Stabilization policies and stagflation: The cases of Brazil and Chile

Abstract

This paper is a comparative study of the economic stabilization policies in Brazil 1964–1968 and Chile 1973–1978. The periods chosen correspond to the first phase of authoritarian regimes whose avowed aim was to re-establish economic equilibrium and ‘put order’ in society in general, after severe disruptions caused by populist or socialist experiences. The economic policies of these regimes have been characterized as a radical attempt to apply orthodox tools in the context of semi-industrialized economies. Conventional wisdom has it that Brazil was the precursor in the orthodox experiments and one imitated by southern-cone countries in Latin America in the 1970s. Our study reveals deep differences between the cases of Brazil and Chile. The study discusses initial conditions, macroeconomic results, the use of monetarist tools, deviations from orthodoxy, the connection between stabilization policies and the long-term development model, and the effects of the policies on income distribution.