MILAN, Italy – Leading economists Tuesday presented an agenda of actions Latin American countries could take in order to achieve stronger growth than the region attained in recent decades and cut its high levels of poverty and inequality.
At a seminar held during the annual meeting of the Inter-American Development Bank’s Board of Governors, former Peruvian finance minister Pedro Pablo Kuczynski and John Williamson, a senior fellow at the Institute for International Economics, outlined a number of areas in which countries could work to overcome their economic vulnerabilities and enable the poor to improve their living standards.
The proposals are contained in a new book they edited, After the Washington Consensus: Restarting Growth and Reform in Latin America. Williamson coined the term “Washington Consensus” in 1989 to describe a set of market-oriented reforms that Washington-based institutions believed Latin America needed to modernize their economies.
These included fiscal discipline, tax reform, trade liberalization, privatization, deregulation, interest rate liberalization, competitive exchange rates, resetting priorities for public spending, liberalization of foreign investments and recognition of property rights.
At the seminar – which was organized by the leading Italian business and economics school Università Bocconi – Kuczynski, Williamson and two of their co-authors, Roberto Bouzas of the Universidad de Buenos Aires and Andrés Velasco of Harvard University’s John F. Kennedy School of Government, presented their case for further reform.
Their main recommendations were: countries should steel their economies against crises by resorting to a variety of measures to reduce their vulnerabilities, including anti-cyclical fiscal policies; completing unfinished reforms, such as labor market flexibilization; overhauling public institutions, such as the judiciary and civil service; and reducing income and social inequities through more progressive fiscal systems. They suggested using property taxes to finance education and health care and measures to empower the poor, such as access to land and credit.
In a brief review of the outcome of the “Washington Consensus” reforms, Williamson said that, save for a couple of exceptions, Latin American countries’ performance had been disappointing. Making matters worse, many countries were battered by crises that underscored their economic frailty.
Williamson said that there was no claim in the book that this agenda constitutes a new paradigm for economic growth and development. “There is no magic bullet,” he added.
Kuczynski pointed out that Latin America has long lagged behind other regions where per capita income grew by many multiples over the past five decades. Latin American countries must act promptly, he added, to build a stronger foundation for long-term growth. “Latin America faces the danger of growing old before it grows up,” he said.
Among the discussants of the book were Italian Economy and Finance Vice Minister Mario Baldassarri, ECLAC Executive Secretary José Antonio Ocampo and Foreign Policy magazine editor Moisés Naím.