Privatization in rent-seeking societies

Abstract

Four Latin American countries have devoted particular attention, though not equal action, to privatization policies, the implementation of which has shed considerable light on the dynamics of rent-seeking societies. The fact that democratization, in some form, is also underway in each of the four has intensified the interplay of forces that shape the implementation of privatization programs. The experiences of Mexico and Chile, in particular, demonstrate how important it may be to “privatize” the private sector by reforming macroeconomic policies and opening the economy to external competition before, or at least concurrently with, tackling the privatization of the public sector. The obstructive force of rent-seeking behavior is shown most clearly in the Argentine case, while the Brazilian experience is useful, along with that of Mexico, as a reminder that rent-seeking dynamics are not necessarily incompatible with structural transformation and high rates of growth.