·sion surh as ·traditiun· in the British scnsc,
'hit-rarchy' and 'corporati).111' in thc Gcrman scnsc. ·corpo ratism· in the
:'\on lrcrn lta lian scnsc. a ~t·cu lar h ut authoritarian statc in thc Fre nd1 scnsc,
l'tC
Rcgarding tl1c scconcl cnclogrnous d cwlopmcn1-constrai111 , that is to say
thc char;1nrristics or tht' capitalist elite. liulc h a:; d1angccl . t•xn·pt that \\'ith
tht• ·ncolibcrar rcforms lhe distribution or inrn mc. \\'t'édtlr a nel power has
detcrioratcd still funh cr. 1' 1 for cxamplc, Lnti11 :\ rnerica's dite continues to
brlicn· that it can ·Ponzi-linance' cxccssin· privatc co11sumption forc \'Cr (in
thc l 990s. thc pri,·atc· sector ·gross' incomc-<'lasticity to consumt· anually
incrcascd abm·c 1), 111 anel that gm·crnments )>hould pick up the bili whcn
things go wrong or as Cure Viciai onct· pur it , ·ncol ibcralism · is about
·'fücialism for tht· rirh a nd capitalism for the re;;t... .
Lat in 1\rnnica 's dite a lso d iscm·tTCcl l\\'O 'poslmockrn · cconomic la\\'s: (i)
instca cl of ha\·ing to p ay taxes lü !-{Ct frct• publir goods. it Ís 1111!Ch mo re lim to
g-C't thl'm hy lcnc.ling moncy lü thc gm·t-rnrncnt: anel (ii) thc lo\\'er tht taxes
(and, thcreforr, thc h igh r r thc kncli11g) the hig hcr thc intcrcst rate that can bc
 chargccl. 1n turn. thcrC' is littlC' doubt that La tin Arncrica ·s elite gocs on bclicv-
jng (anel oftrn gc:tting a\\'ay wi1h Íl fo r long pcriocls or 1i111c) l hal it c:rn al\\'ays
rcn1-scck o n o mconc· clsl' dosing d 11.: saving-im·l'Slllll'nt ~m el externai gaps
niundy gon·rnrncnts d uring l SI anel FDI afü·rn·arcb. 11
By the beginning or this CC' llllll)', forr igll dcbt had n·achccl '7.)0 billion.
many country- risk~ wc1-e in fi\T figures. nct tran ~ICr of n:suurn.::, had again
wrncd 11cgatin- (mo re than S50 billion in 2002). anel Sl'\Tral do nwstic cklJts.
nlOSl notably J3razil's. \\Tn: Sl'l lO burst. ()f lhe four yrnr~ SÍlln : 1999. inCOllll'
per capita h a~ a lrea<ly bl'rnlllc m:gatin: in threc (a nd 200'.1 is hcading in thc
sarne dircnio n1: anel :\q~cntina has probably alrcady liratl'll Russia to thc
recorei for thc higlH'Sl i11<·onw-pn-rnpita drop in pcacctimr li\'ing mcmory,
although this recorei rnay lw sl111n-liyl'd. ,\t thc tinH: of\\'riting. \'l'newda i ~
plunging to\\·arcls a n incu1111: 1w r capita clrop i11 200:1 which will hc n-cn
highcr than thosc of'Russia and :\rgcntina. lt mmt ccnainly takc sonw cloing
for oil-rich Vcm:zuda lO lt;wc an incon1e per (·apita in 200'.{ belo"· tlw onc it
had hcfon· dw firs1 uil-shock thrre dcc:-idc~ ago. and fcir. \rgcn tina to start thc
1"·c11t icth l't'ntu ry " ·ith an ineonw per capita among thc wry 1üp in 1he " ·o rlei .
