¹ A central concern of the discussion is whether FMOEP are the result of random events, and may therefore regress to intervention and protectionism, or alternatively, whether the application of FMOEP generates ‘learning-by-doing’, dynamic comparative advantages and externalities which would eventually contribute to making FMOEP more solid and stable.

² This article does not aim at explaining the reasons for the political transitions from military to civilian regimes; only the reasons for the conversions to market economics. However, these two processes are interrelated. It is possible that, as we offer explanations for the latter, these may also illustrate some important points about the former.

³ See, for example, Malloy, J. M., ‘Democracy, Economic Crisis and the Problem of Governance: The Case of Bolivia’, Studies in Comparative International Development, vol. 26, no. 1 (1991), p. 38CrossRefGoogle Scholar. However, this line of reasoning may be excessively pessimistic because FMOEP imply not only austerity geared towards stabilisation (which may itself be successful or unsuccessful), but they may also encourage new activities and economic processes of unprecedented dynamism. On the other hand, trade liberalisation usually involves a real depreciation of the domestic currency, and with it a fall in real wages, unless there are inward capital flows that compensate for this effect. This is one of the reasons why FMOEP look more stable in Chile than in Bolivia in the early 1990s.

⁴ An IMF programme may be imposed from abroad by external pressures upon a government weakened by economic crisis. By contrast, a process of ‘conversion to market economics’ which is followed by application of FMOEP receives at least part of its dynamism from the presence of positive domestic factors (as opposed to the purely negative influence of an economic crisis). In the first case, the IMF programme is forced upon reluctant politicians. In the second case, if an IMF programme is present at all, it contributes to confirm and strengthen policy decisions taken autonomously at home by domestic decision-makers. The distinction is important because a policy reversal, after a change in the initial circumstances that motivated the decision to go for FMOEP, is much more likely in the first case than in the second.

⁵ R. Dornbusch, ‘Structural Adjustment in Latin America’, The Latin American Programme, Woodrow Wilson International Centre for Scholars, no. 191 (Washington D.C., 1991); Williamson, J., The Progress of Policy Reform in Latin America (Washington, D.C., 1990)Google Scholar; Sachs, J. D. and Larrain, F., Macroeconomics in the Global Economy (New York, 1993)Google Scholar.

⁶ Iglesias, E., ‘From Policy Consensus to Renewed Economic Growth’, in Williamson, J. (ed.), Latin American Adjustment: How Much Has it Happened? (Washington, D.C., 1990), pp. 345–6Google Scholar. Many other authors make similar points: Dornbusch, R. and Edwards, S., ‘The Macroeconomics of Populism’, in Dornbusch, R. and Edwards, S. (eds.), The Macroeconomics of Populism in Latin America (Chicago, 1991), p. 13CrossRefGoogle Scholar; R. B. Fernández, ‘What Have Populists Learned from Hyperinflation?’, in Dornbusch and Edwards (eds.), Macroeconomics, p. 143; Moreira, M. Marques, ‘The Brazilian Quandary Revisited’, in Bottome, R. et al. , In the Shadow of the Debt: Emerging Issues in Latin America (New York, 1992), p. 148Google Scholar; Urrutia, M., ‘Conclusions’, in Urrutia, M. (ed.), Long-Term Trends in Latin American Economic Development (Washington, D.C., 1991), p. 164Google Scholar. Fernández is now President of the Argentine Central Bank, Marques Moreira was Finance Minister of Brazil in the Collor administration, and Urrutia is head of Colombia's Banco de la República. See also Nelson, J. M. (ed.), Economic Crisis and Policy Choice: The Politics of Adjustment in the Third World (Princeton, 1990)Google Scholar, and the annual World Bank World Development Reports.

⁷ Silva, P., ‘Technocrats and Politics in Chile: From the Chicago Boys to the CIEPLAN Monks’, Journal of Latin American Studies, vol. 23, no. 1 (1991), pp. 385–410CrossRefGoogle Scholar; Hojman, D. E., Chile: The Political Economy of Development and Democracy in the 1990s (London, 1993)CrossRefGoogle Scholar. The privatisation of state enterprises has never been included in the conventional IMF package. However, now privatisation in Brazil is defended by left-wing economists and neo-structuralists, and even by the administrators of the state enterprises themselves, Felix, D., ‘Privatizatión y Retractión del Estado en América Latina’, Revista de la CEPAL, no. 46 (1992), p. 44Google Scholar.

