Latin America in the 1990s
Edited by Rob Vos, Lance Taylor and Ricardo Paes de Barros
Chapter 1: Balance of payments liberalization in Latin America: effects on growth, distribution and poverty
Lance Taylor and Rob Vos
1. Balance of payments liberalization in Latin America: effects on growth, distribution and poverty Lance Taylor and Rob Vos 1.1 INTRODUCTION Looking back from the end of the 20th century, the most striking aspect of economic policy in developing economies during the last 10–15 years has been the spread of packages aimed at liberalizing the balance of payments, on both current and capital account. Dramatic leaps toward external openness took place throughout Latin America, Eastern Europe, Asia and parts of Africa. Together with large but highly volatile foreign capital movements (often but not always in connection with privatization of state-owned enterprises), this wave of trade and ﬁnancial deregulation redeﬁned the external environment for a major part of the non-industrialized world. In Latin America, the stabilization and structural adjustment efforts immediately following the debt crisis of the early 1980s had focused mainly on ﬁscal and monetary adjustment and realignment of exchange rates. Then, in the late 1980s and early 1990s, came drastic reductions in trade restrictions and domestic and external ﬁnancial liberalization, almost simultaneously in most countries. Steps were also taken toward restructuring tax systems and deregulating labour markets. All these changes are very recent. It will take time before their full effects on growth, employment, income distribution and poverty can be fully assessed. Still, external liberalization marks a dramatic switch in development policies away from the traditional regime of widespread state controls and import-substituting industrialization. One would expect to see major consequences. The old regime had been criticized...
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