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Latin America's Economy.

THE OUTBREAK of the 1982 international debt crisis and subsequent efforts to resolve the ensuing problems have made Latin America one of the most challenging regions in the world for economists to study. As the "lost decade" progressed, international analyses of the region focused on capital flows, growth, inflation, exchange rates, and structural adjustment policies. Surprisingly, there have been few standard treatments of the region as a whole in the context of general economics. Eliana Cardoso and Ann Helwege have done much to fill that gap with their new text.

The book is organized into ten chapters that progress from an excellent economic overview to the intricacies of agrarian land reform. Traveling the route charted by the authors helps clarify esoteric topics such as "heterodoxy" and "economic populism." Novices in this area will be assisted by the logical development of these and other themes, while experienced economists will benefit from the insights offered on the wide range of material covered. Because the style of the authors is highly readable, it is an appropriate book for international economists as well as professionals from other disciplines.

Chapter one introduces the reader to several major issues facing Latin America. The authors point out that the principal legacies of European imperialism -- language, religion, and bureaucracy -- set the region apart from other developing areas such as eastern Asia. The also emphasize the lack of openness in Latin American economies and the prominent roles that domestic policy mistakes played in deepening the crises of the past decade. A discussion of how these conditions arose enhances the historical summary included in chapter two. Readers are introduced to the long-standing problems caused by recurring bouts of mercantilism, overvalued exchange rates, foreign protectionism, fluctuating terms of trade, and periodic debt repayment difficulties.

Explanations of Latin American development put forth by different schools of thought are covered in chapter three. It is a helpful guide to the many points of view offered by proponents of dependency theories, issues that are still hotly debated by economists and policy analysts throughout the region. The move from import substitution to trade promotion is dealt with in the next chapter. Production inefficiencies that emerged during the "infant industry" era are still causing problems in many countries, but the authors illustrate the risks implied by policy reform efforts.

Chapter five analyzes international debt. The discussion dealing with the history of debt in Latin America outlines the numerous similarities between previous payment crises and the most recent outbreak. Earlier solutions incorporated many of the provisions included in the Baker and Brady initiatives, as well as in IMF adjustment prescriptions. Curiously, the authors seem reluctant to recommend reversing the various domestic disequilibria confronting policymakers in the region as a means for preventing future debt servicing problems. While the Brady initiative may not completely solve the debt crisis, negotiations have stalled in some countries like Ecuador precisely because executive branches of government refused to implement structural adjustment programs.

Inflation is covered in chapter six. Included is a summary of the monetarist-structuralist debate. Evidence supporting both hypotheses in countries such as Mexico is also provided. Stabilization programs are discussed in the next chapter. At this juncture, the authors explain why "persistent deficit finance is unsustainable." Difficulties in policy sequencing, political resistance, and the risks of recession are reviewed. These points are illustrated with accounts of several adjustment experiences undertaken in recent years.

Economic populism has surfaced in the electoral arenas of several countries since the 1940s. As pointed out in chapter eight, hyperinflation is frequently the result of misguided political reforms that ignore budget constraints. The authors also describe how labor market distortions resulting from policies enacted by populist administrations have contributed to high unemployment rates in Latin America. The ways in which impoverished constituencies are hurt by these programs also are illustrated.

Poverty is analyzed in chapter nine. One issue raised is whether eradication of this problem can occur in the absence of growth. A review of the informal sector is also provided. While deregulation may help invigorate small business activity, the authors argue that most peripheral activities result from slow growth. Given this, informal activities generally represent underemployment rather than entrepreneurial free-enterprise. Eliminating free university education and reducing military spending are identified as efficient means of freeing budget resources in order to assist the poor.

Chapter ten discusses agrarian reform efforts in the region. While land redistribution promotes development and reverses historical injustices, it also can lead to food shortage sand trade imbalances unless properly implemented. The authors note that land title transfers and private ownership seem to be the underlying reasons for Bolivian success in this area. While land reform has not always boosted exports, its political advances are considered helpful.

University courses on Latin American economic development will benefit greatly from this book. Instructors will be able to use it as an advanced undergraduate text and organize their class outlines around it. Students will enjoy having a central source of information to serve as a benchmark for other reading assignments. For example, additional material covering the growth performance of Colombia over the past three decades could serve as a useful contrast to the discussions of policy failures in Brazil and Argentina.

Business economists may also profit from including this title in their corporate libraries. Although some topics such as exchange rate overshooting and income tax code reform efforts are omitted, it will still be useful as a standard reference to augment other analyses that planning departments typically purchase. Country risk reports, economic trend analyses, and macroeconometric forecasts for Latin America frequently assume readers are well versed in the nuances of the region. This book can help remove any doubts.

Thomas M. Fullerton, Jr. University of Florida
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Author:Fullerton, Thomas M., Jr.
Publication:Business Economics
Article Type:Book Review
Date:Jan 1, 1993
Words:951
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