⁸ Hojman, D. E., ‘Why the Latin American Countries will Never Form a Debtors' Cartel’, Kyklos, vol. 40, no. 1 (1987), pp. 191–211Google Scholar.

⁹ Following Dornbusch and Edwards (eds.), Macroeconomics, the expression ‘economic populism’ is used here in the broad sense of expansionist, pro-distribution, and eventually inflationary policies that are bound to damage the external equilibria.

¹⁰ ‘The problem, however, is not one of policy preferences. The Salinas administration did not embark on reform and free trade agreement negotiations as an intellectual exercise, but in recognition of the fact that Mexico's prereform economy could not provide its growing population with a livelihood’, L. Rubio, ‘Mexico: Debt and Reform’, in Bottome et al., In the Shadow, p. 123. Dornbusch puts it even more forcefully when he writes that: ‘It is not really Argentina that decided to change, rather it is the rest of the world that has made it totally impossible for the country to continue on the same path’, ‘Structural Adjustment’, p. 14.

¹¹ Dornbusch and Edwards (eds.), Macroeconomics.

¹² Fernández, ‘What have populists learned’, pp. 121–44.

¹³ Foxley, A., ‘Bases para el Desarrollo de la Economía Chilena: Una Visión Alternativa’, Colección Estudios CIEPLAN, no. 26 (1989), p. 180Google Scholar.

¹⁴ Corbo, V., ‘Problems, Development Theory, and Strategies of Latin America’, in Ranis, G. and Schultz, T. P. (eds.), The State of Development Economics: Progress and Perspectives (Oxford, 1988)Google Scholar.

¹⁵ See, for example, De Ramón, A. and Larraín, J. M., Orígenes de la Vida Economica Chilena (Santiago, 1982)Google Scholar; Larraín, F., ‘Proteccionismo y Desarrollo Económico’, Estudios Públicos, no. 7 (1982), pp. 61–75Google Scholar; Fontaine, A., Los Economistas y el Presidente Pinochet (Santiago, 1988)Google Scholar; Hurtado, C., De Balmaceda a Pinochet (Santiago, 1988)Google Scholar; Carey, G., Chile sin U.F.: Vivencias (Santiago, 1989)Google Scholar; Valdes, J. G., La Escuela de Chicago: Operación Chile (Buenos Aires, 1989)Google Scholar. See also Corbo, ‘Problemas’ and Hojman, Chile.

¹⁶ Teichman, J., ‘The Politics of the Mexican Debt Crisis’, in Campbell, B. K. (ed.), Political Dimensions of the International Debt Crisis (London, 1989)Google Scholar; Buffie, E. F., ‘Economic Policy and Foreign Debt in Mexico’, in Sachs, J. D. (ed.), Developing Country Debt and Economic Performance (Chicago, 1990), Vol. 2Google Scholar; Lara, M. Sandoval and García, F. Arroyo, ‘The Mexican Economy at the End of the Century’, CEPAL Review, no. 42 (1990), pp. 195–209Google Scholar; Rubio, ‘Mexico’, pp. 111–28; Kate, A. Ten, ‘Trade Liberalisation and Economic Stabilisation in Mexico: Lesson of Experience’, World Development, vol. 20, no. 5 (1992), pp. 659–72CrossRefGoogle Scholar

¹⁷ On the other hand, if the only reason to adopt FMOEP is the presence of a crisis, then policy reversals after a small change in the initial conditions are more likely (see footnote 4).

¹⁸ J. A. Morales and J. D. Sachs, ‘Bolivia's Economic Crisis’, in Sachs (ed.), Developing Country Debt; Malloy, ‘Democracy’, pp. 37–57.

¹⁹ M. Urrutia, ‘On the Absence of Economic Populism in Colombia’, in Dornbusch and Edwards (eds.), Macroeconomics, pp. 369–89.

