Latin American Development Forum – serie

Latin America has been surprisingly spared from a generalized wave of corporate governance scandals. One possible explanation is that the region's level of investor protection is adequate. The evidence from the papers in this book says otherwise. The still relatively low level of protection and transparency has created an environment where problems cannot be easily detected or are not worth pursuing. These circumstances have started to push firms thirsty for capital to unilaterally opt for better corporate governance and alleviate this disadvantage. The papers in this book constitute the largest firm-level corporate governance analysis undertaken across Latin American countries. The new datasets in the book allow the researchers to conclude that companies with better self-imposed firm-level governance practices or with listing in U.S. markets are given higher valuations and can raise capital at a lower cost. Although these results are encouraging, they point to a rocky path for the future growth of local Latin American capital markets.

Geographic interpretations of development recently have become the subject of much renewed interest and debate within scholarly and public policy circles. Focusing on Latin America, this book examines how physical and human geography has influenced the region's potential for economic and social development. The book assesses how geography affects differences in development between countries and more specifically between Latin America and other regions of the world. The effects of geography on regional development are examined through four channels: the productivity of land, health conditions, frequency and intensity of natural disasters, and access to markets. The book then explores how geography has influenced development within countries through case studies of Bolivia, Brazil, Colombia, Mexico, and Peru-countries significant for their geographical diversity as well as their wide socioeconomic disparities. These case studies illustrate numerous exceptions to international patterns and prove that while geography matters, it need not determine a country's destiny.Using the knowledge gained from these two perspectives, the book concludes with recommendations for policies that can help countries overcome the limitations imposed by geography and thereby enhance their potential for economic and social development.

Latin America's macroeconomic crises of the 1980s and '90s forced a severe fiscal adjustment across the region. More often than not, fiscal stability was achieved at the cost of a drastic compression of public infrastructure spending, accompanied by the hope that the private sector would take the leading role in infrastructure provision. This book documents the major trends in infrastructure provision in Latin America over the past two decades n order to assess the consequences of this changed public-private partnership from the perspective of economic growth, public finances, and the quantity and quality of infrastructure services. It will be of particular interest to those in the fields of infrastructure, fiscal policy, and economic growth, and anyone concerned with Latin America's development. For orders originating outside of North America, please visit the World Bank website for a list of distributors and geographic discounts at http://publications.worldbank.org/howtoorder or e-mail pubdistributors@worldbank.org.

Empirical analysis of two decades of pioneering pension and social security reform in Latin America and the Caribbean shows that much has been achieved, but that critical challenges remain. In tackling the unfinished agenda, a great deal can be learned from the reform experience of countries in the region. Keeping the Promise, produced by the chief economist's office in the Latin America and Caribbean Region at the World Bank, evaluates policy reforms in twelve countries, points to successes and shortcomings, and proposes priorities and options for future reform. The authors argue that poverty in old age can be prevented by relentless efforts to extend coverage to broader segments of society, and by encouraging personal savings.

Analyzing the experience of Mexico under the North American Free Trade Agreement (NAFTA), the authors draw lessons for other countries considering free trade agreements with the United States. The authors conclude that NAFTA raised external trade and foreign investment inflows and had a modest effect on Mexico's average income per person. It is likely that NAFTA also helped achieve a modest reduction in poverty and an improvement in job quality. However, major obstacles remain to Mexico's long term development-NAFTA is not enough. The main lesson for other countries is that free trade agreements offer opportunities to accelerate economic growth, but do not guarantee it.

Analyzing the experience of Mexico under the North American Free Trade Agreement (NAFTA), the authors draw lessons for other countries considering free trade agreements with the United States. The authors conclude that NAFTA raised external trade and foreign investment inflows and had a modest effect on Mexico's average income per person. It is likely that NAFTA also helped achieve a modest reduction in poverty and an improvement in job quality. However, major obstacles remain to Mexico's long term development-NAFTA is not enough. The main lesson for other countries is that free trade agreements offer opportunities to accelerate economic growth, but do not guarantee it.

