neo-liberal market reform in latin america
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Neo-liberal Market Reform in Latin America
Shift Towards Neo-Liberalism in Latin America in 1990s
• International factors made liberal economic policies dominant ideologically in 1980s and 90s
• Regional factors pushed Latin American countries towards liberalization of economies in ’90s
International Factors
• Reagan and Thatcher led charge towards liberal economics in 1980s (smaller role for state in economy)
• Collapse of state socialism and Eastern Bloc, late-1980s
Regional Factors
1. Crisis of ISI across Latin America in 1970s and ’80s
2. Chilean neo-liberal “boom” of late-1970s and early-1980s; “boomlet” after post-Pinochet economic recovery
3. Debt crisis of 1980s – foreign banks had a lot of “petrodollars” b/c of oil boom, LA countries borrowed billions and became stuck with high foreign debt
--IMF offered LA countries exit strategy, but with neo-liberal strings attached (“IMF conditionality”)
What were goals of neo-liberal reforms?
• Tame hyperinflation
• Improve competitiveness of industry
• Open up economy to global markets
• Get prices and wages “right” (supply/demand regulation)
Key Neo-Liberal Policies
1. Eliminate sources of economic inefficiency--subsidies to industries --subsidies to consumers
2. Privatization of state-owned industry3. Austerity Measures
--cuts in govt spending on educ., health, envtl prot
4. Remove tariffs and other trade barriers
Economic Effects of Neo-liberal Policies
1. More connected to international economic system – international investment, openness
Latin American Countries Among Top FDI Recipients
Lower Tariffs and Trade Restrictions
• Average tariff rate in Latin America fell from 42% in 1986 to 14% in 1998
Economic Effects
2. Improved macroeconomic outlook over medium and long-term
Economic Effects
3. Decline in average wages
4. Larger gap between rich and poor, greater concentration of wealth
Political Effects
• Less inclusive public policy that tends not to reflect needs and interests of poor
• Multiple, competing economic demands on state that were ignored under dictatorships hard to meet, given demands of neo-liberalism
• Recent electoral backlash against neo-liberalism – Lula da Silva in Brazil, Gustavo Noboa in Ecuador, Chavez in Venezuela
Cultural Effects
1. Loss of communitarianism and solidarity
--greater emphasis on the individual, as opposed to working together to achieve common good
2. Weakened national identity – in context of U.S. hegemony, integration can spell the decimation of a national culture
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