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Argentinian financial crises (Lora & Panizza 2002, pp13-17). Furthermore, at this rate, even with sustained growth at around 3%, it would still take most Latin American countries as much as 50 years to reach the current standard of living of OECD countries (Lora & Panizza 2002, p21).

Partial failures, moreover, continue to hobble the development and prospects of many Latin American states. We can see this in a number of factors: -

1) Ongoing poverty remains a problem for the region, especially in depressed rural areas and in the informal settlements that have grown up around all the major cities. Although Latin America and the Caribbean has only 6.5% of the total of world's poor (via the rough measure of income of below $1 a day), almost 20 million new poor were added to those in Latin America during the period 1987-1998 (World Development Report 2000-2001). Poverty rates across the region vary from 20-60%, with Central American states and Haiti falling in the top of the range (Klak 1999, p112). By one estimate, 214 million in the region lived in poverty, and 9.8 (18.6%) million were destitute through 2001 (Sader 2003). At the same time, we should not exaggerate this into an image of overall poverty. In terms of the Human Development Index (HDI, including life expectancy, literacy, education, and per capita purchasing power factors), Central America and Caribbean, for example, fall in the top two thirds of the rating (Klak 1999, p103), with the exception of Haiti. Likewise, although growing GDP can slowly reduce average poverty, vulnerable groups may be worse off, income differentials can increase, and there is no guarantee of distribution to the poorest levels (Lora & Panizza 2002, p20). Thus the gap between rich and poor continues to increase in Brazil, even as the bottom level has had income levels lifted to some degree. Figures from the Economic Commission for Latin America and the Caribbean 'show that the proportion of Latin Americans living in poverty decreased from 41 percent in 1990 to 36 percent in 1997' (Fraser 2000). Thus poverty and inequality reduction remained major themes in the 13th Latin American-Iberian Summit, held in November 2003 (Xinhua 2003b).

2) Economic reform, though occurring throughout the region and generating continued growth, has uneven effects and has not yet created stable, balanced economies, though considerable improvement has occurred in countries such as Chile over the last decade. The state-guided or hybrid capitalism that was common in much of the region through the early and mid-20th century, whereby the state is a major player in investing and controlling capitalistic development, has been rolled back with a wave of uneven privatization, e.g. in Brazil, Argentina and Mexico (Skidmore & Smith 2001, p418). From the mid-1990s, for most of the region (excluding Cuba and Venezuela), neo-liberal policies have dominated, with an effort to create open economies that are viable under conditions of accelerating economic globalisation. Thus import duty levels on average fell from about 40% in the mid-1980s to approximately 10% in the late 1990s (Lora & Panizza 2002, p4).

The neo-liberal model implies a limited role for state economic activity, with a key role for the state in 'promoting exports and competing for investments'

Lecture 12

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