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Economic reform or social development? the challenges of a period of reform in Latin America: case study of Mexico

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  • Diana Alarcon
  • Eduardo Zepeda

Abstract

>The paper argues that 20 years of development have produced very mixed results in the economies and societies of Latin America. While the region was successful in reversing the large macroeconomic disequilibria of the 1980s, economic volatility persists, mainly associated with greater integration to the world economy. More importantly, the social impact of the long period of reform remains controversial. Through a review of comparable economic and social data for the region, it is suggested in this paper that such inconsistency—between economic and social performance—may be the result of deep flaws in the design of development policies. Over-concern for macroeconomic stability, fast growth and rapid integration to the international economy has resulted in insufficient attention being given to the social cost of adjustment and structural change. Social policies have been mainly concerned with the administration of scarce resources and the creation of safety nets to counter the negative social impact of economic policy. Less attention has been given, however, to resolving long-entrenched inequalities in society, to improving the productivity of labour and broad-based access to productive capital. We illustrate one aspect of this discussion through a review of employment trends in the manufacturing sector in Mexico to show that, in spite of rapid job creation, lack of integration with the rest of the economy has generated overall poor employment results, partly a result of the failure of industrial policies to provide a timely response to the many challenges faced by opening up international competition. This case study helps us to support the claim that what is probably lacking in Latin America is a strategic approach to policy design to bring consistency between rapid changes in the economy and longer term development objectives, between the short and the long term, between stability and growth, and between rising productivity and improvement of welfare in the largest developmental sense.

Suggested Citation

  • Diana Alarcon & Eduardo Zepeda, 2004. "Economic reform or social development? the challenges of a period of reform in Latin America: case study of Mexico," Oxford Development Studies, Taylor & Francis Journals, vol. 32(1), pages 59-86.
    • Handle: RePEc:taf:oxdevs:v:32:y:2004:i:1:p:59-86
    DOI: 10.1080/1360081042000184129
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    References listed on IDEAS

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    1. William Maloney & Jairo Mendez, 2004. "Measuring the Impact of Minimum Wages. Evidence from Latin America," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130, National Bureau of Economic Research, Inc.
    2. Weller, Jürgen, 2000. "Reformas económicas, crecimiento y empleo: los mercados de trabajo en América Latina y el Caribe," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1653 edited by Cepal, November.
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    1. Alarcón González, Diana & Zepeda, Eduardo, 2007. "Growth, poverty and the distribution of labor earnings in Brazil, Chile and Mexico," IDB Publications (Working Papers) 4308, Inter-American Development Bank.
    2. repec:ilo:ilowps:384376 is not listed on IDEAS
    3. Eduardo Zepeda & Diana Alarcón & Fabio Veras Soares & Rafael Guerreiro Osorio, 2009. "Changes in Earnings in Brazil, Chile, and Mexico: Disentangling the Forces Behind Pro-Poor Change in Labour Markets," Working Papers 51, International Policy Centre for Inclusive Growth.
    4. Ernst, Christoph., 2005. "Economic opening, FDI and its contribution to the creation of quality employment in Argentina, Brazil and Mexico," ILO Working Papers 993843763402676, International Labour Organization.

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