Economic Reform and Progress in Latin America and the Caribbean

39 Pages Posted: 20 Apr 2016

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Luisa Palacios

affiliation not provided to SSRN

Date Written: June 1997

Abstract

The paper examines the experience in structural reform in five areas- international trade, financial markets, labor markets, and the generation and use of public resources- countries of Latin America and the Caribbean. It develops quantitative indicators for the policy reforms and for their outcomes.

In the late 1980s, after decades of poor economic management, many Latin American and Caribbean countries undertook structural reform that placed them on a path toward superior economic performance.

Loayza and Palacios examine the experience in structural reform in five areas: governance (reforming public institutions), international trade, financial markets, labor markets, and the generation and use of public resources.

To characterize the experience with structural reform in the region, they develop quantitative indicators for different types of policy reform and for their outcomes.

They conclude that the most progress has been made in liberalizing international trade. In this area the region has done almost as well as the Asian newly industrialized countries (NICs).

The least progress has been made in reforming labor markets. In most countries there are still severe constraints on hiring and firing workers, payroll tax rates are high, there are few or no mechanisms for resolving labor disputes, and there is too much public employment.

Financial development has improved, especially the depth of financial intermediation, private sector participation in banking, and the size and activity of stock markets. As for the efficient generation and use of public resources, much has been done to make the value-added tax system efficient and to privatize public enterprises.

Reform gains in governance have been modest. Latin America remains well behind the Asian NICs and OECD countries, especially regarding the rule of law (judicial and police systems) and the quality of public administration (procedural clarity and the bureaucracy's honesty and technical competence).

A great deal has been accomplished, but compared with the Asian NICs and OECD countries, there is still substantial room for improvement.

This paper - product of the Office of the Chief Economist, Latin America and the Caribbean Region - the second chapter of the report The Long March: A Reform Agenda for Latin America and the Caribbean in the Next Decade, presented at the ABCD-LAC conference in Montevideo, June 30, 1997.

Suggested Citation

Loayza, Norman and Palacios, Luisa, Economic Reform and Progress in Latin America and the Caribbean (June 1997). World Bank Policy Research Working Paper No. 1829. Available at SSRN: https://ssrn.com/abstract=604993

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Luisa Palacios

affiliation not provided to SSRN

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