Camdessus Calls for "Second Generation" Of Reforms in Argentina

Pages175-176

Page 175

Following are edited excerpts of an address by IMF Managing Director Michel Camdessus at the 1997 National Banks Convention in Buenos Aires on May 21.

Since the late 1980s, most countries in the region have undertaken programs of macroeconomic stabilization and structural reform. The problems in the region have been similar and the programs have had points in common, especially an emphasis on paring back state intervention to allow the market to allocate a majority of the resources and to give freer rein to the private sector to fulfill its role as the main engine of growth.

The process has not been easy, but there has been a dramatic turnaround in economic performance throughout the region. Average growth in Latin America and the Caribbean rose from less than 1 1/2 percent in 1988-89 to 5 percent in 1994-the highest rate since 1980. Although this growth was not immune to the "tequila effect," it is now once again around 5 percent for the region as a whole. Meanwhile, average annual inflation in the region has fallen from a breathtaking 1,100 percent at the end of 1989 to 19 percent at the end of last year. Gross international reserves have increased fivefold, and private capital inflows have increased from close to zero in 1989 to over $70 billion last year. In Argentina, growth may reach 6 percent this year, and inflation remains close to zero.

Despite these achievements, few observers inside or outside the region would be fully satisfied with the region's overall economic or social progress over the last several decades. Most countries have been unable to narrow the income gap with advanced economies significantly or achieve a decisive reduction in poverty.

I do understand why many in the region are dissatisfied with progress so far. In 1965, average real per capita income in Latin America and the Caribbean was almost twice as high in terms of purchasing power as it was in the Asian countries-now referred to as "newly industrialized economies." Today the situation is just the reverse: real per capita income in these Asian tigers is now about two and a half times higher than in Latin America.

Education levels are lagging as well. In the 1960s, the average level of education in Latin America was in line with or slightly better than that in other countries at a comparable stage of development. Today, the average level of education in the region is two years less than the average for comparable countries elsewhere in the world and...

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