In limited but important ways, Washington can positively influence economic policy in Latin America. At a time when much of the region is experiencing economic and political instability, the rise of neo-populism, and a general backlash against free-market reforms that were partially implemented in the 1990s, the United States should exercise its influence by opening its market to the region’s goods and by encouraging market reforms.
The early 1990s saw the introduction of far-reaching market reforms in many, but not all, Latin American countries, especially in the areas of monetary policy, trade and investment liberalization, and privatization of state-owned enterprises. Countries in the region ended hyperinflation, reduced their tariffs unilaterally, and eventually sold more than $150 billion of state assets. The initial results were high growth and the widespread popularity of the reforms in the countries that did the most to reform (Mendoza, Montaner, Llosa, 44-59).
Mexican president Carlos Salinas was the most popular outgoing president in Mexican history in 1994, and Presidents Alberto Fujimori of Peru and Carlos Menem of Argentina were reelected by wide margins in the mid-1990s.
By the end of the decade and the beginning of the next one, however, a number of countries had experienced years of recession, political instability, and economic crises. Even countries that had introduced only timid reforms had that experience. The IMF bailed out Mexico, Argentina, Brazil, and Uruguay, some more than once. Most spectacular was the collapse of the Argentine economy in early 2002. That country’s default and devaluation sent it into a deep depression, calling into question market reforms in the minds of many Argentineans. Latin America’s disappointing per capita growth of 1.5 percent per year in the 1990s was still better than that of the ‘‘lost decade’’ of the 1980s (_0.68 percent), but it certainly did not live up to expectations and was too often accompanied by economic turmoil...........