anel to start thc 21!'i l \\'ith \ \Til on:r half of" tlH" popu la tio n bdo\\" tht· povc rty
linc. L: murpri~ingly, i1 had to IJl: a srriously fragmrn1ed socie1y. sud1 as
Argt·111i11a. \\'hid1 imported ' nl"oliheralism ' in Íls most t·x11-c11w n-rsion. II
Tht-rt· n·main a i h-ast lin1r crucia l questio ns s1ill recp1iri11g an ans\\'c-r:
(i) \\'hy \\'as i1 that thc drnncstir capitalist oligardtit·s anel dw · \\·a~hington
Consrnsus· needed indi,·iduals such as J>inodwt, Collor . .\knem, Salinas and
FLijimori (to nwntion only a ft•" ') as 'lirs1 gcnc-r:uion · lcadcrs in order to gct tlw
neoliberal show o n thr road in tlic first ph1cc? 11
Ahhuugh thcsc pe tit-bo uq~to i s parn;nu -popu li~t~ are no thing nc\\' in Latin
Amc-rica n politirs, \\'hat i ~ peculiar to ' neolihcrali ~m • is that tlwy initia lly got
into po\\('r using :u1 anti-ncoliht·ral discoursc and. sccondly. tliat thcy :-iller-
wards ~\\'itdwd camp hy nH·:-ins oi" 111aki11g thi ~ pupulist 1raclitio n an a n -
form. 11 Thirdly. for doing tl1i-;. thcy \\'lTt' thr first pulitical lcadcrs of this 1r:1cli-
tio11 sitlt't' thc l 9:10s th:ll got 1he suppon. respcn (a nd ad mirat iun) oi' thr
oligarchy for ha\·ing hdpl'd cn·a te a lll'\\' structurc or propcrty rights from
whid1 (as the po:-sibilitil'!'i or crrating l\l'\\' ISl-gt'lltTatn l rrnh \ \'t" l't" gr1ti11g
cxhaustl'Cl) ma ~~in· til'\\' i1Kn11w :>ln::1111s (rcnts) cnulcl lw gcncrated for
cxamph·. ohsrure pri,·at iza1 ion,, unre~t ri ct ccl 111011opoly pract ic e~. rnas,in·
ba il-out,;. ·f kxihle · !aliou r n 1ark1 ·ts, h ighl~ t·xchangt··ralt'· subsidizt·cl capital
ílight , a nd so on. "'
(ÍiJ \\"hy \\';1' it ll tTl'!',ar~ lO \\':IÍl for a SC'COl1cl-~1·1llT:tlÍllll' l)'j1!' (lf k ack r
0

(.\yl"in. Canl<ho. Dt· la Rua anel othcrs) to b1' cknl'cl bl"fon· som(' orckr
tould lil' introdun ·d (1101 a lwa\'~ \'ery ' ltn-cssfu lly) i11to tlw ·ncol ilinal'
i111 broglio?
 iii \ \·hy did thcsc ·sccond-gcncration · lcadcrs fccl diat thcy wcrc caught in
an ab. olutc ·path-ckpt·nckncy' s1raightjackc1: i.c.. that thcy hacl no option but
10 ofll.-r (t hnu.~h more dccrntly) more n:fom1s from thr . ame basic
\ \'a!'hingt011 C:on~c11s11s pro~-amme inducling stn:rn:,rthc ning stiU funhcr a
~tru cturc o i' propcny ri~hts anel inccnti\T'i that ga\'c ai! thl' carrots 10 (intcr-
11a t io11a l mobik) capita l and all thc sticks to human capital)? 1''
,i,·1 \ \·hy arl· thr ·1hird-gc11cration · po litical kadc r;; made up 1110!.Uy of CX-
miliwry-plotll'I''. t·x-rac in~ clri\Tn. ex-.\ 1i-;s-C n i,·c r~C's. [,·angclist prcachcrs
Opus-Dei 'super-numt'l'ario:-:. sirn~t-r:.. T \ ·-cclcbritir!>, t·x-football-playcrs, ex~
shoc-shirw hoys, cx-shop-lloor workcro;. anel mothcrs. "idows anel childrcn of
,-ictims oi' ,·iokncc anel reprc!>sÍon? Thcy not o nly han· a rathcr diílicult task
alwad. hut with thc :-i n~le cxccption of 1.ula anel his \ \·orkcrs' Pany. thcy are
11nk110\\'n quan tit ics.