²⁰ Bird, R. M., ‘Tax Reform in Latin America: A Review of Some Recent Experiences’, Latin American Research Review, vol. 27, no. 1 (1991), pp. 7–36Google Scholar; McLure, C. E., ‘Income Tax Reform in Colombia and Venezuela: A Comparative History’, World Development, vol. 20, no. 3 (1992), pp. 351–67CrossRefGoogle Scholar.

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²² Teichman, ‘The Polities’.

²³ Hojman, D. E., ‘Chile after Pinochet: Aylwin's Christian Democrat Economic Policies for the Nineties’, Bulletin of Latin American Research, vol. 9, no. 1 (1990), pp. 25–47CrossRefGoogle Scholar; Hojman, Chile.

²⁴ Silva, ‘Technocrats’, p. 407.

²⁵ According to UNESCO figures, about 3,300 Chileans were doing postgraduate work abroad in the late 1980s, 30 per cent of them in the United States. Among those in the USA, almost 30 per cent were doing courses in ‘business and management’ and in ‘social sciences’ (there are no separate numbers for economics). The British Council, Education Market Survey: Chile (Glasgow, 1989)Google Scholar.

²⁶ Hojman, Chile; D. E. Hojman, ‘Non-governmental Organisations and the Chilean Transition to Democracy’, Revista Europea de Estudios Latinoamericarwsj del Caribe, forthcoming.

²⁷ Inter-American Development Bank, Politicas de Desarrollo (03 1992Google Scholar, June 1992).

²⁸ This evolution can be traced through the World Bank World Development Reports, for example, and it was also reflected in the shift from Reagan to Bush to Clinton. Although they are not comprehensive surveys, good discussions are provided by Krueger, A. O., ‘Government Failures in Development’, Journal of Economic Perspectives, vol. 4, no. 3 (1990), pp. 9–23CrossRefGoogle Scholar; Dornbusch, R., ‘The Case for Trade Liberalisation in Developing Countries’, Journal of Economic Perspectives, vol. 6, no. 1 (1992), pp. 69–85CrossRefGoogle Scholar; and Rodrik, D., ‘The Limits of Trade Policy Reform in Developing Countries’, Journal of Economic Perspectives, vol. 6, no. 1 (1992), pp. 87–105CrossRefGoogle Scholar.

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³¹ Cortez, M., Berry, A. and Ishaq, A., Success in Small and Medium Scale Enterprises: The Evidence from Colombia (Oxford, 1987)Google Scholar; Montero, C., ‘La Evolución del Empresariado Chileno: ¿Surge un Nuevo Actor?’, Colección Estudios CIEPLAN, no. 30 (1990), pp. 91–122Google Scholar; Hojman, Chile.

³² Llovet, I. D., ‘Algunas Consideraciones acerca de las Peculiaridades del Proceso de Diferenciacion Campesina en el Ecuador’, Boletín de Estudios Latinoamericanos y del Caribe, no. 58 (1985), pp. 47–59Google Scholar; Gómez, S. and Echenique, J., ‘Nuevos Empresarios y Empresas Agricolas en Chile’, FLACSO, Working Paper no. 277 (Santiago, 1986)Google Scholar; Korovkin, T., ‘Neo-Liberal Counter-Reform: Peasant Differentiation and Organisation in Tartaro, Central Chile’, in Hojman, D. E. (ed.), Neo-Liberal Agriculture in Rural Chile (London, 1990)Google Scholar; Melmed-Sanjak, J. S. and Carter, M. R., ‘The Economic Viability and Stability of “Capitalised Family Farming”: An Analysis of Agricultural Decollectivisation in Peru’, Journal of Development Studies, vol. 27, no. 1 (1991), pp. 190–210CrossRefGoogle Scholar; Nagel, B. Y., ‘Socioeconomic Differentiation among Small Cultivators on Paraguay's Eastern Frontier’, Latin American Research Review, vol. 26, no. 1 (1991), pp. 103–32Google Scholar.