Privatization in Latin America represents the first systemic economic analysis of the efficiency and distributive effect of privatization in Latin America. Examining the privatization experience of six Latin American countries-Brazil, Argentina, Chile, Bolivia, Peru, and Colombia-Privatization in Latin America evaluates the empirical evidence on privatization and assesses the validity of the criticisms raised. It shows that privatization can lead to increased profitability and productivity, firm restructuring, fiscal benefits, output growth, and even quality improvements. Privatization in Latin America is destined to become a must-have reference for researchers interested in privatization or the economic aspects of social policy reforms.

This collection presents the difficult challenges of the new economic era as well as a set of alternative economic policies for managing the open Latin American economies of the early twenty-first century. Ideas that were removed from the reform agenda over the past two decades are seen as critical to the improved economic and social performance that liberalization has so far failed to produce. These ideas include a role for counter-cyclical macroeconomic policies, including restrictions on capital mobility; active productive sector and technological development policies; and the need to pay greater attention not only to social policies, but also to the links between economic policies and social outcomes, in order to guarantee a desirable social performance. This collection sheds new light on issues that were largely overlooked during the reform period, and that must be faced squarely to overcome the deficiencies that Latin America has faced during its phase of liberalization and its dismal economic performance since the Asian crisis.

This collection presents the difficult challenges of the new economic era as well as a set of alternative economic policies for managing the open Latin American economies of the early twenty-first century. Ideas that were removed from the reform agenda over the past two decades are seen as critical to the improved economic and social performance that liberalization has so far failed to produce. These ideas include a role for counter-cyclical macroeconomic policies, including restrictions on capital mobility; active productive sector and technological development policies; and the need to pay greater attention not only to social policies, but also to the links between economic policies and social outcomes, in order to guarantee a desirable social performance. This collection sheds new light on issues that were largely overlooked during the reform period, and that must be faced squarely to overcome the deficiencies that Latin America has faced during its phase of liberalization and its dismal economic performance since the Asian crisis.

Latin America suffered a profound state crisis in the 1980s, which prompted not only the wave of macroeconomic and deregulation reforms known as the Washington Consensus, but also a wide variety of institutional or 'second generation' reforms. The State of State Reform in Latin America reviews and assesses the outcomes of these less studied institutional reforms. This book examines four major areas of institutional reform: a) political institutions and the state organization; b) fiscal institutions, such as budget, tax and decentralization institutions; c) public institutions in charge of sectoral economic policies (financial, industrial, and infrastructure); and d) social sector institutions (pensions, social protection, and education). In each of these areas, the authors summarize the reform objectives, describe and measure their scope, assess the main outcomes, and identify the obstacles for implementation, especially those of an institutional nature.

Brazil faces important issues as to whether and how socio-economic and political reforms will be pursued with urgency and persistence. This book presents a strong agenda and action plan to achieve for Brazil both economic growth and improved welfare for its citizens. The book begins by examining the existing welfare system, including the differences between that of people in rural areas and those in cities. It goes on to examine issues related to productivity, looking at whether investments in physical, natural, and human capital affect performance; to sustainability of the country's growth and development; to its use and conservation of natural resources; and to the structure and effectiveness of its institutions. Finally, it compares and contrasts the priorities of these agendas, coming up with both quantitative and qualitative targets that can guide those setting down Brazilian policy.

Brazil faces important issues as to whether and how socio-economic and political reforms will be pursued with urgency and persistence. This book presents a strong agenda and action plan to achieve for Brazil both economic growth and improved welfare for its citizens. The book begins by examining the existing welfare system, including the differences between that of people in rural areas and those in cities. It goes on to examine issues related to productivity, looking at whether investments in physical, natural, and human capital affect performance; to sustainability of the country's growth and development; to its use and conservation of natural resources; and to the structure and effectiveness of its institutions. Finally, it compares and contrasts the priorities of these agendas, coming up with both quantitative and qualitative targets that can guide those setting down Brazilian policy.

