The long march

Abstract

The Mexican peso crisis in 1994 brought about gloom, anxiety, and uncertainty in the LAC (Latin America and Caribbean) region. There is a general awareness among policymakers that additional reforms need to be undertaken if LAC economies are to grow more than 6 percent a year, which is the growth rate that is widely believed necessary to lower the number of people living in poverty in the region. The agenda proposed in this volume is based on recent theoretical and empirical work on the sources of economic growth and poverty reduction; on empirical measures of the LAC region's progress in terms of policies and economic factors that affect economic growth, and on comparisons between the LAC region and other rapidly growing regions. The report identifies items in the reform agenda required to consolidate macroeconomic stability in the region (see Chapter 1), a necessary condition for sustaining high rates of growth. It also specifies the additional structural reforms needed to accelerate growth in the medium and long term (see Chapters 2 and 3) and the policies required to broaden the reach of economic growth in order to confront the challenge of poverty reduction in the LAC region (Chapter 4). This three-pronged analysis has yielded a reform agenda for LAC in the next decade. This agenda comprises the following five broad policy areas: 1) quality investment in human capital; 2) efficient financial markets; 3) enhanced legal and regulatory environment; 4) quality public sector governance; and 5) fiscal strengthening.