Private sector power and market reform: Exploring the domestic origins of Argentina's meltdown and Mexico's policy failures

Abstract

The failure of market reforms in Latin America to produce sustained growth and equitable prosperity is demonstrated most clearly by Argentina's most recent economic and political meltdown. But economic difficulties, poverty and searing inequality has continued to plague the Mexican case as well. Latin American policy makers themselves have begun to contribute to the growing discussion of policies necessary to confront the lingering economic and social challenges. Included among the recommended policy prescriptions are increased social spending, supported by tax reform, assistance to small and medium enterprise, and an end to corruption. Such policy reforms require governments that are autonomous from particular business interests with established institutional channels capable of securing generalized business cooperation and support. This article argues that the market reform experiences of Argentina and Mexico reinforced preexisting power structures and political practices, strengthening the economic clout and personalized political access of the owners of powerful holding companies, a situation diametrically opposed to the sort of business state relations conducive to further essential reforms. As the case of Argentina illustrates, this sort of skewed policy influence is liable to generate strong opposition and resistance to the market model.