The Limits of Stabilization: Infrastructure, Public Deficits, and Growth in Latin America

AUTHOR(s): Easterly, William , Serven, Luis
PUBLISHED: October 2003
RELATED TOPICS: Macroeconomics


Latin America's macroeconomic crisis of the 1980s and '90s forced a severe fiscal adjustment across the region. More often than not, however, fiscal stability was achieved at the cost of a drastic compression of public infrastructure spending, which in some countries amounted to half or more of the total budget deficit reduction. The retrenchment of the public sector from infrastructure construction and maintenance was accompanied by the opening up of such activities to the private sector, in the hope that it would take the leading role in infrastructure provision. This book assesses the consequences of this changed public-private partnership from the perspective of economic growth, public finances, and the quantity and quality of infrastructure services. First, it documents the major trends in infrastructure provision in Latin America over the past two decades. Second, it evaluates the implications of these trends for economic growth and public deficits. Finally, it assesses the determinants and macroeconomic effects of the private sector response, and in particular whether private involvement has succeeded in making up for the public sector retrenchment. Valuable to anyone concerned with Latin America's development, this book will be of particular interest to those in the fields of infrastructure, fiscal policy, and economic growth.

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