³³ Cruz, J. M., ‘La Fruticultura de Exportatión: Una Experiencia de Desarrollo Empresarial’, Coleccion Estudios CIEPLAN, no. 25 (1988), pp. 79–114Google Scholar; Chávez, H. González, ‘Los Empresarios en la Agricultura de Exportatión en México: Un Estudio de Caso’, Revista Europea de Estudios LMtinoamerkanos y del Caribe, no. 50 (1991), pp. 87–114Google Scholar; Hojman, D. E. (ed.), Change in the Chilean Countryside: From Pinochet to Aylwin and Beyond (London, 1993)CrossRefGoogle Scholar.

³⁴ Sklair, L., ‘The Maquilas in Mexico: A Global Perspective’, Bulletin of Latin American Research, vol. 11, no. 1 (1992), pp. 91–107CrossRefGoogle Scholar. See also Cleaves, P. and Stephens, C., ‘Businessmen and Economic Policy in Mexico’, Latin American Research Review, vol. 26, no. 1 (1991), pp. 187–202Google Scholar. A similar experience, admittedly in a much smaller scale, can be observed in Chile's Zona Franca de Iquique (ZOFRI).

³⁵ Sklair, ‘The Maquilas’, pp. 96–7.

³⁶ De Soto, The Other Path.

³⁷ Cameron, M. A., ‘Political Parties and the Worker-Employer Cleavage: The Impact of the Informal Sector on Voting in Lima, Peru’, Bulletin of Latin American Research, vol. 10, no. 3 (1991), pp. 293–313CrossRefGoogle Scholar; Ghersi, E., ‘La Electión Presidencial Peruana de 1990’, Estudios Públicos, no. 42 (1991), pp. 155–65Google Scholar.

³⁸ Malloy, ‘Democracy’.

³⁹ For a long-term view of the evolution of Latin America, which introduces explicitly the Kondratief wave, see Bulmer-Thomas, V., ‘Life after Debt: The New Economic Trajectory in Latin America’, Institute of Latin American Studies, Occasional Paper No. 1, London (1992)Google Scholar.

⁴⁰ For a definition of ERP, see Griffin, K. B. and Enos, J. L., ‘Policies for Industrialisation’, in Bernstein, H. (ed.), Underdevelopment and Development (Harmondsworth, 1976)Google Scholar. Applications to the Latin American car industry appear in Johnson, L. J., ‘Problems of Import Substitution: The Chilean Automobile Industry’, Economic Development and Cultural Change, vol. 15, no. 1 (1967), pp. 202–16CrossRefGoogle Scholar, and Munk, B., ‘The Welfare Costs of Content Protection: The Automotive Industry in Latin America’, Journal of Political Economy, vol. 77, no. 1 (1969), pp. 85–98CrossRefGoogle Scholar.

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⁴³ Some studies measure international competitiveness in manufacturing using ratios such as exports to imports, or exports to domestic output, without paying any attention to the subsidies involved and welfare costs; see Ficher, G., ‘The Competitiveness of Latin American Industry’, CEPAL Review, no. 43 (1991), pp. 51–65Google Scholar; Mandeng, O., ‘International Competitiveness and Specialisation’, CEPAL Review, no. 45 (1991), pp. 25–40Google Scholar. See also Hoffmaister, A., ‘The Cost of Export Subsidies: Evidence from Costa Rica’, IMF Staff Papers, vol. 39, no. 1 (1992), pp. 149–74Google Scholar.

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⁴⁷ Perhaps the most essential difference concerns the role of a highly authoritative state bureaucracy in ‘guiding’ export-led development in the East Asian case. The instruments of guidance were often highly interventionist.

⁴⁸ Kamas, L., ‘Dutch Disease Economics and the Colombian Export Boom’, World Development, vol. 14, no.9 (1986), pp. 1177–98CrossRefGoogle Scholar; Vaez-Zadeh, R., ‘Oil Wealth and Economic Behaviour: The Case of Venezuela, 1965–81’, IMF Staff Papers, vol. 36, no. 1 (1989), pp. 343–84CrossRefGoogle Scholar; A. Bianchi, ‘“Overabundance” of Foreign Exchange, Inflation and Exchange Rate Policy: The Chilean Experience’, Paper presented to the IDBOECD International Forum on Latin American Perspectives, Paris, 4–6 November 1992; Jeftanovic, P., ‘El Síndrome Holandés: Teoría, Evidencia y Aplicación al Caso Chileno’, Estudios Públicos, no. 45 (1992), pp. 299–331Google Scholar.

