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The second Washington consensus and Latin America's quasi-stagnation

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  • LUIZ CARLOS BRESSER-PEREIRA
  • CARMEN AUGUSTA VARELA

Abstract

It took more than ten years for Latin America to overcome the debt crisis, which turned into a fiscal crisis of the state. Yet in the early 1990s, most of Latin America had undergone deep reforms (particularly trade liberalization and privatization), and, thanks to exchange rate devaluation and fiscal adjustment, they had reduced the foreign and the public debt. Yet growth was not resumed. The basic reason for that was the adoption of the growth cum foreign savings strategy coupled with financial opening (the "second" Washington Consensus). The huge capital inflows created serious solvency problems, as the foreign indebtedness threshold was exceeded. On the other hand, capital inflows appreciated the national currencies, artificially increasing wages and consumption, having as trade-offs the reduction of domestic savings and, again, the increase of foreign debt. Despite sizable direct investments, the total investment rate remained constant, as growth did not resume. Only the foreign financial and patrimonial debt increased.

Suggested Citation

  • Luiz Carlos Bresser-Pereira & Carmen Augusta Varela, 2004. "The second Washington consensus and Latin America's quasi-stagnation," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(2), pages 231-250.
    • Handle: RePEc:mes:postke:v:27:y:2004:i:2:p:231-250
    DOI: 10.1080/01603477.2004.11051436
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    Citations

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    Cited by:

    1. Luiz Bresser-Pereira & Paulo Gala, 2009. "Why Foreign Savings Fail to Cause Growth," International Journal of Political Economy, Taylor & Francis Journals, vol. 38(3), pages 58-76.
    2. Bresser-Pereira, Luiz Carlos, 2006. "The political economy of global economic disgovernance," Textos para discussão 151, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    3. Luiz Carlos Bresser-Pereira & Paulo Gala, 2008. "Foreign savings, insufficiency of demand, and low growth," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(3), pages 315-334, April.
    4. Eric Berr, 2006. "Keynes and the Post Keynesians on Sustainable Development," Post-Print hal-00388849, HAL.
    5. Eric BERR, 2008. "Which development for the 21st century? Reflections on sustainable development\r\n (In French)," Cahiers du GREThA (2007-2019) 2008-04, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    6. Eric Berr & François Combarnous & Eric Rougier, 2005. "Too much consensus could be harmful : measuring the degree of implementation of the Washington consensus and its impact on economic growth," Documents de travail 116, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
    7. Eric Berr & François Combarnous, 2004. "L'impact du consensus de Washington sur les pays en développement : une évaluation empirique," Documents de travail 100, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
    8. repec:grt:wpegrt:2014-21 is not listed on IDEAS
    9. Eric BERR, 2011. "Power and domination in development policies (In French)," Cahiers du GREThA (2007-2019) 2011-04, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    10. Bresser-Pereira, Luiz Carlos & Gala, Paulo, 2005. "Crítica do crescimento com poupança externa," Textos para discussão 145, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    11. MASCA Simona-Gabriela & JUDE Cristina, 2009. "The Vicious Circle Of Fdi And Consumption In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 417-423, May.

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