Beyond Survival: Protecting Households from Health Shocks in Latin America breaks new ground in the ongoing debate about health finance and financial protection from the costs of health care. The evidence and discussion support the need to consider financial protection, in addition to health status, as a policy objective when setting priorities for health systems. This book reviews the Latin American experience with health reform in the last 20 years and the fundamentals of health system financing, using new evidence to show the magnitude and mechanisms that determine the impoverishing effects of health events (diseases, accidents, and those of the life cycle). It provides options for policy makers on how to protect, and help households to protect themselves, against this impoverishment. The authors use empirical evidence from six case studies commissioned for this report, on Argentina, Chile, Columbia, Ecuador, Honduras, and Mexico. This book provides policy makers with a solid conceptual basis for decisions on the contents of mandatory health insurance benefit packages, choices of financing mechanisms, and the roles of public policy in this field.Beyond Survival provides an in-depth analysis of, and organizational alternatives for, risk pooling and health insurance for financial protection. It analyzes the urgent need to extend risk pooling to the informal sector, the challenges for current social insurance arrangements, and options for policy makers to effectively extend risk pooling to the informal sector.

For almost as long as economics has been a profession, the role of natural resources in the promotion of economic growth has been among the core issues of development theory. Some newer theories suggest that natural riches produce institutional weaknesses as various social groups attempt to capture the economic rents derived from the exploitation of natural resources. Since the 1960s, some analysts have argued that resource-rich developing countries have grown more slowly than other developing countries. Nevertheless, we find ourselves in a time when conventional wisdom again postulates that natural resources are indeed riches. This book brings together a variety of analytical perspectives, ranging from econometric analyses of economic growth to historical studies of successful development experiences in countries with abundant natural resources. The evidence suggests that natural resources are neither a curse nor destiny. Natural resources can actually spur economic development when combined with the accumulation of knowledge for economic innovation.Furthermore, natural resource abundance need not be the only determinant of the structure of trade in developing countries. In fact, the accumulation of knowledge, infrastructure, and the quality of governance all seem to determine not only what countries produce and export, but how firms and workers produce any good.

Back in the early 1990s, economists and policy makers had high expectations about the prospects for domestic capital market development in emerging economies, particularly in Latin America. Unfortunately, they are now faced with disheartening results. Stock and bond markets remain illiquid and segmented. Debt is concentrated at the short end of the maturity spectrum and denominated in foreign currency, exposing countries to maturity and currency risk. Capital markets in Latin America look particularly underdeveloped when considering the many efforts undertaken to improve the macroeconomic environment and to reform the institutions believed to foster capital market development. The disappointing performance has made conventional policy recommendations questionable, at best. Emerging Capital Markets and Globalization analyzes where we stand and where we are heading on capital market development. First, it takes stock of the state and evolution of Latin American capital markets and related reforms over time and relative to other countries. Second, it analyzes the factors related to the development of capital markets, with particular interest on measuring the impact of reforms.And third, in light of this analysis, it discusses the prospects for capital market development in Latin America and emerging economies and the implications for the reform agenda.

This book sheds light on the analytical, empirical, and policy dimensions of a basic stylized fact - that the development of local capital markets in most of Latin America has been quite poor relative to other emerging economies and to global trends. Importantly, it discusses the implications for the capital market reform agenda going forward, emphasizing the need for revisions to the prevalent policy paradigm.

The papers in this book constitute the largest firm-level corporate governance analysis undertaken across Latin American countries. The new datasets in the book allow the researchers to conclude that companies with better self-imposed firm-level governance practices or with listings in U.S. markets are given higher valuations and can raise capital at a lower cost.

Interest in access to finance and awareness of its importance have increased significantly since the early 2000s. Growing evidence suggests that lack of access to credit prevents many households and firms from financing high-return investment projects, which has an adverse effect on growth and poverty alleviation. Despite the increasing awareness of the importance of access to finance among both researchers and policymakers, there are still some major gaps in our understanding of the main drivers of access, as well as about the impact of different policies in this area.This book aims to fill some of these gaps by discussing recent innovative experiences in broadening access to credit in Latin America. These experiences are consistent with an emerging new view that, while recognizing the central role of the public sector in improving the contractual and informational environment for financial markets, contends that there might be room for well-designed, restricted interventions in collaboration with the private sector to foster the development of financial markets and broaden access to them. The book analyzes some interesting experiences from Brazil, Chile, Colombia, and Mexico, most of which have led to financial innovation by developing new financial products and coordinating different players in the financial and real sectors to overcome barriers to access to credit.The book provides an analytical framework to understand problems of access to finance and a discussion of the effects and optimal design of public interventions. It also discusses some open policy questions about the role of the private and public sectors in broadening access to finance in a sustainable and market-friendly manner.