⁴⁹ Typical examples of quantitative recommendations in an IMF package are: ‘Print less money’, ‘Devalue at a faster rate’, or ‘Reduce fiscal expenditure’. But some IMF policies have been changing over the years. In the 1950s and early 1960s a fixed exchange rate was recommended, until the crawling peg was successfully applied in Chile in the mid-1960s. This was followed by the ‘tablita’, in the context of so-called ‘global monetarism’, in the Southern Cone countries in the late 1970s. Currently both a fixed exchange rate and any version of the crawling peg are acceptable, provided that the regime adopted is credible and stable. These changes in the IMF approach reflect admission that inflation was proving more difficult to eradicate than expected, and that external balance was equally or even more important than internal equilibrium.

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⁵² Dornbusch, R. and Reynoso, A., ‘Financial Factors in Economic Development’, American Economic Review, Papers and Proceedings, vol. 79, no. 1 (1989), pp. 204–9Google Scholar; Chandavarkar, A., ‘Of Finance and Development: Neglected and Unsettled Questions’, World Development, vol. 20, no. 1 (1992), pp. 133–42CrossRefGoogle Scholar; Lee, ‘The Government’.

⁵³ The IDB (September-October 1992), p. 3. Gains in the Mexican stock market were more than 100 per cent in 1991.

⁵⁴ The IDB (September-October 1992), pp. 4–5.

⁵⁵ Huss, T., ‘Transfer of Technology: The Case of the Chile Foundation’, CEPAL Review, no. 43 (1991), pp. 97–115Google Scholar; Egan, M. L. and Mody, A., ‘Buyer-Seller Links in Export Development’, World Development, vol. 20, no. 3 (1992), pp. 321–34CrossRefGoogle Scholar; Mizala, A., ‘Vinculación Industrial Internacional y Desarrollo Exportador: El Caso Chileno’, Revista de la CEPAL, no. 46 (1992), pp. 159–86Google Scholar; C. Pietrobelli, ‘Non-Traditional Agricultural and Agro-Industrial Exports and Technological Change: a Microeconomic Approach’, in Hojman (ed.), Change.

⁵⁶ Hoffmaister, ‘The Cost’; Hojman, Chile; Pietrobelli, ‘Non-Traditional Agricultural and Agro-Industrial Export’.

⁵⁷ This phenomenon, called hysteresis, is well known in economic analysis. Baldwin, R. and Krugman, P. R., ‘Persistent Trade Effects of Large Exchange Rate Shocks’, Quarterly Journal of Economics, vol. 104, no. 4 (1989), pp. 635–54CrossRefGoogle Scholar; Franz, W., ‘Hysteresis in Economic Relationships: An Overview’, Empirical Economics, vol. 15, no. 1 (1990), pp. 109–25CrossRefGoogle Scholar.

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⁵⁹ Hojman, Chile.

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⁶¹ There may be a positive association between fiscal expansion and political instability in Latin America. Voters (and union members and army officers) would tend to punish profligate governments, Cuzan, A. G., Moussalli, S. D. and Bundrick, C. M., ‘Fiscal Expansion and Political Instability in the Iberic-Latin Region’, Public Choice, vol. 59, no. 3 (1988), pp. 255–38CrossRefGoogle Scholar. Possibly there is a strong connection between inflation and political instability, with causality working both ways. A vicious circle mechanism would make inflation and political instability mutually reinforcing, Paldam, M., ‘Inflation and Political Instability in Eight Latin American Countries, 1946–83’, Public Choice, vol. 52, no. 1 (1987), pp. 143–68CrossRefGoogle Scholar. By the end of the populist regimes of Alfonsín in Argentina and García in Peru, ordinary people may have been in the grip of ‘…social dispair, approaching social anomie and disorganisation. It is typical of this kind of situation that people do not worry if their leaders (Menem and Fujimori, respectively) change their minds about economic matters after taking office’, F. C. Weffort, ‘New Democracies, Which Democracies?’, The Latin American Programme, Woodrow Wilson International Centre for Scholars, no. 198 (Washington, D.C., 1992), p. 28.