Pcrhap~ om· all!>\\Cr to ai! thl'sc quc,.,tions is simply that in f .;nin :\ m crica,
from time 10 time. thr oli~an-hy mt·s ma~~jq· political a11d lTOnomic changc
rncrcly as a way oi' rcinforcing thc fan that thcy h ;\\'c !>ll<'n'l'dcd i11 m a king thc
rcgion thc \rnrkrs most paradigmatic ca~c of·1hc politic!> anel ccono mic~ ofthc
Gnt111pt1rdu·. in which 'nTrything has got to change. for {'\'lTythit1!{ to stay jus1
éL\ it is'.

N o tes
Thi, d 1aptcT rir;"'·' rn1 m~ 1'11lllrihu1io11 to Flit·nrh-Davi,. '.\1111111/. .111<1 Palma 19~H. 1
\\OUld m..· to th.mk them and ~tq>h.lllil' lllank1·nhun.:.J o11.1tha11 Oij11h11 anel Richard
Kowl- \ \'rii_:hr for tlwir hdpli1I ro1111nl'n". Tl w icka, of Dí:11:-. \ lt-jandro. 11 ir~d1man
;111d K.1ld<11 ,1rongly i11tlne11l t' thi, d1aptt·1. Tlll' thu.11 c:t\ l'ah .1ppl~.
2 St'<" al'o \ \'dl' l 9H!l: Día.t-. \11jandro 1989: F.~jn/.ylha 19!10: Ffrt·1u h- D.1\·j,: '.\lul111z
anel Pal111a 1!J!J l: lluln 1<T-Tho111a' 1!19.): Thu1 p 2000; anel Ca11l1·n,b. Ocampo and
T horp 2002.
::1 ECI _\ (: Stari•ric d 1Jivi-iu11: 111111-,, orlu-r" iw ''ª'"d. thi, w urn·. togeth1:r "ith EC:l .·\ C:
:211112. l'.\IF 21102.1, h :111d e. \\"11ilcl Bank 2110:.?a .md li..111d tlw \\ork, offoo1111111· 2 are
1111· -ount'> litr clat.1. .\li l"S·doll.tr fii.:1111·- thro111.;hmn a1l' in 20!JO \'al11t·>. and ali
,l'.l·rn1•th ra1t·, are n·al.
.J D~ namic ~rrn' th aJ,o kcl to soci.11 impro\·1·ml'nt-; thl' mortaliry ra11· clroppt'CI hy h.1lf.
\\'hile lil(· 1·xpenancy inrrea-1·cl by 1/+ 1!GO 81 .
•> '.\ l.irglin anel Si hor 1!l9U.
ti .\l'nirclini.: to l'n·hi,d1. he \\;h ·an 01 thodo:-. rronumi,t 1111til he \\Íllll'"t·cl the 1!J:lfl,
anrl n·acl 7 lt, (:1111 mi 1 ltru~,.· m hidt h1: tt.111,(atl'CI).
I 1'.1l111a 1978.
B l't·n·1 2002.
!J Foocl produrtion incn-.1,1·cl at only IJ. l''u pl'r capita ;11111u all~ l!lliO 90 1•
lll On <"Xchani.:1·-r.111· 111a11.1i_:e111t'nt in .1 linanrially lilwrali/.1·d \\'11rld. 'l't' Fl;b,hl'l'k '.WO 1.
11 Only the :'\JC-; had li1:1·11 ~ai nini.: f...'l ·ou nd ,i1m· th1: latl' 1!JGlb.
11 Onc uftlw char.111c1Í•tit-,111'tlw lc111~-hT1t1pul~ry1 ych- in l ~uin .\1 m·ric.1. reani,·atl'd in
 l 980-. i< 1h:t1 hur,ts of inll.11io11 :b thl'y art' thually hlamt'cl 011 c:o,·crnml'nl and
'thC uour) 1cncl lO k.1(1 lO a peno< . f li lllrll ....,
. 1 () f' «;nu nc1 11101wy nwn· 111ark·1·1. po1·lCll'<.
