Structural reforms, technological gaps and economic development: a Latin American perspective

Abstract

This paper explores the impact that recent structural reforms have had upon macro‐to‐micro linkages, as well as upon the pattern of production specialization, the entry and exit of firms during the adjustment process, and the ‘sources’ of technical change in the present more open and deregulated Latin American macroeconomic scenarios. From this exploration a major question emerges: is the new ‘market‐oriented’ development paradigm sustainable in the long run? The interpretation presented in this paper suggests that the present pattern of production specialization—strongly biased in favour of industries featuring low domestic knowledge generation and value‐added content—and the inhibition of local R&D and engineering activities resulting from the rapid expansion of internationally integrated production systems are pushing Latin American economies into a ‘low development trap’ from which it might prove extremely difficult to escape on the basis exclusively of free market principles.