Economic Liberalization, Distribution and Poverty

Economic Liberalization, Distribution and Poverty

Latin America in the 1990s

Edited by Rob Vos, Lance Taylor and Ricardo Paes de Barros

Since the late 1980s, almost all Latin American countries have undergone a series of far-reaching economic reforms, particularly in the areas of financial and capital account liberalization and trade. This book provides a comparative and analytical framework for assessing the impact of these reforms upon 16 countries in Latin America and the Caribbean, including: Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Mexico, and Peru.

Chapter 6: Colombia: structural change, labour market adjustment and income distribution in the 1990s

José Antonio Ocampo, Fabio Sánchez and Camilo Ernesto Tovar

Subjects: development studies, development economics, economics and finance, development economics

Extract

6. Colombia: structural change, labour market adjustment and income distribution in the 1990s1 José Antonio Ocampo, Fabio Sánchez and Camilo Ernesto Tovar 6.1 INTRODUCTION Like other Latin American countries, Colombia was immersed in an intense process of structural reforms in the 1990s. On the external front, this process has had elements common to other regional experiences, such as trade reform and opening to direct foreign investments. There have also been contrasting elements, especially the maintenance of an active external-debt management. The reform process also included a modest labour reform and an ambitious reform of the social security system. The latter reform is part of a wider process of giving the private sector access to traditionally state-oriented areas. Major components of monetary and financial reforms include giving autonomy to the Central Bank and measures to increase competition among financial agents and improve prudential regulation and supervision. The most important difference with what has happened elsewhere in the region has been the combination of these economic liberalization processes with a significant growth of the size of the public sector, through an expansion of the supply of social services. Despite substantial growth of government revenue, rising social spending caused widening fiscal deficits, reflecting the difficulty faced by the Colombian government in reconciling economic liberalization with a more active social policy. The economy grew at moderate rates in the 1990s. Growth was more volatile than in the past (especially in terms of aggregate demand behaviour), but with a gradual...

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