Consolidating Economic Governance in Latin America (Governance, Development, and Social Inclusion in Latin America)

This book explains how Latin American countries consolidate economic governance after serious disruptions to their formal and informal policy making routines. It asserts that the process of institutional change that started as a result of such disruptions resulted in complementary institutions, which supported a new consolidated pattern of economic governance. In addition, this work also offers a robust theoretical underpinning to economic governance, independent from performance. Performance figures prominently as a criterion to assess economic governance; however, crises are becoming more frequent and performance does not entirely depend on governments' actions. This book argues that governance in the economic arena depends on the ability and feasibility of limiting the discretion of vested interests over economic policies insofar as these interests can shift the costs of their actions so the rest of the society bears them. Alejandro Angel is Researcher at Universidade Federal de Santa Catarina, Brazil Acknowledgments 7 Contents 10 Acronyms 13 List of Figures 16 List of Tables 17 1 Introduction 18 1.1 Plan of the Book 26 References 27 2 Complementarity and Economic Governance 30 2.1 Institutional Complementarities 35 2.2 Economic Performance, Stability, and Institutional Change 45 2.3 Economic Governance: Limits on Discretion 58 2.4 Conclusions 64 References 65 3 Economic Governance in Latin America 74 3.1 Development as Economic Governance 76 3.2 The Crises, Vested Interests, and Reforms 87 3.3 Legacies, New Crises, and Possibilities of Consolidation 98 3.4 Conclusions 103 References 104 4 The Real Plan: The Successful Struggle to Consolidate Economic Governance 113 4.1 Privatization 120 4.1.1 Development, Scarcity, and Reform 120 4.1.2 Collor Government: A New Priority 125 4.2 Trade Liberalization 132 4.2.1 First Phase 132 4.2.2 Actual Opening 134 4.3 Anti-Inflationary Plans 138 4.3.1 First Organized Attempts 138 4.3.2 The Time of the Real 142 4.4 Consolidating Reforms 147 4.5 Conclusions 155 References 157 5 The Chilean Pension System: Contentious Economic Governance 165 5.1 Pension System Reform 168 5.2 Financial System Reform 181 5.3 Continuous Struggle and Unease 190 5.4 Conclusions 202 References 203 6 Institutionalizing Mexican Economic Policies: Limiting Presidential Discretion 211 6.1 Banco de México 217 6.1.1 Central Banks: Theory and Practice 218 6.1.2 Brewing a Reform 221 6.2 Budget and Fiscal Responsibility Act 233 6.3 Difficulties in Controlling Discretion 241 6.4 Conclusions 246 References 247 7 Conclusions: Limiting Discretion—The Problem of Economic Governance 256 7.1 Complementarity and Economic Governance 258 7.2 The Legacies of Crises and Economic Policymaking 260 7.3 The Continuous Struggle for Economic Governance 266 References 269 List of Interviews 272 Index 275