The future of reforms in Latin America looks like a lost cause given reform fatigue, criticism and disappointment in many countries, agreed regional experts during the presentation of recent publications on the subject.
The authors of these new publications acknowledged an overall public disappointment with past reforms throughout the region, but disagreed on whether they should be supported or criticized.
Jose Antonio Ocampo, United Nations Undersecretary General for Economic and Social Affairs and editor of Beyond Reforms , argued that reforms failed on increasing economic growth. But François Bourguignon, World Bank Chief Economist and Senior Vice President, argued that reform successes have been dimmed by external factors.
Structural reforms lack the support of voters, he added, because reforms results have been hidden by other problems: a succession of very bad years, unrealistically high expectations, some imposing privatization, little improvement on pension systems and adverse shocks.
“We realize that reforms undertaken in the 80s produced some results, but not as big as expected because they addressed some disruption in the region—but not all—during that time,” Bourguignon said. Today, he added, “we realize that not enough has been done in infrastructure in many countries.”
The public discontent is increased by their difficulty to distinguish what is due to the reforms themselves and what is due to exogenous causes, adverse shocks, or mistakes in micro management in various countries, according to the World Bank Chief Economist. Also, there are reforms that still need to be carried out, and will be more difficult and complex to implement. Tax reforms would be part of this new era of reforms, Bourguignon said, as he pointed out that public sector budgets are not enough to cover social needs.
On pension and social security reform, Guillermo Perry, World Bank Chief Economist for Latin America and the Caribbean, highlighted an unfinished agenda. Keeping the Promise of Social Security in Latin America , presents empirical analysis of two decades and shows that much has been achieved, but critical challenges remain.
Eduardo Lora, Principal Advisor of the IDB Research Department, underscored the valuable data presented in this set of books. They could be handy to understand what has happened to different reforms, he said, adding that a great deal can be learned from the reform experience of countries in the region.
Something common in the three new books, Lora stressed out, is the lack of references to ideology.
Ideology should be part of the discussion of the future of reforms in Latin America and the Caribbean, he added, precisely because Latin American ideology is one of the factors putting structural reforms and liberalization at risk. Ideology is clearly against markets, he added, because "Latin Americans believe that markets do not protect them, because they think markets are not the best solution for the social problems, and because they think that productivity problems can be solved in other ways.”
What is currently moving the Latin American political environment to the left is the revival of this ideology, according to Lora. “No matter what the results of the reforms have been, people stick to their own beliefs. Thus, politicians are responding to the beliefs of Latin Americans, saying that market liberalization is wrong, privatization is wrong, and so forth.”
According to Lora, there is evidence that Latin Americans are reacting in the polls against pro market reforms. “We tend not to think about ideology,” he warned, “but ideologies reflect very deep seeded beliefs that might have no link with reality.”
The IDB, the World Bank and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) have joined efforts in a cooperative agreement to present these recent publications of theirs in the Latin American Development Forum series.
Forthcoming books prepared by the IDB as part of this partnership are on investment protection in Latin America and the Caribbean, tackling the issues of property rights and the state reforms.