In This Review

Privatization in Latin America: Myths and Reality
Privatization in Latin America: Myths and Reality
Edited by Alberto Chong and Florencio Lopez De Silanes
Stanford University Press, 2005, 384 pp

Nineteen Latin American economists present a powerful, well-documented case that the privatization of state-owned enterprises has been a regional success story, popular perceptions notwithstanding. Correcting for previous methodological biases in the literature and compiling copious data, they celebrate increased productivity, rising output, and improved public services. Government coffers have fattened, too: sales proceeds from 1990 to 1999 tallied some $180 billion, and new management has transformed firms addicted to subsidies into profitable entities that pay taxes. The authors also rebut populist accusations that profitability has come at the expense of workers and the poor (albeit with less robust evidence than they present on efficiency gains). Layoffs have been common, but available data show rising wages for the privatized work force. In Argentina's poor municipalities, where water services were privatized, child mortality fell 24 percent, translating into 375 fewer child deaths per year. Investment rates, however, have risen only modestly, in part due to the region's underdeveloped capital markets. Those cases where privatization was botched suggest the next round of rigorous reforms: transparent auctions, robust regulatory regimes, and radically revamped corporate governance. This accessible, state-of-the-art collection will be valuable reading to students of privatization worldwide.