In This Review
Central America, Panama, and the Dominican Republic: Challenges Following the 2008-09 Global Crisis
International Monetary Fund, 2012, 268 pp.
According to these four IMF experts, the small economies of Central America deserve praise for their prudent fiscal and monetary policies, which helped them weather the recent global economic crisis with relatively little pain. Nevertheless, their per capita growth rates remain too sluggish to close the wide income gaps between them and the developed nations. Interestingly, the authors propose raising tax rates on both individuals and corporations to enable underfunded governments to increase investments in education and other public goods. Far from simply suggesting that governments get out of the way, the authors recognize the importance of strong regulatory bodies that can oversee banking, competition policies, and tax collection. But readers looking for prescriptions for even more activist government policies—to spur investment in particular industrial sectors, for instance—will be disappointed. Indeed, the IMF economists argue that reducing the level of government intervention in other markets, such as agriculture and electricity, would improve efficiency and productivity.
Source URL: https://www.foreignaffairs.com/reviews/capsule-review/2012-12-27/central-america-panama-and-dominican-republic-challenges