Lessons from Developing Countries
INTRODUCTION This chapter focuses on a sample of Latin American countries, which includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela.1 Latin America is a crucial area to investigate when one analyses the relationship between taxation and political regimes. As we will see, this relationship differentiates Latin America from other areas of the world, and thus justifies why a specific analysis focused only on Latin American countries is interesting and recommended. Most Latin American countries have only recently experienced a transition towards democracy. With the exception of ‘old’ democracies such as Costa Rica or Colombia, while in the 1950s only a minority of Latin American countries could be considered democracies, in the 1990s a large majority of them accomplished the transition to a democratic political organization, which has generally represented the defeat of the armed forces’ political power, although with several specific features. More detailed historical information on the political regimes characterizing our sample of Latin American countries are reported in the appendix to this chapter. As analysed in Chapter 2, the literature underlines that the level of democratization may have relevant implications for economics. Some of the predictions of this literature however are to a certain extent at odds with what we observe in the Latin American context. In general, the economic performances of Latin American countries have been rather poor and disappointing, in particular in the years before and right after democratization:...
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