Mandatory defined contribution pension markets are present in a growing number of countries around the world. But despite their popularity, policymakers continue to struggle with two key policy concerns. On the one hand, a number of design shortcomings encourages pension firms to charge high administrative fees. On the other hand, the global crisis that started in 2007 has reignited the debate on whether pension participants bear excessive investment risk. Both are valid policy concerns as their incidence can imply higher than expected levels of poverty among old age individuals. Both concerns have the same root problem---the limited capacity of individuals to choose what is best for them. This, in turn, stems from a combination of inadequate financial education, bounded rationality and the use of simplistic "rules of thumb" that produce systematic biases in the decision making process of individuals. While improving financial education is an obvious avenue to pursue, this book is more concerned with design features that can exploit these systematic biases to protect consumers from themselves.New Policies for Mandatory Defined Contribution Pensions: Industrial Organization Models and Investment Products (i) discusses the main implications for the functioning of mandatory defined contribution pensions of consumers' inability to make rational choices; (ii) describes how jurisdictions have tried to address these problems through ad hoc policy interventions; and (iii) proposes new policy directions in the areas of industrial organisation models and investment products to address these concerns more effectively.

After a sustained economic growth period at the end of the last century and the beginning of this one, Latin America still faces high inequality and lower well-being indicators among women, afro-descendants, and indigenous peoples. This is a period in which the world and particularly Latin America has experienced important changes regarding the role of women and men. Marriage, education and work decisions have evolved and, as a result, women’s visibility at home, at school, in the labor markets and in society have evolved as well. But there are still, however, important challenges in the labor markets. Earnings differentials as well as occupational and hierarchical segregation are commonly accepted as the norm in the region’s labor markets.For the diverse racial and ethnic groups the situation has been less auspicious than for women. Statistics reveal that traditionally excluded ethnic groups have worse poverty and income outcomes, reflected in issues such as restricted access to public services, poorer health conditions, lack of political representation, confinement into low productivity activities and prevalent discrimination. The evidence points that in Latin America, a racially and ethnically diverse region, the benefits of the recent progress have not reached equally indigenous peoples and Afro-descendants. This pattern can be traced to lower human capital endowments, manifested in poorer educational performance and fewer years of job experience. In this way, these groups have been less able to benefit from the economic opportunities generated within this prosperous period.This book is about gender and ethnic differences in labor markets earnings. It revolves around the question: to what extent the gender (ethnic) differences in earnings are a result of gender (ethnic) differences in observable individuals’ characteristics that the labor markets reward? Such question is answered with a novel methodological approach based on matching comparisons, resembling the Oaxaca Blinder (OB) decompositions, extending their scope. What would the distribution of females’ and males’ earnings be if they had equal levels of education, if they worked the same quantity of hours per week, if they worked in the same kind of formal jobs, or in firms of the same size? What would happen with the earnings gap, for instance, if men and women had the same occupations or were distributed equally through economic sectors? Further on, what would happen if all men and women in the labor markets were equally distributed along all of these characteristics at the same time? The novelty of the methodology introduced in this book is that it allows us to create fictional labor markets where these counterfactuals are true. Furthermore, this book addresses not only the extent to which those differentials can be explained by individuals’ characteristics, but also how have these gaps evolved during the last two decades. In this way, it allows the discussion of policy options for these pressing issues in the region.

Inequality and entrenched poverty has been decreasing in countries of Latin America and the Caribbean, due in significant part to expansion of social protection programs within the region. Innovations such as well-targeted conditional cash transfer programs and noncontributory pensions or health insurance systems have been adopted by several countries. Yet several challenges remain. The majority of informal sector workers lack access to social protection; programs tend to be fragmented and operate with little or no coordination; and redistributive arrangements are non-transparent and can distort labor markets by inducing informality, lowering labor participation, or producing longer unemployment spells.From Right to Reality: Incentives, Labor Markets, and the Challenge of Universal Social Protection in Latin America and the Caribbean addresses these challenges in a thorough yet accessible manner. Building on careful, detailed analysis of a wealth of data, this book takes stock of current social protection systems in the Latin America and the Caribbean region, highlighting their interaction with labor markets. The book presents an in-depth assessment of the main social protection programs including pensions, health, unemployment insurance, active labor market interventions, and safety net transfers. A central theme is that a well-functioning social protection system must take into account both the realities of labor markets, including high levels of informal sector employment where governments are unable to impose compulsory social insurance, and the effects of policies on the behavior of their beneficiaries, employers, and of service providers. Of interest to policy makers, academics, and practitioners, From Right to Reality presents practical recommendations to expand the coverage of social protection programs, improve their design, and create the conditions for the creation of more and better jobs.

