Economic Issues in 20th century Latin America Essay

Economic Issues in 20th century Latin America - Essay Example The economy of such countries as Chile, Mexico, Argentina and Peru is now much more open than before. Even in Brazil, where the resistance to market reforms continued in the 90 years, government policy as a whole turned in the direction of foreign trade liberalization and privatization. The changes in both spheres – political and economical – were rather difficult for the countries. In contrast to the predictions of many analysts new democratic regimes have proven to be viable even in a severe economic crisis. Ultimately, most of them show the ability to implement difficult but much-needed market reforms. Now the countries of Latin America are facing new, more complex tasks, which differ from the previous problems at least in two important aspects. First of all, conditions of policy have changed. In the past reformers were opposed by supporters of import-replacing model and the dominant role of the state. Before government did not pay so much attention to the problems o f private investment, market competition, and prudent macroeconomic policies. Now the debate is centered on the extent of state support to private sector and focus on the issues like distribution and the actual economic growth. There are the disputes around the economic policy which closely related to the changing nature of policy challenges facing the young democracies of Latin America. The task of overthrowing the military dictatorship and preventing the return to authoritarian rule gave way to the issues of efficiency and accountability of the elected governments. The results of these political challenges impact on the issues of economic growth and property. Economic overview and challenges The neoliberal reforms of 80-90-ies have been repeatedly criticized and continue to cause controversy today. The incentives for economic growth, which are created by market-oriented policies, derive from several sources. In the context of economic globalization, external financing is crucial f or the balance of payments in all countries. In Latin America, as in other developing countries, governments in most cases are aware of the importance of maintaining the confidence of private investors and institutions like the IMF and World Bank. The significance of these goals is well demonstrated by the Mexican peso crisis. In 80-ies a typical reaction to these events was to limit imports and capital movements, in the mid-90'ies answer to the crisis was the deepening of liberal reforms. The past experience has also demonstrated how important it is to maintain continuity of policy. Export-oriented East Asian countries have successfully emerged from the debt crisis, which sharply contrasted with the profound failure of the political experiments in Brazil, Argentina and Peru. The lessons of this experience are still being discussed, but already had a consensus on the need for a cautious approach to macroeconomic policy (Frieden, 2000). Finally, the probability of the direct cancella tion of the results of past reforms is limited by internal factors. In countries such as Chile and Mexico, the political influence of export-oriented business provides a powerful motivation for the continuity of policies. Moreover, the successful stabilization programs have gained wide popularity among lower-income groups, which particularly were affected by high inflation. Thus, although the opposition argue for more vigorous measures to