“RETHINKING STRUCTURAL REFORM IN LATIN AMERICA”

Reserve Bank of Atlanta. Apart from the main authors, several researchers from both institutions have contributed valuable material, including Mauricio Olivera and Mónica Yáñez of the IDB and Stephen Kay of the Federal Reserve Bank of Atlanta. The authors also acknowledge the valuable editorial support of Carlos Andrés Gómez and Rita Funaro and the suggestions and comments of Andrés Rodríguez-Clare. 2 After more than a decade of pro-market reform in Latin America, symptoms of fatigue are evident among all the major players: public opinion polls show that most individuals think the reforms have not been beneficial, policymakers seem to have lost their reform zeal, and neither opinion leaders nor the international community remain unified around the thesis that pro-market reforms are the key to accelerating development. This paper describes the symptoms and causes of reform fatigue, and explores the implications for the future of reform. Clearly, economic reasons are behind the reform fatigue. Although the reforms seem to have increased incomes and growth, they did so in a modest way, probably below the expectations created by the reformers. Furthermore, evidence based on public opinion surveys shows that as growth has faltered, support for reform has declined. Political reasons play a much lesser role. Although the political opinions and socioeconomic characteristics of the public have played a role in shaping people's views on pro-market reforms, those variables do not go a long way toward explaining why rejection of reform has increased over time. However, the political implications of reform fatigue should be reason for concern because the political parties that pursued reforms have paid a hefty political price