'li e JJOlicic:s are lalt'r assoria in l wi1h low wowth. hit:z h u1u:mplny111.. 111 aml i11<'q uali1 y,
11CS .
t)icrc is :1 n-ar11011 Il'ac1.1111~ tn a ncw p<'nou ~ l'r lllar kTh • po1·ll'lt'~;
· ..i o 1.• 1ou,1·r 111011cy 11·11 ·

anel so 011 .
13
in 197 1. in tlw a\ c1-.'.i:c L·s c11 1p11r.'.ii~111.l11" r:11io hc1.111·1·11 ~lll' C:E~)-rnn 1111t· 1 .11io11 ;mel
Lhal of ihc lo11-c:.1-pa1d workl'r "'ª':li>: a l1 er 1,1·aga11'pr1·,1cknry11 was ·100: 1oclay 11 1.
aboli! 1.000.
1~ for c:'(ampk. in tlw m·11· 1r:11h- 111·c:oiiatin1i- 1>.. 1111...-11 1l1t· l ·S.\ aml Chik. 1h1· L·s.\
impo cd 1hc rondi1 iPn d1a1 Chile slHlulel praCI i r.til~ 11·1un11111· ih righ1 to 11't'
(prc,·ioii-h- ; ucr1·"1i1I) cu111rol, 1111 capital inflm,·, anel 1Jtllllm" . ln a n -cen1 i11te1v i1·11-,
Siigliiz r«mark. 1ha1 it j, ninditinn, likc 1hi, whirh li1d di-n11t11·n1 11 ith glol1ali1.a1iu11.
l5 Even in U1 .11il. 11 hich IS! 1ra11,I( 11 mcd inw 0111· of tlw f;hll'sl grm' int: 1Tonomie, in tl1t·
world. d1t· attitu<k "'ª' tlu· :.:une. :\ rcnrcling w Cmtan1 Fra1w11. l'n·, iel1·111 of d11·
Centra l 11.mk un1il llll' 199!) 1 ri-i,: '[Our rl'al 1a., kl i~ w uncl<J ltJ ~'<·ar, <J I' -111pidi1y
[btsttimJ .. .' \ ·cja 1.)/11/19% .
16 Franrn ac:.1i11: '[T he .1hanatiwl j, tn lw m·u-l ilic1al or m:o-icliu1ir [nr11-h11rn"I.' .\d:1111
Smith nnn· >aid 1hat ·wi1ho111 r 11111pcti1ion lln·n· is no progn·ss' 1!l90s ·111·olilHTali"u·
in l~'ltin .\ 111l'1·ic:i -lul\\' 1ha1 1Jij, n·rta inl~ applirs m i<kology ;l'; \\l· ll.
17 ln An:cmiua's ttl!J!J pr1·,id1·u1i.tl n1111t·,1. thc· ouly eli,put<" amou.~ canelicla1<·, 11;1, in
whosc ham" tlw 1ixl'Cl-parily \\l1 t1ld lw ,;tlt·,t: i..-.. whn \\'011 id hri111.: dw .\r.c:en1iui:111
'popul i,tic-1aliba11' 1·xperi1111·1H fo ,1,·r to i1~ \ \'ag111·ria11 1·ud.
18 Thc l 9!111- are :m;1I~ '1'fl in 1h1· linanri:tl cri'"' d1aptcr.
19 ln 19:,0. .">3",. 11fp11l1lirly ofli-rl'CI or guarantl'l'el cloll.1r-honc" '"·n· 'till in d1·fault: ·fSº ..
had ·adj u, tcd' ddu -,c·rYin:: anel uuly '.l% hacl fui! S<T\ in·.
20 For a litll (;1111101a1.-d) hibliogr;1p hy of thi' l'olllro\'<'l''Y (i11\'C1h·ing :'-loyola. Pinto :mel
Sunk..t .• md othl'r i"u1•, cli,cu"1·cl in til<' d1aptn. >t'<" Palma 19!1."i.
