The Political Economy of Macroeconomic Policy Reform in Latin America The Distributive and Institutional Context
The Distributive and Institutional Context
Chapter 1: Overview: The Current Status and Prospects of the Reform Process
1. Overview: the current status and prospects of the reform process Deductive reasoning no longer suﬃces for predicting economic behavior without constant assistance from empirical observation. Herbert A. Simon (1957) This overview oﬀers a summary of the current status of the process of macroeconomic policy reform in Latin America. The focus is on the main reforms emerging out of the macroeconomic crisis that several countries experienced since the mid-1990s. The central objective is to extract the underlying political economy factors (that is, the real interests and incentives) that may explain the nature and rationale of the policies adopted and of the results observed. The idea is not only to look at the immediate past or even at the present but also to try to extract the political economy and policy implications that are particularly relevant for a forward-looking perspective. In general terms Latin America has done well since about 2002–03; the question is, to what extent have the reforms adopted actually given the region enough macroeconomic resiliency and political tolerance to assimilate the upcoming unfolding of international adjustment processes and of each country’s own particular circumstances? The answer seems to vary across countries and appears to be largely a function of the pace at which distributive justice and equity challenges are perceived and are actually addressed and corrected. The overview ends with the key policy implication that one of the most important sources and origins of the political demand for reforms and for institutional transformation, on the...
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