The Latin American State

Abstract

The role of the state in Latin American economic development is undergoing fundamental reconsideration. This essay focuses on the reasons underlying the new commitment to reduced state participation. In particular, I suggest that the impetus comes less from newfound ideological conviction in the virtues of the market than from ineffective macroeconomic policy in the 1980s. The principal problem confronted by the countries of the region is a fiscal shortfall, not massive inefficiency resulting from misallocation of resources. Latin America is not Eastern Europe, where reform translates into elimination of the monopoly of state ownership and the structure of central command. Latin American countries have adhered to market capitalism, but without experiencing its magical effects in recent years. It is the contest between the micro- and macroeconomic explanations that illuminates why surface agreement on a reduced state role conceals a continuing divergence of views within the region.