21 A11,,.1in R11bi1Mlll ~ \Hi1i11g 011 lnclia1 had pi111t1'l'rnl 1hi, \ i1·11 ufinlla1i11u.
22 Kalclor 1!lS!I 1·111ph :i- i.~l'cl l hi' i" u1·: >l'I' !'alma anel ~ l:trn·l l 9B!I. 11 istory '' onlcl aga in
1Tp1·a1 it-1·11: indlil'i1·111 aucl ri~icl impknwmation wo11lcl 1·11d ttp hl'ini:: lll'lllil w1alism\
main <'lh'my iu thl' 1!l!IU-.
2:{ ~l'l' Ffi·1·111·h-Da,·i,, ~lui'toz anel P.1hua l 'l 1J 1.
2·f Loga rill1111ir n ·gr.." iom nrnlinn 1hat OEClr, in<'llllll' d ihlir ity to impon 111an ufor-
tun·, 1 aru1111d :!.:>) m11r1· 1ha11 d1111hln 1ha1 w i111pc111 no11-oil-r111111110cli1i1·, (alunn 1 ·
'l'l'. for l'X.1111pl1·. \ \·1·1J, l !Jll!l.
2.) Su111con1· who go l hi ' 1:1cb llT<Jll)( un thi ' \\'il' La ll 1!J!l l.
26 Sn· C hang 199·1. Frum 1his 1wr, 1Jl'ct iw. i11 ltTlllS or 1r;1cl1· anel i11du, 1rial p11lir i1·, . du·
r1-;tl eliíl~· n·nn· h1·1111Tn East . \ ,ia .mel Lt1 i11 . \nwrica clid 1w1 li.- in tl1t' rd:lli\ 1· 'ol11m1·
of ·rcnh· g1·11t'r;1t1·cl 11~ 1h1..;1· polin·o. !nu in tln· fan 1h.11 in L t1in . \ mnican n·111, w1·r.-
'YSle111a1 irally all< ll'al.-cl \\'itlu 1111 p1:rfnnn:11111· .-ri1 .. ria.
27 S1T ai'" \ \ '1·lb l !IHB.
'.111 :'\e,,· oil 1id11-, kd .1 ~ kxic:m 1'1nid1·111 10 mauirally ckdan-: 'f10111 lltl\\ on. ~ h-xico\
l'CO llOlllic· policy j, llt> longl' r ahuul all111-.1(Íll); ;.çarn- l l ''OlllTl'~. lntl O tll' of cli,lrilnlliug
ahuncla11n·· 1
2!1 S1T r hapu·r on fin.111rial cri<t».
JO Sunmll'r 19119.
:{ 1 Fnr an c·t·m1on1l't ric ,imulatiun un tlw ro't fo r !111· ()[(:!) (in t1·rn" oi' 1111tp111 anel
c · 111p lu~ 111c11l) ül' l1111·cr DCs' impon-clrn1a 11d :din 1'Hl'l, M'(' ~ larr..J anel l';tl111a 19BB.
3:! Of cow:;c. rl'gio11al a\'t'ragr~ alway' hidl' ,ignilkam P<'• frll mann·-cli,·cr; ity: ivhil
Brazir , (;J) I' gTL'W at G.Hºu anel :\kxico's at f>.Gº <, duri11g th•»t thn:t· d1·cadcsc
.\rgt·mi11a 11111~ 111.111al{t:cl :2.!l~u (7.ti 0 11, 7.1º" and 3. 1"•• i11 man11fo1·111ring. '
3:$ :\ , Kindklicrg1·r 1!.1!16 1·mpha, jz,·s. fina ncial 1narkl' t' ca n do lllll' thing dumbcr than
irrl',pon,ihk kncli ng 10 1)(:,: l>l'inc:ing th:rt lt·nd in l{ to an alirup1 hah 1
'.H F:~jn/~ lhcr 1!JIU.
'.j:i Dia1.-:\l1jandro 1!JH'I.
3!) \\'1% 1!!811.
