Reform, Recovery, and Growth: Latin America and the Middle East
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research
Volume Title: Reform, Recovery, and Growth: Latin America and the Middle East Volume Author/Editor: Rudiger Dornbusch and Sebastian Edwards, eds. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-15745-4 Volume URL: http://www.nber.org/books/dorn95-1 Conference Date: December 17-18, 1992 Publication Date: January 1995
Chapter Title: Trade Policy, Exchange Rates, and Growth Chapter Author: Sebastian Edwards Chapter URL: http://www.nber.org/chapters/c7649 Chapter pages in book: (p. 13 - 52)
1
Trade Policy, Exchange Rates, and Growth
Sebastian Edwards
1.1 Introduction
After decades of protectionist policies, most of Latin America began to open up to the rest of the world in the late 1980s. This process, pioneered by Chile, is perhaps the most impressive achievement of the structural adjustment programs of the last decade. It has effectively put an end to more than four decades of generalized import substitution policies aimed at encouraging an industrial sector, that turned out to be largely inefficient.’ The process leading to these trade reforms has not been easy. As recently as in the mid-1980s the protectionist view was still dominant in many parts of Latin America. In fact, the debt crisis of 1982 provided a new impetus to the protectionist paradigm. Initially, many analysts interpreted the crisis as a failure of “the world economic order” and argued that the only way for Latin America to avoid the recurrence of this type of shocks was to further isolate itself from the rest of the world, through selective protectionism and government intervention. This sentiment was compounded by the fact that a number of observers considered the experiences of the Southern Cone countries-Argentina, Chile, and Uruguay-with liberalization reforms during the 1970s as
Sebastian Edwards is chief economist for Latin America and the Caribbean at the World
Volume Title: Reform, Recovery, and Growth: Latin America and the Middle East Volume Author/Editor: Rudiger Dornbusch and Sebastian Edwards, eds. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-15745-4 Volume URL: http://www.nber.org/books/dorn95-1 Conference Date: December 17-18, 1992 Publication Date: January 1995
Chapter Title: Trade Policy, Exchange Rates, and Growth Chapter Author: Sebastian Edwards Chapter URL: http://www.nber.org/chapters/c7649 Chapter pages in book: (p. 13 - 52)
1
Trade Policy, Exchange Rates, and Growth
Sebastian Edwards
1.1 Introduction
After decades of protectionist policies, most of Latin America began to open up to the rest of the world in the late 1980s. This process, pioneered by Chile, is perhaps the most impressive achievement of the structural adjustment programs of the last decade. It has effectively put an end to more than four decades of generalized import substitution policies aimed at encouraging an industrial sector, that turned out to be largely inefficient.’ The process leading to these trade reforms has not been easy. As recently as in the mid-1980s the protectionist view was still dominant in many parts of Latin America. In fact, the debt crisis of 1982 provided a new impetus to the protectionist paradigm. Initially, many analysts interpreted the crisis as a failure of “the world economic order” and argued that the only way for Latin America to avoid the recurrence of this type of shocks was to further isolate itself from the rest of the world, through selective protectionism and government intervention. This sentiment was compounded by the fact that a number of observers considered the experiences of the Southern Cone countries-Argentina, Chile, and Uruguay-with liberalization reforms during the 1970s as
Sebastian Edwards is chief economist for Latin America and the Caribbean at the World