Latin America's Underperformance

Abstract

In the last few years Latin American economies have undergone a remarkable transformation. Nations that sneered at the market system and pursued protectionist policies have suddenly embraced structural re forms aimed at stabilizing their economies, deregulating business prac tices, and becoming integrated with the rest of the world. After the Mex ican peso crisis of December 1994, many observers predicted this process would end or, in some nations, be reversed. Their prediction proved false. Perhaps surprisingly, the reform effort continues?albeit at a different pace?in most countries. Now it appears that the Mexican crisis was a wake-up call for the region. Most political leaders realize that the reform process must intensify in order to build truly robust economies. It is unclear, however, whether more rapid reform will be politi cally feasible. After almost a decade of reform, the region has little to show in improved economic performance and social conditions. Poverty has not been reduced. Growth has been modest at best. In many countries wages have stagnated and job creation has been slug gish. The reining in of inflation has been one of the few commend able accomplishments. Until recently the Latin American population had given remarkable support to the reform process, rewarding political leaders who tackled their countries' perennial economic problems. The reelection of Presi dent Carlos Sa?l Menem in Argentina and the election of President Fer nando Henrique Cardoso in Brazil have been perhaps the best examples.