:n Th,.,,. r.11i"' art· 1·alkd ' gro" 1"l:i,1ici1~ · li1r p111T n J11\·1·11in 1n· tlw usua l ran·:u~ apply.
:m R<'ganling tllt' lark oi' ,..i1:ll''P"ll oi' many L11 i11 .\111niran t'o11m ri"'. 'il'l' llw t·xarnplc
l'!td11111<· ( 1 ' aho\'t' . whirh rdi·r'i to Chih· r.·1111u1u i11g it- right hl u,,. l'apirnl t·o1111·01~ in
0
urcl1'I' C!! ·app<':l'il' dw tll'\\" l"S .1dmi11i,11·.11io11 :md g<'I it 111 ,ig111lwir lat<·,c tradt· agrcc-
lllt'lll.
'.)1) J', " 1- I !li::! l .atin . \11wrica11 polilil'' anel 1·nmu111i1·, makt· otH' think .1h11111 wh:n 1hc his-
10ry of 1lw C!-i:\ rnigln h.1w lw1·11 had tl w !-i11111 h "un ih,· Ci\'il \ \'.11 .
4ll 1u ·17,, (;1111111! 'fl1rm:r. Kl'ynl's >lat<'cl ch.11 'Tl w fundarnt·ntal p,yd1ol11gfr.1I bw [... , is
1ha1 llll'n a11· di,p11."·tl. ª' a 1111<· :111d !!li a1·1-rac;1·.111 i1 u-rr.1s1· tlwi1·crnhump1ion as th cir
i11ro11w inn1·a'"'· h111 um hy ª' m11r h ª' tl1<· in1T1·aw in tl11·i1· inn111w '. \ \'l'il. p1Thaps
'"' '· h111 n111 in J .. 11in .\nwrir:i 1
lI Thi, n·111 ->t·cking ac1 i1t1dl' "'ª' 01'1,·11 m l'Xlr1·1111· tl1a1 i1 l'ttdo·cl up l u·i 11~ .1 ,l·lf-d..fcat ing
pr0< I'": ~,.,·,·ral 1·ro1111nu·1rir "nrk, ha1·1· , 1i11wn tl1:11 1hl' ,ur~1· of' FI )) tl1a1 1011k placl' in
1~1ti 11 .\nwril'a li 11111 tlw 1·11d oi' tlw 1<)!)()~ had a highly lll'ga tiw corrda1io11 with
du111",;1 i1· inn·,unnll. ln J::"1.\ ,ia, hy CCJ1111."1. FDI h.1cl a p11<i1i\'t· ·n111,·ding-i11" dll-ct.
S1·1·. li11 t'X:tmpl ... :\ gu,in and :\la) 1·r 20UU.
·1:1 S1H1wtl1ing 1h.11 ,1, latt· ,h 1!19111,1íll 111ad1· th1· thrn Bra:.:i lian :\linbt1T 111' l .alu111r ra1hn
j1·almr-: ' I wnulcl líkt· tl1,· JYI' [l.111.1º; \ \ '111 kl't< l'any] li! lwhan· iu Brm:il lik1· 1h1· oppo·
>iliCJ11 d11t'' in .\ n,:<'nli11a. Tlwn·. nohody q111·,1io1h !11n1lihl·r:1l] 111acr111·•·t11111111Ír poli·
r i...,. Tlwn·. t:\'t'I) lmdy kno" ' 1ha1 tia·,,· polici.., :m· 1h1: 1!'111" path · \ \ «:ja . l ·I / +I 1998).
·l '.! . \ .., i11 En1ador. li>I' 1·xa1npk. "i1h thl' l'n·,íd1·111 who ,1an1·cl th1· ·1woliti.. r:d' rdurm;.
