These complementary studies by two of Latin America’s leading economists astutely combine rational analysis with political sensitivity. De Gregorio, formerly the head of Chile’s central bank, brilliantly elucidates (with restrained pride) the region’s remarkable recent successes. Perry, the former chief economist for Latin America at the World Bank, proposes a compelling regional agenda to maintain the forward momentum.
Debunking populist criticisms of the neoliberalism of the so-called Washington consensus, De Gregorio credits Latin America’s macroeconomic reforms of the 1990s -- countercyclical fiscal policies, flexible inflation targets, more open trade policies, adjustable exchange rates -- for the region’s strong economic performance during the last decade. Having learned from costly errors, most governments (excluding the traditional populist rulers of Argentina and Venezuela) built up strong fiscal and hard-currency reserves, improved their debt profiles, and strengthened their countries’ national banking systems. As a consequence, the region successfully weathered the 2008–9 global downturn, a sharp contrast to the destructive Latin American debt crisis of the 1980s. Good luck also helped, in the form of high export commodity prices. As befits a hardheaded central banker, De Gregorio warns against complacency and urges additional structural reforms, more financial oversight, and other changes that would improve the rule of law and promote social inclusion.
Perry is something of a Simón Bolívar for the twenty-first century. For two centuries, many in Latin America have pushed for Bolivarian regional integration but have seen meager results. Conditions today might be more propitious: most of the region’s governments are more competent than ever, and globalization now rewards, indeed demands, regional efficiencies. Drawing on a lifetime in policymaking circles and academia, Perry sets forth ambitious, precise recommendations for transnational cooperation on finance, direct investment, trade, and infrastructure. In each of these areas, the harmonization of regulations and supervision would yield gains in efficiency and growth. Far from naive, Perry recognizes the hurdles to effective intergovernmental cooperation. He looks hopefully to regional development banks, which boast financial resources and political legitimacy, to overcome the problems associated with policy coordination, cost allocation, and conflict resolution.