Bigger Economies, Smaller Governments
Published in cooperation with the Institute of the Americas
First published 1996 by Westview Press
Published 2018 by Routledge
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Copyright 1996 by Taylor & Francis
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ISBN 0-8133-2432-7 (hc)
ISBN 13: 978-0-367-01003-4 (hbk)
Contents
PART ONE
Introduction
, William Glade
PART TWO
Capital Markets and Privatization
, Frederick Z. Jaspersen
, Hernn Bchi Buc
, Carmelo Mesa-Lago
PART THREE
Privatization and the State
, Dominique Hachette
, Manuel Snchez Gonzalez
PART FOUR
Privatization and the Business Sector
, Pablo Gerchunoff and Guillermo Cnovas
Rolf J. Lders
, Rossana Corona
, Catherine Mansell-Carstens
, Edgar C. Harrell
PART FIVE
Social Impacts
, Ben A. Petrazzini
, Cristin Larroulet
More than a decade after the launch of Latin Americas ambitious privatization programs, it is possible to ask what has been achieved for the financial health of government, for the efficiency of enterprises and the economies, for capital formation, and for social welfare. Answering these questions is the objective of this volume, which represents the culmination of a four-year project of studies and dialogue organized by the Institute of the Americas, with support from the Andrew F. Mellon Foundation and the Pew Charitable Trusts.
Such a study necessarily concentrates on the countries that started first and have carried out the most ambitious privatizations: Chile, Mexico, and Argentina. The experience of three significant countries permits judgments that do not depend on the conditions and historical circumstances of one country or one approach and therefore have strong implications for the rest of the region, and indeed for the developing world.
The analysis presented here is predominantly that of Latin Americans. Their analysis of the impact of Latin Americas privatizations, while carefully balanced, is distinctly encouraging with regard to what privatization can contribute to broad programs of economic and social reform.
William Glade has edited this study of Latin Americas privatizations with the assistance of Rossana Corona of Mexico, a fellow at the Institute of the Americas in 1993. Jody Harrell, of the Institute of the Americas, supervised this project. Their work and that of the authors of the studies included in this volume offer a first cross-country assessment of what privatizations have done to change the way Latin America works.
Over four years, analysts, ministers, and heads of enterprises from eighteen Latin American countries participated in six conferences and seminars of the Institute of the Americas at the University of California, San Diego, in La Jolla, California. Their efforts, reflected in earlier publications of the Institute, contributed indirectly to the work of the analysts selected to perform this final study. The Institute of the Americas mission remains, in this and other areas, to analyze and encourage economic and social reform in Latin America and to promote stronger private sector ties across borders in the Americas.
Paul H. Boeker
President
Institute of the Americas
Part One
Introduction
Introduction
Privatization: Pictures of a Process
William Glade
Just over seven decades ago, the modem world witnessed its first privatization program, a pioneering policy experiment that, ironically, took place in the very country that may be the site of the last great privatization project of this century. Although the Soviet Unions New Economic Policy was a remarkable success, particularly given the economic disarray it was instituted to remedy, it was snuffed out after only a few years, victim of the determination of Soviet leadership to press ahead with an ideological agenda at whatever cost.
That a half-century went by before another country embarked on a comprehensive privatization program tells much about the main drift of policy in the interim. For varied reasons, economies that little resembled each other in most respects moved, with seeming inexorability, to enhance the directive role of the state in resource allocation, a trend that had begun well before the turn of the century. In time, both direct and indirect intervention became, even outside the centrally planned economies, a well-nigh universal feature of the modem age. The mixed economy, modem capitalism, the welfare state, the social market economythe labels were not always the same, but they all involved more comprehensive responsibilities for the public sector than had been envisioned before Bismarck began the early programs in social welfare. Yet, just as the origins of this policy course were varied, so also were the outcomes. And so, too, were the circumstances that in the last quarter of the twentieth century reversed the rising tide of statism.
So pervasive and deeply ingrained was state intervention that when the earliest meetings were organized to examine privatization, it was reasonable to ask whether the new policiesthen mainly exhibited in Chile and Great Britainwere a momentary aberration in a long-term trend or represented a sea-change in relations between public and private sectors. Today, it is clear that they were harbingers of the latterat least in Latin America and very likely elsewhere as well. As the spreading economic crisis of the early 1980s made plain, a great many policies that had been devised to promote industrialization and structural change had gone awry in developing countries, and something had also gone wrong in the multitude of government-operated enterprises that were once viewed as a major part of the organizational infrastructure of industrial development. Meanwhile, the threat of stagflation seemed to menace the viability of the comfortable social democratic arrangements that had been achieved in advanced industrial societies, leading some of them to institute privatization programs and other policy changes. By the end of the decade, even centrally planned regimes were being abandoned.
The Background of Policy Problems
For years, parastatal firms had been thought indispensable for national development in Latin America: as catalysts for industrial and, occasionally, agricultural development, as the means of bringing economic opportunity to lagging areas, and as paladins of national sovereignty.
Less frequently observeduntil the Brazilian maharajahs became so conspicuous-was the fact that the public enterprises served, along with the government bureaucracy, as the nesting-place of a state bourgeoisie. As they proliferated and expanded, state-owned companies provided a livelihood for growing numbers of middle-class professionals and white- and blue-collar workers. But others, too, were added to the list of government beneficiaries when the state took on responsibilities as employer of last resort. Parastatal banks, as creditors and equity holders in firms whose growth they sought to foster, often proved reluctant to let go when adverse economic conditions or bad management drove the beneficiaries of government largesse into bankruptcy. Consequently, downturns in economic conditions often brought in train a transfer of additional businesses from the private sector to the public.
