seems to have developed rapidly, especially in the field of
manufacturing exports. Free trade agreements with industrialized
countries have, in contrast, strengthened the exports of primary
commodities. A possible exception is Mexico, which increased its
exports of manufactured goods with high import contents and
limited backward and forward linkages.
LOC governments attempted to reduce their dependence on
foreign borrowing and generally, existing short-term stabilization
agreements with the IMF were not renewed. Brazil (in 2005) and
Argentina (in 2006) prepaid their outstanding debt to the IMF. A
few countries restructured their foreign debt, as in the case of
Argentina which – against the advice of the IMF – successfully
renegotiated its private debt at a 70% discount. As a result, Latin
America’s gross foreign debt declined from 42% of the regional
GDP in 2002, to 20% in 2007, while foreign debt/GDP net of
currency reserves fell from 33% to eight percent.
(ii) Income, redistributive, and social policies
Measures to reduce the glaring wealth concentration existing in the
region have seldom made their way on the LOC governments’
agenda. The exception are ‘radical LOC’ regimes like Bolivia
(which nationalized mines and is planning land reform) and
Venezuela (which renegotiated oil royalties and nationalized key
industries, including steel, electricity and telecommunications). The
moderate stance adopted by social-democratic/reformist LOC
countries is likely explained by the fact that – in the absence of
overwhelming political support, and in view of the heterogeneity
of the LOC coalitions – radical reforms would have unavoidably
generated tensions affecting the business climate, capital flights, and
electoral support. In addition, the power of progressive regimes
did not reduce the influence of dominant interest groups which –
though small in number – are still powerful and can sway the
public opinion on controversial issues. As a result, and with the
two exceptions mentioned above, the L O C policy model
resembles the ‘Redistribution With Growth’ (Chenery et al 1978)
model more than its more radical alternative of ‘Redistribution
Before Growth’ which sees the redistribution of assets and
opportunities as a way to overcome the under-consumption trap