⁶² E. Cardoso and A. Helwege, ‘Populism, Profligacy, and Redistribution’, in Dornbusch and Edwards (eds.), Macroeconomics, pp. 66–7; Urrutia, ‘On the Absence’.

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⁶⁵ Cameron, ‘Political Parties’; Ghersi, ‘La Elección’.

⁶⁶ R. Lago, ‘The Illusion of Pursuing Redistribution through Macropolicy: Peru's Heterodox Experience’, in Dornbusch and Edwards (eds.), Macroeconomics.

⁶⁷ Graham, C., ‘Peru's APRA Party in Power’, Journal of Interamerican Studies and World Affairs, vol. 32, no. 3 (1990), pp. 75–113CrossRefGoogle Scholar; Ghersi, ‘La Elección’; Lago, ‘The Illusion’.

⁶⁸ Teichman, ‘The Polities’.

⁶⁹ The application of FMOEP in Mexico was sweetened by a highly publicised campaign, ‘Solidaridad’, by which some benefits were granted directly to the poor by President Salinas himself. The policy reforms were so popular that even opposition leader Cuauhtémoc Cardenas, when asked what he thought of them, answered that he would have done the same. Dornbusch, ‘Structural Adjustment’, p. 11. It has been argued that electoral advance of the political right in Mexico and Argentina was prevented by ‘…the ability of populist parties to transform themselves by adopting a neo-liberal orientation…’ Right-wing political organisations ‘… remained weak and failed for the most part to win elections…because populist parties adopted neo-liberal policies, thus pre-empting the growth of neo-liberal parties’. Espinal, R., ‘Development, Neo-Liberalism and Electoral Politics in Latin America’, Development and Change, vol. 23, no. 4 (1992), pp. 38, 44CrossRefGoogle Scholar. This confirms that there was strong underlying popular support for stabilisation policies, to be tapped by whoever was prepared to apply them.

⁷⁰ No other military in a major Latin American country have been actually defeated in a war in recent decades. This blow, together with the Peronist Menem's ‘betrayal’ of such natural clients of the state as the public sector unions, which left these unions with no one to turn to for support, made the situation in Argentina particularly favourable to the preservation of both democratic government and FMOEP.

⁷¹ Rodrik, ‘The Limits’.

⁷² Malloy, ‘Democracy’.

⁷³ In the late 1980s, the democratic opposition to the Pinochet regime promised that they would maintain and enhance the economic achievements of the military regime, but without any of its negative political and human rights connotations. Hojman, D. E., ‘Yes or No to Pinochet: Television in the 1988 Chilean Plebiscite’, Studies in Latin American Popular Culture, vol. 11, no. 1 (1992), pp. 1–24Google Scholar. This pledge has been fulfilled. The Chilean experience after March 1990 confirms that the previous identification of FMOEP with repressive politics was incorrect. Imitation of models that are perceived as successful is widespread. Several Chilean economists are advising on reform around the region. In the 1980s, Colombian tax specialists travelled to Chile to examine the tax reforms there. Now some of the same Colombian experts are advising the government of Ecuador. McLure, ‘Income Tax’, p. 364.

⁷⁴ Not much has been said in this article about corruption. Both actual corruption, as a results of the drugs traffic, and public awareness of it have increased in recent years. But it seems that the relationship between corruption and FMOEP is more complex than what we would tend to expect intuitively. The nature of this relationship may be country-specific. The Collor and Pérez governments in Brazil and Venezuela, respectively, were notoriously affected by corruption. Related or not, Collor and Pérez also found many difficulties in their attempts at carrying out (admittedly flawed) adjustment programmes. By contrast, Menem in Argentina was accused of many instances of corruption and nepotism, but corruption did not prevent him from being reasonably successful in his application of FMOEP. For all its successes, the Salinas government in Mexico was not able to deal with corruption in many spheres of national life.