Economic Liberalisation and Development;
The Experience of Some Latin American Countries
THE INDUSTRIALIZATION strategies adopted by the developing countries in the period following their decolonization have varied widely. While some countries chose to follow an outward looking policy and in the process depended on the external forces, the transnational corporations (TNCs) and the international financial agencies, some others have been trying to follow a relatively more inward looking policy aimed at expanding their home markets. The consequences of adopting these policies are being felt by most countries at present. The countries which depended more on the TNCs and external finance have found themselves in payments crises accompanied by distortions in the domestic economy.,
The main focus of our discussion here would be to analyse the problem of massive debt overhang that has affected several countries in the Southern Cone of America. We would be discussing the cases of four countries, Brazil, Mexico, Argentina and Chile, which have accumulated the largest debts to non-residents. Our objective here would be to provide an explanation for the emergence of the present crisis situation in the four countries and to indicate the relevance of the experience of the Latin American countries for a country like India which is in the process of adopting liberal economic policies.
The extent of the problem being faced by the four countries chosen here for discussion can be gauged from the table below in which we have tried to bring out the magnitude of the external debt overhang on these countries.
The table indicates the rapidity with which all these countries accumulated their external liabilities in the 1970s and this has forced the countries to adopt policies aimed at balancing the external account. In trying to remedy the external payments position the authorities of these countries gave little or no attention to the more important problems of employment creation and income distribution., But before we analyse the reasons behind the economic crisis in the Southern Cone countries we would describe the various policies adopted by these countries in their industrialization process.
Indian Institute of Public Administration, New Delhi