In Latvia, for instance, private consumption per capita is expected
to fall by a staggering 40% over 2008-2010. In fact, (CEPAL 2009b)
estimates for 2009 include a two percent GDP growth in Argentina,
Ecuador and Colombia, and a decline of just one percent or less in
Chile and Brazil.
Table 13. Simulated impact of the crisis on income inequality
Source: authors’ simulation using the parameters of model 1, Table 13.
Conclusion
Has the LOC model of prudent distributive and redistributive
policies reduced inequality? Is the current crisis reversing these
gains? The spread of democracy and dissatisfaction with
Washington Consensus policies have led to the electio ns of
LOC governments which introduced – thanks also to
favorable external conditions – economic reforms broadly
inspired by a ‘prudent redistribution with growth’ which
committed to reducing the ‘social debt’ inherited from the colonial
past and exacerbated by the liberal policies of the 1980s and 1990s.
With few exceptions, the new policy model did not introduce a
radical redistribution. Rather, it has emphasized orthodox
objectives such as macro-stability, fiscal prudence, and the
preservation of free trade and capital movements. Yet, in a clear
departure from the 1990s, LOC governments opted for managed
exchange rates, a neutral or countercyclical fiscal policy, reduced
dependence on foreign capital, rapid accumulation of currency
reserves and a more active role of the state in the field of labor and
social policies.
As with European social democracies, LOC and to a lesser extent
moderate centre-right governments raised the tax/GDP ratio (a
trend facilitated but not explained, neither in its timing nor in its