(1' ith :\!'l{c l1ti11a\ C.:a,·allo a~ hi-, 111ai11 adl'i,or ntnning hi, pn·, ích-111 ial ra 111pai~11 011
tlw 1111u, 11all y ho111-st , luga n ·,·111c li1r thl· madman ·. Sud1 i111IÍI íduab ro11ld collll' from
a ( ;arl'i.1 :\ l:'trq 111·/.·style nn\'t' I. J-l rn,·<'n'I'. ª' latt· ª' 1!l!l:I. i11 1h .. ir .m1111al llll'l'IÍ ng. 1h1·
1:\ IF an d \\'otlcl Ba11k paradccl :\ll'111·m. of:dl 1w11pk . .1, tlw pnli·n ' rdi11111í,1 'il:ll<">·
lll:tll 0.

11 ln . \1·~1·111ina, li11 1·xa111pk , hdi m· its 1!l9."> n i'í'. prí1·a1,· l on,111np1íon n'.1d11·cl !J]"., of
(;!))'; :\l l·n1·111 mad1· c11·11hody l1l'li1·\'1· hoth 1ha1 thi, cuuld bl' ad1inl'd i11 .1 ·1'a11·110
opt ímal way· (Í.c.. nohocly had lo IC>>t'). a nel 1ha1 thi, " ·" pcrlê:1 dy ,11,1.1i11ahl1·.
·l."1 For l'xampk. in l 99fl, fon·ígn ª''ti hnldi11 ~, b~· .\ rg1·111 i1wan n ·,idl'n1' an1011111nl to
ahmu S 100 hillion. Tl1i, figun- " ·as 1·quil·aknt to :V ·I oi' all ot1hla ndin g lim·ig-n clt-ht.
anel 1:1."11'0 of':1ll acldi1ion.1I fon·ih11 1 d..tn , í11 n· 1he fir., 1 d ccli1111 ol' :\k11<·111 in l 'Hl!l lkad-
in~ 10 linancial lih1..-.1li7.llion).
-Ili :\ rnirclinc; 10 ( ;r;im,t·i. i1 j , in llll' n·.11111111'id1·11lm.,•y1 h:11 1woplt· IJt·c1111w crn1,rio11, of
' ocial rdacium: h111. il'li;r th" majorí1y ofth,·111, tlw '>llci:rl rd.ni1111' uf\\'hid1 dwy han·
lwn1nw aw:11T :11 .. ' " cli':t~n"'al1le. p.-rh.q» tlw •1111) alte111a ti1·1· lo .1t11 hori1arí:1 n
n ·~i 1 li<'' i, a lfr.tL:i H dl'1t1un atic IH"~\'lllCJllic n1111 rol cn1hl'cl(kcl in idL"ol• >gin "hit h haw
lw< onll' ·t11in ', 1111 iforn1 and 'li111clanwn1.1lí,1ir· e·~· · J ~li in . \nwric,111-.,1) k 111·olilH"r:tl-
í,111' . ;uHi 111· \\· foi'! Ih oJ" 11atio11ali,111 and 1..!ÍL:ÍOn .
 Bu1me r-·1·110 111a,, \ ·. 1~)9.1. 'nte J::rotu>tttir lli1lllrr . l.11ti11. !turrim 1i11rr /11rl1/1mdma. C:.unhridg<".
. of .
cuP.
~- 1 ~ 111clo11 .
Cflrd CI1 " '"
1: j 1\ Oca1111Jo aml R T hor1>. <'<k, :ltt l:'r11111m1it //11/of)' n{/.111i11. !111111111.
.. • ·
Palgr.1\"C·
e11:111g • li -';)· 109 1. Thc l'olitim/ Hrmt0111ro{/11i/111/ri11/
- •
f'oli11 . l ,,ncl1111,.\lacmillan.
•
Di~z-t\kja11dro. C:. 1!!89. (.i1llfft.rl E111!1" l'cl .. \ \ 'i·la,cu. Oxfi1rcl. Ol · p.
ECl.t\C. '.W02. S1a1i11iml SumJ"
Fajnz)'lba. 19!!0. l '11muirl11!tk ft11/mt~11/ R'-'1m<1mi11g i11 /,,~''." .lmt1i1.a. l ,onelo'.1 . .\l.1l:milla11. .
Ffrcnch-Da,·i,. R. .\luf\01. and (, Palma. l!J!J L ' 1111: l.a1111 ,\ml'l'll'an Lrono11111">.
