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THE WASHINGTON CONSENSUS Osvaldo Jordan September 10, 2009.

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Presentation on theme: "THE WASHINGTON CONSENSUS Osvaldo Jordan September 10, 2009."— Presentation transcript:

1 THE WASHINGTON CONSENSUS Osvaldo Jordan September 10, 2009

2 ECONOMIC DEVELOPMENT OUTWARD DEVELOPMENT - Growth is based on the export of those crops in which a country has a comparative advantage (Free International Trade). INWARD DEVELOPMENT - Growth is based on the industrialization of the national economy (Trade Barriers and Protective Tariffs).

3 OUTWARD VS. INWARD After the 1930s, nationalistic and socially- oriented governments leaned towards inward development. Getulio Vargas, Lazaro Cardenas, Juan Domingo Peron. During the Cold War, the US considered these government anti-American, and acted to protect the interests of Multinational Corporations (MNCs).

4 OUTWARD VS. INWARD In the 1970s, the World Bank and American universities propagated the notion that ISI was reducing Latin American competitiveness, and therefore countries should undergo Structural Adjustment (SA) economic policies. During this period, military governments borrowed millions of dollars from International Financial Institutions (IFIs), and the Club of Paris, to finance massive development projects, such as the Itaipu Dam and the Trans- Amazonian Highway.

5 THE LOST DECADE In the 1980s, several Latin American countries declared bankruptcy confronted with the debt crisis and uncontrolled inflation rates. Since Latin American countries had borrowed millions of dollars from International Financial Institutions (IFIs) and the Club of Paris, they were required to undertake SA measures as a requisite for economic stabilization (Washington Consensus).

6 STRUCTURAL ADJUSTMENT Reduce Inflation and stabilize currency. Privatize state-owned enterprises (including public utilities) Promote international trade and investment. Eliminate tariffs and quotas. Reduce government spending and social services. Relax labor and social security legislation.

7 THE NEW LIBERAL AGE During the 1980s and especially in the 1990s, most Latin American governments implemented SA measures. However, these economic policies had dismal economic and social results, such as the Peso Crisis of 1994 and the Collapse of the Argentinean Economy in By the late 1990s, several Latin American countries began turning away from the Washington Consensus, as well as from traditional political parties.

8 THE PINK TIDE Former General Hugo Chavez is elected President of Venezuela An indigenous uprising leads former General Lucio Gutierrez to the Presidency of Ecuador Ricardo Lagos becomes the first socialist president of Chile after the death of Salvador Allende Former Workers Party Leader, Luis Ignacio Da Silva becomes President of Brazil.

9 THE PINK TIDE Socialist candidate Tabare Vasquez wins the presidency of Uruguay Former cocalero leader Evo Morales wins the presidency of Bolivia Ollanta Humala threatens to win the presidency of Peru; elections finish virtually tied in Costa Rica and Mexico; Sandinista leader Daniel Ortega wins the presidency in Nicaragua, and Rafael Correa wins in Ecuador The Reverse of the Tide? Fernando Lugo wins in Paraguay Mauricio Funes wins in El Salvador, but Manuel Zelaya is overthrown in Honduras.

10 Is Washington Losing Latin America? Free Trade Area of the Americas (FTAA) (Hakim 2006). Alternativa Bolivariana de Las Americas (ALBA) (Harris 2005) Is there a single tide or are there two different kinds of Lefts in Latin America (Castaneda 2006)?


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