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Why don't Latin American countries implement industrial policies?

Actualizado: 5 ago 2020

Wilson Peres (ECLAC)

Some crucial questions about industrial policy in Latin America remain unanswered. If, in the late 1990s, an analyst who advocated industrial policies had been asked to design an ideal  political scenario for their acceptance and implementation in the region, he or  she hardly could have hoped for a better environment than that which exists today. At present, political parties or coalitions of parties that based much of  their long-term platforms on the rejection of ‘economic neoliberalism’ are in  power in Argentina, Brazil, Bolivia, Chile, Ecuador, Nicaragua, Uruguay, and Venezuela. Industrial policies had frequently been mentioned by these parties as a substantive part of their strategic guidelines for achieving sustainable development with greater social justice. Reality appears not to have fulfilled those expectations. Even in the most advanced example of  policy development and actions (Brazil), the  perception is that a lot has to be done in terms of what is needed to change the production structure of the country. In short, there has been no significant action in most of the countries mentioned above to change the current economic model, in terms of its pattern of production specialization, through the application of industrial  policies. Two explanations may be attempted. The first would be that the discourse of the opposition was  rapidly constrained, upon its rise to power, by the pressure of global financial markets and the existing consensus as to what constitutes a ‘responsible’  macroeconomic policy, and that, as part of the same move toward international acceptance, the discourse of structural change was relegated to second or third place. Naturally, once countries showed they held ‘responsible’ policies, their degrees of freedom increased, and, if they wanted to do so, they were able to undertake bolder actions to diversify their production structure. The most notorious case is Brazil’s, and the most recent Uruguay’s, where the administration that took office in March 2010 began almost immediately the formulation of an industrial policy for 2010–2015, which includes significant sectoral components.

Another explanation might be that, without denying the significance of the factors mentioned above, the structural change or industrialist discourse lacked the strength to show that it could be translated into specific operational proposals, capable of yielding at least a few results that were attainable within the space of a single administration. If the second explanation is correct, one might conclude that the main concern of structural policy analysis should be to pay attention to governments that wish to carry out such policies, do not know how to do so  and, if they did, would scarcely have the time needed for those policies to yield results that strengthen their position and allow them to remain in office. Even if policies to diversify the production structure can technically demonstrate their capacity to generate positive impacts, it is by no means clear which stakeholders would be interested in generalizing them in the countries of the region. In other words, which stakeholders are likely to put their economic and political resources behind initiatives that go beyond support for cluster development, the great majority of which are in any case far from well-funded? Industrial policies have been making a (slow) return in Latin America and have been able to operate, albeit on a small scale, in open economies and with orthodox macroeconomic policies—contrary to the previous conventional wisdom that they were incompatible. Enhancing their, if not minimal, then at least marginal status, requires stakeholders, including the state, to take ownership of them and commit their political power and economic resources behind them. From "Industrial policies in Latin America", in Pathways to Industrialization in the Twenty-First Century. New Challenges and Emerging Paradigms, editedby Adam Szirmai, Wim Naudé and Ludovico Alcorta, Oxford University Press, 2013. ISBN 978-0-19-966785-7.

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