1950 1990'. in (.i1111bri1(f.!1 //i11111:i '!/ l .111in .1111.rim. n 11. li. C:amhriel.~l' . C:L'I'.
flassbcck. 11. 200 1. 'Tlu· 1·•ffha11~1· rar(': 1·rnno111ir poli<'y ,.,,,1 nr rnarkrr prir(')'. U:\C-
TAD Disn1,,io11 l'.1per. l:i7.
~IF. 2002.1. //·X Darabank.
- , 200'..?b. fl11/01111 1!f'l'l!1111111/1 S1111i1IÍf1.
- . 2002r. ll'EO da111bmr.
Kalelor. N. t 9:i!r. ' Ern11n111ic probl1·nh ol'C:hil('·. /:"11!1.1 r111 l'olir,1. C:;1111briclgl·, CL'J'.
Kindlcbe1gl'r. C. 199!i . .\11111im. l 1t111in .1111rl C 1111hr1. C:hid11·>tl·r. \\'ilL·y.
Lall, D. 1!l!H. '/ he f'on 1!l' q/ /Jcrd11/1111ml l:io1111111Íc1, li h1i11111· of Econ11111ir,. \lfai1".
Marglin. S anel.) Schur. 1990. 'nz, Galdt11 .-l,!;1 1!/C11pi1a/i',111. Oxford. O l 'I'.
J\larcd . .\1 a nel Palma, C. l!HIH. 'Third \\'orld Ol'ln a nel ii' Ell~·n, 011 11H- Brirish
Econum~"· (.a111ln11{!.!• } u11m11! '!/ FomlJ/llÍn. 'ui. 12.
Palma. G. l 9iH. ' Dl'prnd<'nry'. 11 orld f),rd11/1111ml, ,·oi. G.
- - , 19!1.). ·Bihlio~r.1phical E"·'Y 011 En1110111i1· Dl'\'l'lop1m·111 i11 l.a1i11 .\ 1111·1ica. 19.10
1990' in C11111lnid.g1 lli1t111:rofl.111i11 .l111rrim. rnl. 10. C:amhridc;l'. C:l ' P.
- - , 200'.la . "1'11\' K111.111·1, l' llr\'\' r1·,·i,it1'CI'. / 11/r 11111liu11t1/}mm111/ 1yDritlo/1111111/ f ,.1111. \'oi. 1.
- . 200'.?b. 'Thl· .\l1·xir:111 En 1110111y ,jncl' tradl' lihrrali,;11io11 anel :\:\FI':\', L'i\CTAD.
Palma, (; anel ;\ larl't'I, .\ 1. 1989. ·Kalclor w1 1hl' ili,. tt'.! d1111111 of llw Chill',111 hourgnii.;j,.·.
Ca111bru(!;t ] mm111/ 1!f l:'r111w111i11. \'til. 1:t
Pcr1·z. C. '..?OU'..?. -r.c11110/11,ét'11/ R1 111/111iu11111111/ l-i111111ri11/ C'a/1i11zl. C:hl'lrl'nham. Elga r, 200'..?.
S111nnl\'r,. L .111d \ · S11111111l'rs. 198!1. ·\ \'lu·n fi11:inci:il 111ark1·h \\lirk 1110 \\'l'll'. /·l111111ti11/
Srn·Ít',•1. rnl. .l.
Thorp. R. 2000, .111 / :'0 11w1111r lli1lt1~T1!} /,L1/i11 .l111mi11. l:\Dll.
TDR, 1~r'l :l. T111d1· mui Omlo/1111m1 N1por1. L0:C:T :\I ).
\\'cll,.J. 1!l8B. l.111i11 . l1111rim 1111ft1 <:w.11 11111d1. 11.0.
Worlcl Ba11k. '.?00'..?a. J J 'orld f)ffd11/1111ml /111/irallln.
, 20021i. (:/oba/ /), ulo/1111111/ Fi111111r..
. .\; ;,111/ / 111111 . J J iirld /Juilo/1111.11/ N1/111rl.