Since the last wave of financial crises in the late-1990s and early 2000s, the financial systems of Latin America and the Caribbean (LAC) have continued to gain in soundness, depth, and diversity. For all the gains, however, many challenges remain. In many respects, LAC’s financial services industry is underdeveloped by international comparisons, notably, bank credit to the private sector lags and domestic equity markets remain liquidity. Furthermore, the provision of long-term finance—whether to households, firms, or infrastructure—is probably well below what would be desired. This book aims to meet the dual challenge of stock-taking and reassessment of the state of financial development in LAC, so as to set on firmer grounds the financial development agenda going forward. The chapters offer a comprehensive analysis of the status, prospects, and challenges of sustainable financial development in the region. Rather than going in detail into sector-specific issues, the book focuses on the main architectural issues, overall perspectives, and inter-connections. Its value added thus hinges on its holistic view of the development process, its broad coverage of the financial services industry beyond just banking, its emphasis on comparisons and benchmarking, its systemic perspective, and its explicit effort to incorporate the lessons from the recent global financial crisis.

This book looks at both the potential and limits of policies to promote entrepreneurship as an important vehicle for social mobility in Latin America and the Caribbean. Who are the region’s entrepreneurs? They tend to be middle-aged males with secondary and, often, tertiary education who represent only a small segment of the economically-active population in the six countries considered in this book. They come from families in which a parent is, or was, an entrepreneur. In fact, a parent’s occupation is more important in the decision to become an entrepreneur than a parent's wealth, income or education.Middle class entrepreneurship tends to dominate the sample in part since this is the majority class in society. However, as a percentage of each social class, entrepreneurship tends to be higher in the upper class, followed by the middle and lower classes. Entrepreneurs concentrate in micro-enterprises with fewer than five employees. They enjoy greater social mobility than employees and the self-employed, but this mobility is not always in the upward direction. Entrepreneurs face multiple obstacles including stifling bureaucracy, burdensome tax procedures, and lack of financing, human capital, technological skills, and supportive networks. The support of family and friends, and a modicum of social capital, help them cope with these obstacles to entrepreneurship.

Over seven million teachers file into classrooms across Latin America and the Caribbean every day. These women and men represent four percent of the region's overall labour force, over twenty percent of its professional workers, and their salaries absorb close to four percent of the region's GDP. Their working conditions vary widely - from mud-walled, one-room rural schools to world-class facilities - but teachers everywhere are the key actors in the region's efforts to improve education quality.This book shows that teacher quality is crucial for economic development, and presents a first-ever picture of how LAC's teachers perform inside the classroom, drawing on new research in over 14,000 classrooms in seven countries. It presents the latest evidence on the three core strategies for raising teacher quality: attracting high-talent students into teaching careers, developing their skills effectively, and using incentives to motivate high performance. Finally, the book analyses the political dynamics of teacher policy reforms, drawing lessons from recent cases of successful and unsuccessful reforms in the region.

During the 2000s, the Latin America and the Caribbean region (LAC) saw a decade of growth and income convergence. Its growth performance was also especially pro-poor. Understanding the factors underlying the region’s growth is critical for policy design going forward. This volume reassesses these engines of growth in light of new data and information. To a large extent, the LAC region benefitted from external conditions and policy decisions in the 2000s. However, with the favorable external conditions coming to a close, the determinants of growth that are influenced by policy will need to play a bigger role if the region wants to avoid losing its growth momentum. Using dynamic panel data regressions, this publication investigates how aggregate economic, political, and social variables affect per capita GDP growth rates for a large sample of countries. The research finds that drivers of growth in LAC have shifted over the last decade. Most LAC countries had already brought their macroeconomic house in order throughout the 1990s, which facilitated benefits from other sources of growth. While structural features continued to be robust determinants of growth, for many LAC countries— most notably net commodity exporters—external conditions were an essential driver. This publication also carries out a benchmarking exercise that sheds light on where the greatest return on investment could be for LAC countries in terms of broad policy directions. The empirical findings provide a window into the potential growth-facilitating role that governments can play in the region.

