Privatization in Latin America: New Roles for the Public and Private Sectors

By Werner Baer; Melissa H. Birch | Go to book overview

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Privatization and the Changing Role of the State in Brazil

Werner Baer and Annibal V. Villela

It is almost 20 years since we wrote an article (with 1. Kerstenetzky) on the changing role of the state in the Brazilian economy ( Baer, Kerstenetzky, and Villela, 1973). After describing and analyzing the circumstances that led to the expansion of the state in public utilities, heavy industry, and the financial sector, we concluded that the large presence of the state in the Brazilian economy had been necessary for achieving rapid economic development through import substitution industrialization (ISI) from the 1930s to the 1960s. We viewed the state enterprise sector as complementary to the private domestic and multinational sectors; in other words, each ownership specialized in specific areas of the economy where it had the greatest comparative advantage. Thus, each ownership sector reinforced the others. We assumed that this division of labor among the ownership sectors was gradually becoming institutionalized, and in fact, it came to be known among economists and policymakers as the "tripod" (tripe) model of ownership structure in Brazil's development process.1

Since the mid- 1970s, the tripod model has slowly broken down as state involvement in the economy became an increasingly negative force. As the debt crisis of the early 1980s resulted in a decade of low growth and investment (the "lost decade"), there gradually emerged a consensus that one way to lead Brazil out of the economic morass was to privatize a large part of the economy. Moreover, the early 1990s, under the administration of President Fernando Collor, Brazil adopted large-scale privatization as a key economic policy tool for reviving the economy.

In this chapter we briefly review the contribution of the state sector to Brazil's ISI process. We then examine the causes of the decay of the state sector, the aims and achievements to date of the privatization process, and the implications of a privatized economy with respect to its impact on efficiency, equity, and the economic role of the Brazilian state in the future.

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Privatization in Latin America: New Roles for the Public and Private Sectors
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures and Tables vii
  • Preface xi
  • Notes xiii
  • 1 - Privatization and the Changing Role Of The State in Brazil 1
  • References 18
  • 2 - Privatization and the Role of the State In Post-Isi Mexico 21
  • Notes 41
  • 3 - The Regulation of Newly Privatized Firms: an Illustration from Argentina 45
  • References 68
  • 4 - Privatization: the Role of Domestic Business Elites 71
  • Notes 91
  • 5 - Foreign Direct Investment in Latin America During the 1990s 95
  • Conclusion 112
  • Notes 113
  • References 114
  • 6 - The Financial Sector in Latin American Restructuring 117
  • Notes 131
  • Notes 132
  • 7 - Privatization with Share Diffusion: Popular Capitalism in Chile, 1985-1988 135
  • Conclusion 153
  • Appendix 155
  • Acknowledgements 158
  • Notes 159
  • Refferences 160
  • 8 - Liquid Equity Markets as an Engine For Long-Term Growth in Latin America 163
  • Notes 177
  • Notes 180
  • 9 - Privatization in Spain 183
  • References 200
  • Selected Bibliography 201
  • Index 207
  • About the Contributors 213
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