The Economic Recovery of Latin America: The Myth and the Reality

Abstract

Bankers, academics and journalists are celebrating what is described — after a decade that was ‘lost to development’ — as the ‘economic recovery’ of Latin America. They point to the end of a haemorrhage of resources and the debt crisis that had plagued the region since 1982, a net positive inflow of capital since 1990, a veritable boom in exports and the growth of GNP in some countries (Argentina, Chile, Venezuela and Mexico). This ‘recovery’ is credited to the free market policies adopted, within the framework of the Structural Adjustment Program promoted and imposed by the IMF and World Bank, by virtually all regimes, including those in Argentina and Peru where the incumbent President had campaigned on a populist program but in power introduced the most ‘radical’ form of economic reforms in Latin America. The ‘restructuring’ and ‘refoundation’ of Latin America — privatization of the means of the means of production (state enterprizes); the liberalization of capital and trade flows; the deregulation of private activity; the abolition of subsidies and price controls; the modernization and downsizing of the state (deficit reduction, balanced accounts, cutting back on social programs and public sector employment); and the implementation of austerity measures (demand management and control of inflation) — are described as the painful but necessary conditions for ‘economic cleansing’, ridding the economy of an outmoded model (protectionism, state intervention) and other remnants of a populist strategy and model that created and maintained inefficient and uncompetitive industries, inhibiting economic growth and new investment.