Scielo RSS <![CDATA[Cuadernos de economía]]> vol. 37 num. 112 lang. es <![CDATA[SciELO Logo]]> <![CDATA[IN SEARCH OF A POSITIVE THEORY OF ECONOMIC POLICY: LESSONS FROM LATIN AMERICA]]> <![CDATA[POLITICAL HABITS AND THE POLITICAL ECONOMY OF ECONOMIC REPRESSION AND REFORM]]> This paper shows how the analytical framework developed in <A HREF="#Lal96">Lal-Myint (1996)</A> and <A HREF="#Lal98">Lal (1998)</A> can be used to think rigorously about the role of culture and politics in addition to traditional economic factors like factor-proportions in explaining divergent economic performance can be applied to Latin America. It is in particular used to explain the cycles of repression and reform and to judge the long-term sustainability of the current period of economic reform in Latin America <![CDATA[ON THE CRISIS HYPOTHESIS OF ECONOMIC REFORM: COLOMBIA 1989-91]]> On July 1999 Colombia entered into an extended facility agreement with the IMF. Clearly, problems currently affecting Colombia go well beyond economics, as political and social tensions have intensified. Many of the policies contemplated in the IMF program had already been addressed in the late 1980s and early 1990s. Indeed, during the final years of the Barco administration an economic reform program was initiated. This was intensified during the first two years of César Gaviria's presidency. The purpose of this paper is to analyze, from a political economy perspective, the launching of the Colombian market-oriented reforms in 1989-91. We are specially interested in investigating whether the so called "crisis hypothesis" applies to Colombia. This hypothesis is based on the observation made by a number of scholars, that a major economic crisis almost always precedes the launching of a reform effort. We argue that although Colombia was not facing a major economic crisis, it was facing a severe political and institutional breakdown. The profound attention devoted by key actors to political issues gave President Gaviria ample room to maneuver in the economic reform front. As a result, his first six months in office were truly remarkable in terms of economic reform. However, following the enactment of a new Constitution, interest groups negatively affected by the reforms were able to regroup, and started to actively lobby to stall the modernization process. As a result, the reformist effort slowed down significantly. Worse, many of the constitutional mandates placed Colombia on an unsustainable fiscal path <![CDATA[LA ECONOMIA POLITICA DE LAS REFORMAS ECONOMICAS EN LA ARGENTINA]]> In 1989, Argentina entered a process of sweeping transformations of its economic institutions, which have provided for the recovery of economic growth and the taming of inflation. The Argentine experience with market oriented reforms has been regarded by the literature as a salient case of radical and `unconstrained' reform. Yet, a closer scrutiny of the process and of its outcomes portrays that the building and maintenance of a pro-reform coalition determined the pace, depth and characteristics of the `new economic institutions'. The idiosyncrasies of Argentina's political institutions in turn conditioned this coalition-building strategy. The argument we present in this paper is twofold. On the one hand, we contend that the 1989 economic crisis provided the incentives that led President Carlos Menem to initiate the reforms, and triggered a series of "delegation" patterns conductive to the adoption of a reformist agenda. On the other hand, we assert that the political and institutional process of implementing these reforms has left a heavy imprint on the outcomes. Even in the framework of a favorable partisan composition of the institutional structure, and with high concentration of political power, the coalition that combined economic interest groups with the electoral support of the peronist party set limits to the reforms. These limits were translated in concessions of design and sequencing, as well as in the use of signaling, exchanges and compensations that fostered the adoption and implementation of the agenda. Though many of the features associated with a state-led development model were dismantled, some `illiberal enclaves', such as the heavily regulated labor market, and provincial economies, survived. More so, we contend that it was through its the maintenance that the core of the reforms -privatization, liberalization and convertibility-, were made viable politically <![CDATA[THE POLITICAL ECONOMY OF THE CHILEAN TRANSITION TO DEMOCRACY]]> Chile's economic performance since the mid 1990s has been outstanding. Several reasons account for this success. The strong initial position of the economy was a crucial asset. Broad consensus on economic matters helped a lot. This paper argues that the institutional setup was key to this success. Of course, there are many reasons why events unfolded as they did (the people, the ideas at the time, the external conditions, the internal economic situation, the institutional setup, etc.). We study in the paper how changes in the institutional setup may have constrained behavior during the transition, and also discuss how it may help (or hinder) the preservation of such economic performance in the future. For this we use the models from political economics and analyze how the institutional constraint contributed to the transition. The paper concludes that the institutional setup was important. Policy making involves the interplay of what might be termed big and small institutions. Running through much of the literature on economic reform is the recognition that it is not enough to get certain policies right; it is also important to get institutions right. The technocratic approach to this problem is the creation of independent agencies: independent central banks, autonomous regulatory agencies, independent judiciaries, and so forth. The Chilean process is remarkable in its concern to appropriately design both big and small institutions so to provide an adequate framework for decision making by the private sector