Chronic poverty raises perhaps the most complex and difficult challenge for governments around the world. Chronic poverty refers to those people that persistently live in low levels of welfare over long periods, as opposed to vulnerable populations that may get in and out of poverty due to shocks. Within generations, this manifests itself by the weak link between economic growth and the income generation capabilities that hinder individuals ability to integrate productively in society. Left Behind: Chronic Poverty in Latin America and the Caribbean is motivated by three questions: How many people live in chronic poverty in Latin America and the Caribbean? Who are they and how effective has been the policy toolkit in the region to address chronic poverty? This publication reviews the evolution of chronic poverty between 2004 and 2012 in Latin America and the Caribbean. From an inter-generational perspective, chronic poverty is associated with the long-term structural constraints that persist from one generation to the other, and can be framed as a problem of fairness or equality of opportunity. In addition to its links to the fairness of the social system and the capacity to move out of poverty, the chronicity or persistence of poverty also results from the lack of voice of some population groups and the lack of responsiveness of the political system to their needs. The nature and extent of chronic poverty are therefore multidimensional. Addressing chronic poverty thus requires a multi-layer, cross-sectoral policy approach that is tailored to specific manifestations of chronic poverty in a given context.

The Latin America and Caribbean (LAC) region has the undesirable distinction of being the world’s most violent region, with 24.7 homicides per 100,000 inhabitants. The magnitude of the problem is staggering and persistent. Of the top 50 most violent cities in the world, 42 are in LAC. In 2010 alone, 142,302 people in LAC fell victim to homicide, representing 390 homicides per day and 4.06 homicides every 15 minutes. Crime disproportionately affects young men aged 20 to 24, whose homicide rate of 92 per 100,000 nearly quadruples that of the region. The focus of Crime Prevention in Latin America and the Caribben is to identify policy interventions that, whether by design or indirect effect, have been shown to affect antisocial behaviour early in life and patterns of criminal offending in youth and adults. Particular attention is devoted to recent studies that rigorously establish a causal link between the interventions in question and outcomes. This publication adopts a lifecycle perspective and argues that as individuals progress through different stages of the lifecycle, not only do different sets of risk factors arise and take more prominence, but their interactions and interdependencies shape human behaviour. These interactions and the relative importance of different sets of risk factors identify relevant margins that can effectively be targeted by prevention policies, not only early in life, but throughout the lifecycle. Indeed prevention can never start too early, nor start too late, nor be too comprehensive. The success or failure of a violence strategy may rest on the ability to implement an integrated set of policies that can exploit these interdependencies, so that the ultimate outcome in terms of crime reduction may be larger than the sum of the individual policy outcomes.

Investments in education across countries in Latin America and the Caribbean have transformed the lives of millions of girls and the prospects of their families and societies. Unleashing the full economic potential of women is nevertheless still a curtailed issue in the region: just about half of women are unable to participate in paid work. The majority of the population out of the labour market is women between the ages of 24 and 45 years. This is the largest share of the available pool of unused human capital countries have, and where mothers of young children are concentrated.This book argues that more and better childcare constitutes a fundamental policy option to improve female outcomes in the labour market, but countries need to pay particular attention to the design and features of such services. First-rate educational programmes will be useless if children are not enrolled or do not attend formal education centres.Through an integrated framework applied to each country and an overview of the existing evidence, this book addresses the why and what questions about policy relevant instruments to achieve female labor participation. Moreover, this book tackles the how question contributing to the incipient evidence about factors affecting the take-up of programs and demand for childcare services and other informal care arrangements.

This book investigates who decides on social policy combining political economy and social network analysis of social policy formulation processes. Case studies of Argentina, Bolivia, The Bahamas, and Trinidad and Tobago show that societal actors are the main influences in South America while governmental actors are in the Caribbean countries.