CEPAL Review - Volume 2009, Issue 97, 2009

This essay argues that while the complete lack of liquidity characterizing the most severe phase of the financial crisis unleashed in September 2008 is now a thing of the past, lending and production activity in the industrialized countries are both contracting rapidly and the financial system is still undercapitalized. Of all the external channels through which the crisis has been transmitted to Latin America, the drop in remittances is the least important. The most widespread negative effects will come from the decline in the volume of international trade and the sharp deterioration in the terms of trade for commodities. In addition, a period of very restricted external private-sector financing lies ahead. The region’s economies have entered this crisis in a stronger position than in the past, mainly because public debt is lower and international reserves are large, but this will only partially mitigate the repercussions of the worst global economic crisis since the Great Depression of the 1930s.

This article discusses the origins of the international financial crisis, emphasizing the instability of the financial system as a leading cause. Although monetary policy in the early part of this decade may have helped to inflate the property bubble, it is far from having been the decisive factor. This article also argues that the function of controlling excessive asset price rises is one for regulatory policy rather than interest rates. What is proposed, accordingly, is the creation of institutional arrangements that facilitate the implementation of countercyclical financial policies during periods of strong economic growth. After considering the characteristics that economic policies in developed countries should adopt, the article then analyses the effects of the international crisis on the current accounts of the region’s countries and the difficulty of applying countercyclical policies in the absence of a global lender.

One of the characteristics of globalization has been the marked volatility of financial flows. The realization that this was affecting growth and equity induced the International Conference on Financing for Development, held in Monterrey in 2002, to adopt a global commitment to deal with the issue of development financing. Since then there has been a mixture of progress, backsliding and inaction. This article conducts a brief review of financial globalization and the current global crisis. It then examines the Monterrey Consensus, the evaluations by the United Nations Secretariat of compliance with the commitments accepted, and the financial system reforms needed to make globalization more equitable. It then proceeds to a stocktaking of the progress made under a North-South collaboration initiative, Action against Hunger and Poverty, in applying “innovative financing mechanisms” that can contribute to attainment of the Millennium Development Goals and help developing countries cope with critical situations like the current global recession. It concludes with proposals for dealing with the challenges that remain.

The combination of profound technological change and the emergence of powerful competitors such as China and the other bric countries has led to dramatic shifts in competitiveness and a tendency for production to be structured around global value chains. Against this background, traditional protectionist threats have reappeared and others have arisen in connection with new security requirements, private-sector quality standards, good practices and climate change. These issues are integral to the new competitive environment but could turn into protectionist barriers in the absence of the right multilateral approach. In view of this and of the current global crisis, the present paper offers some policy proposals oriented towards the adoption of an internationalization strategy in the region’s countries, emphasizing the importance of innovation and on issues that can be addressed from a regional cooperation standpoint.

Few developing countries have succeeded in consistently closing the income gap with the world’s richest nations without proactive government action in pursuit of economic transformation and a dynamic role in the global economy. Two factors are crucial here: the development and implementation of a medium- and long-term strategy to achieve rapid economic transformation, and the support provided to this strategy by a public-private alliance forged by means of a social process suited to local conditions. This article analyses the way alliances of this kind operate in 10 countries outside the region deemed to be successful because they have achieved a process of convergence with the developed countries or performed better than those of Latin America and the Caribbean, despite having similar resource endowments. One element that is lacking in the region, or at best is only incipient, is public-private collaboration. Thus, the aim of the analysis is to prompt reflection about the kind of alliances we ourselves could form to underpin strategies aimed at creating “Latin American tigers”.

This paper develops and tests a model of growth that emphasizes the introduction of new exports as the main source of growth in countries that are well within the global technology frontier and depend for growth on adapting existing products to their economic environment. It seeks to capture the stylized facts behind growth in countries as different as the Republic of Korea, Taiwan Province of China, Mauritius, Finland, China and Chile, all of which have relied on export diversification. The widening of comparative advantage is thus seen as the main driver of economic growth. The export diversification hypothesis is tested using an empirical growth model. Controlling for other variables that affect growth, export diversification —both alone and in interaction with growth in per capita export volumes— is found to be highly significant in explaining per capita gdp growth over the 1980-2003 period.

This paper suggests that Chile needs to adopt a renewed longterm development strategy tending towards inclusive development with increasing equity in order to supersede the undesirable effects of the current economic growth pattern, namely the persistence of unacceptable inequality in incomes, living standards and quality of life and a growing feeling of social exclusion. To address these issues, it first charts the development of inequality over the past two decades. It then goes on to analyse the characteristics of the production structure in the Chilean economy, as these are believed to be a determinant of inequality. Drawing on this analysis, it outlines a renewed strategy designed specifically to include the different production and social strata involved in the growth process. Lastly, it identifies the policy areas critical to inclusive development.

This article reviews the formal institutional framework for implementing rural development policies in Guatemala, which originated in the State modernization process promoted through the Peace Accords. The main thesis is that rural development policies will be more efficient if they are based on the institutional framework that the Peace Accords provided, which distinguishes between three levels of government: central, deconcentrated and decentralized. While the two sub-national levels execute 43% of total public investment, central government needs to target the budget on poor zones, cut subsidies to the private sector and increase the supply of public goods. At the deconcentrated and decentralized levels, the territorial approach has proven effective in generating policies, but land-use planning needs to be based on political-social covenants between local stakeholders.

This article analyses the thinking and key ideas generated by eclac throughout its six decades of life, by reviewing the work published since its creation in 1948, in both the structuralist stage (1950s, 1960s, 1970s and 1980s) and the neo-structuralist phase (since 1990). It then reviews the most important contributions made between 1998 and 2008, which address the effects of the structural reforms of the 1990s; the agenda for the global era; approaches to rights, citizenship and social cohesion; the Schumpeterian-structuralist convergence and countercyclical macroeconomic policies under conditions of financial volatility. The article discusses the similarities and differences between the two phases and concludes that neo-structuralism has remained analytically very close to structuralism.