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

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

powerful domestic and foreign interests. The thesis advanced here should not be interpreted as a shallow form of instrumentalism whereby the state is solely conceived as an instrument of the capitalist class, but rather, one in which the state, to follow the lead of Nora Hamilton, operates under internal and external structural constraints such as its control over economic resources, capacity to assist the process of private capital formation, access to external sources of funds, capacity (or inability) to control short-term capital movements in the presence of integrated capital markets, ability to form political alliances with subordinate or underprivileged groups in society, relationship to the dominant classes (and, therefore, its capacity to affect the degree of cohesiveness or division among its various factions), and, finally, its ability to legitimize its policies to the dominated classes and groups.48 From this perspective, it is perfectly possible for the state to act in the general interests of the dominant financial and industrial groups of the country without necessarily becoming their instrument; in this sense, it can be said that it has a degree of relative autonomy. As this discussion has shown, however, many of the structural constraints (both external and internal) under which the state operates have became binding with the onset, and aftermath, of the debt crisis. Particularly, the state's political and economic inability to raise and/or place taxes on capital and high-income recipients in the face of dwindling external sources of funds has driven it to accept the double conditionality of the IMF and the World Bank, thus further constraining its room to maneuver. This process, whereby the domestic constraint further strengthens the external one, has engendered a protracted--and, some would argue, intractable--fiscal crisis of the state that severely limits the policy options it can pursue on behalf of society's disenfranchised groups. This is so much the case that, in the words of James Cypher, the ongoing dismantling of the parastate sector represents: a piecemeal method of undercutting any future turn towards populism in Mexico. Privatization is not an irreversible process. Yet a populist government, if it had sufficient political power to do so, would be forced to rebuild the economic power of the state very slowly and only with the greatest difficulty. The short-run consequences of such a step would be likely to make a poor situation worse by fanning the flames of ideological debate and hastening the hair-trigger response of the business elite toward massive capital flight, given the smallest pretexts. Thus, privatization of the state sector is in itself a very powerful political tool and objective. Without the framework of a large parastate sector, the state must rely on the cumbersome mechanisms of monetary and fiscal policy to promote its socioeconomic goals and development plans.49


NOTES
1.
See Nora Hamilton, "State-Class Alliances and Conflicts," Latin American Perspectives, 11, no. 4 (Fall 1984): 167.

-41-

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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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