Held in Mangaratiba, Rio de Janeiro, under the sponsorship of the International Monetary Fund, the Central Bank of Brazil, and the Catholic University of Rio de Janeiro, this seminar brought together a large number of economists from different countries and institutions. The purpose was to discuss policies for sustained growth based on recent Latin American experiences. Although, at the time of the seminar, some economies—particularly that of Brazil—could not yet be deemed successful in their efforts to achieve price stability, the discussions centered on themes considered pertinent to the consolidation of stability and the recovery of growth.
This paper discusses stabilization programs in Latin America, with an analysis of the general conceptual framework and of a few practical experiences that demonstrate the main points. The viewpoint will be that of a policymaker, with an emphasis on those issues that experience has generally shown to be the most controversial.
Orthodox stabilization plans in the member countries of the Organization for Economic Cooperation and Development (OECD)—such as the Reagan and Thatcher plans in the early 1980s—have had significant negative distributive and welfare effects. Unemployment and real wage reductions caused by the Phillips curve trade-off between inflation and the level of activity result from stabilization attempts that were based on contractionary monetary policies. The long stabilization in Chile, for example, although mixed with some incomes policy ingredients, had a strong orthodox flavor and was also associated with significant distributive and welfare consequences.
During the past several years, many Latin American countries have faced an abundant foreign exchange supply. In some cases, this was the result of capital inflows in unprecedented amounts, at least since the advent of the debt crisis in 1982. The size, timing, and characteristics of the inflows have varied among countries, as have the initial conditions that these countries faced when the inflows began. Additionally, not all countries have had the same short-term policy objectives; while some were leaning heavily toward reducing inflation, others were engaged in consolidating exports.
Monetary and public debt management are closely linked aspects of economic policy: actions in one area heavily influence the other. At the same time, however, there is a trend toward making the monetary authority—the central bank—more independent of the government, which is the issuer of public debt. This paper discusses the key links between these policies and suggests possible arrangements to reconcile central bank independence with coordination of monetary and public debt management.
The past decade has witnessed wide-ranging economic reform in several Latin American countries. There is little resemblance between the economies of the early 1990s and their more controlled, poorer performing counterparts of the early 1980s. The new atmosphere reflects, in part, support for sound economic policymaking at the highest political levels and a change in attitudes that now permits the consideration of deregulation, privatization, and the opening up of the economy. Deregulation has spurred economic activity. The opening of the economy, with its impact of increased imports, has led to higher revenue from this source.1 Where privatization occurred, it has also led to increases in revenue. Significant efforts to reduce the fiscal deficit—even though in most instances the improvement was mainly the result of revenue-enhancing rather than expenditure-tightening efforts—and sensible credit policies have led to success in the control of often runaway inflation. In some countries, the role of the state itself has undergone careful scrutiny. Consequently, government has become less involved in running public enterprises, which began to respond more to market signals; there have been some efforts to contain the government payroll; and, in a few instances, social security has passed from public to private management.
Most Latin American countries began to open up to the rest of the world in the late 1980s. This process is perhaps the most impressive achievement of the structural adjustment programs that followed the debt crisis and has effectively put an end to more than four decades of active industrial policies based on import substitution.
Many developing countries must rely on taxation of the agricultural sector for a significant part of government revenue. The author discusses the policy issues involved in designing an effective system of agricultural taxation.
This Selected Issues paper provides background information and analysis on recent developments and critical issues for the Colombian economy. The study discusses the unemployment and stresses in the financial system and also focuses on fiscal issues. The following statistical data are presented in detail: national accounts at current prices and at constant prices, savings and investment, value of agricultural crops, mining production, structure of regular gasoline prices, indicators of construction activity, minimum wages, producer price index, interest rates, and so on.
This paper analyzes particular areas of tax policy that have concerned the Colombian authorities during the 1990s, while comprising a comprehensive approach to tax reform over time. It is intended to allow the reader to view in technical detail the type of analysis conducted in a representative tax reform study carried out by the IMF.