The Latin American countries had been plagued by economic problems in the pre-reform period. The major concern areas facing the Latin American economies were lack of growth, abnormally high rates of inflation and growing poverty. Extensive borrowings on the part of the government to negotiate fiscal deficits resulted in huge public debts.
Faced with such economic crises, the Latin American countries resorted to economic reforms in the 1980s and 1990s to reverse the negative trends in their economic situations and to lead the countries back on the path of growth.
The International Financial Institutions (IFIs) – World Bank and International Monetary Fund (IMF) also played a key role in convincing the Latin American nations to take up economic reforms.
Objective of economic reforms in Latin America
The Latin American countries traditionally had state controlled economic systems, with product and labor markets being strongly regulated by the government. The economies were characterized by price controls and strong barriers to international trade in the form of taxes and tariffs. The economic reforms of the 1980s and 1990s ere undertaken with the objective of moving towards a free market economy with least regulatory interventions on the part of the government.
The major measures adopted through these economic reforms were –
- Trade liberalization.
- Privatization of public sector units.
Economic reforms in major Latin American countries
Among the important Latin American countries that adopted economic reforms, Argentina, Chile, Peru and Bolivia took an aggressive approach to the implementation of reforms. Others like Brazil, and Mexico, Columbia and Costa Rica were slow reformers who took a cautious approach to economic reforms. Together these eight nations contribute 80% to the total GDP of Latin America.
Results of economic reforms in Latin America
The benefits of economic reforms in Latin America started pouring in during the 1990s. The Latin American countries grew by an average 2.5% in terms of per capita GDP between 1991 and 1997. Significant success was achieved from liberalization of international trade and also in terms of financial development. Economic reforms enabled to bring inflation under control. This proved to be of substantial importance to the growth of the Latin American economies. Although success has been achieved in terms of reducing income disparities and addressing the issue of poverty, still there is scope of further development in this regard. Progress in terms of labor market reforms also need to be taken up in good measure.
Last Updated on : 26th June 2013