Chapter 4: Economic Growth in the Andean Region: The Role of Economic and Governance Factors
* Claudio Aravena, André A. Hofman and Andrés Solimano 4.1 INTRODUCTION This chapter analyzes the growth performance of Bolivia, Colombia, Ecuador, Peru and Venezuela – the so-called Andean region – in the last decades of the twentieth century. Economic growth is a main vehicle to improve living standards, reduce poverty and provide resources to the state for the ﬁnancing of social policy. The Andean countries are a diverse group in terms of economic characteristics, policies and socio-political conditions. Several Andean countries exhibited in the last three decades high indices of Presidential crises, regime changes and above average frequencies of constitutional changes (see Solimano, 2003 and 2005). Growth in the Andean region has to be understood in a context of chronic political instability, and governance problems that have characterized this region. In terms of natural resource endowments Venezuela and Ecuador are oil exporters while Bolivia, Peru and Colombia are net oil importers. Ethnic diversity is far greater in Peru, Bolivia and Ecuador than in Colombia and Venezuela. Colombia was, historically, a country of mild growth cycles and prudent macroeconomic management, although a deterioration of economic conditions started in the mid-1990s. Ecuador experienced very rapid rates of economic growth in the 1970s led by the oil sector but fell down into a protracted period of sluggish economic growth and macroeconomic instability in the 1980s and 1990s. This culminated with a severe economic and ﬁnancial crisis in 1998–99. In 2000 the country ofﬁcially dollarized the economy, starting a process of stabilization and resumption...
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