Consenso de Washington

Summary

The 'Washington Consensus' was a set of 10 policy recommendations by economist John Williamson in the 1980s to help Latin America recover from economic crisis, characterized by high oil prices and external debt. It led to the 1982 debt crisis, especially impacting Brazil, Mexico, Argentina, and others. The consensus, presented in 1989, focused on fiscal discipline, tax reform, interest rate liberalization, trade and investment liberalization, and privatization, aiming to stimulate growth and debt repayment. However, it was criticized for its narrow focus and unequal wealth distribution, favoring certain groups over others.

Takeaways

• 📜 The 'Washington Consensus' refers to a set of 10 economic policy recommendations developed by economist John Williamson to help Latin America overcome the crisis of the 1980s.
• 🌐 The crisis in Latin America was characterized by high oil prices and increased external debt, leading to countries like Brazil, Mexico, and Argentina defaulting on their debt payments.
• 💡 The trigger for the debt crisis was the 1982 Mexican economic recession, which forced Mexico to declare a debt moratorium and led to a regional economic downturn.
• 💵 The appreciation of the US dollar during the oil crisis of the early 1980s exacerbated the debt issue for Latin American countries, as their debt increased sevenfold on average.
• 📉 The most affected countries by the debt crisis were Brazil, Mexico, Argentina, Venezuela, Peru, Colombia, and Chile.
• 🏛 In November 1989, the Institute for International Economics held a conference where John Williamson presented the main reforms necessary to reestablish economic growth in Latin America.
• 💼 The consensus included 10 policy instruments, such as fiscal discipline, tax reform, interest rate liberalization, trade and investment liberalization, and privatization, aimed at promoting economic efficiency and competitiveness.
• 💼 The Washington Consensus was based on neoclassical economic theory and the neoliberal ideological and political model, initially designed for Latin America but later applied globally.
• 🔑 One of the main issues with the Washington Consensus was its focus on solving the urgent debt crisis of the 1980s by promoting growth to pay off external debt, which was a priority for the American institutions and lenders.
• 💰 The consensus had its pros and cons, including an increase in wealth, but with an inequitable distribution, benefiting the same groups while leaving others behind.

Q & A

What is the Washington Consensus?

The Washington Consensus refers to a set of 10 policy recommendations in the economic and political sphere, developed by economist John Williamson, aimed at helping Latin America emerge from the crisis of the 1980s.

Why was the Washington Consensus created?

The Washington Consensus was created to address the severe economic stagnation in Latin America during the 1980s, caused by high oil prices and increased external debt.

Which event triggered the debt crisis in Latin America?

The debt crisis in Latin America was triggered by the Mexican economic recession in August 1982, which led to Mexico declaring a moratorium on its debt.

How did the appreciation of the US dollar affect Latin American countries?

The appreciation of the US dollar increased the debt burden of Latin American countries because their loans had been acquired in dollars, causing their debt to increase on average seven times.

Which countries were most affected by the debt crisis?

The most affected countries by the debt crisis were Brazil, Mexico, Argentina, Venezuela, Peru, Colombia, and Chile.

What were the main reforms presented by John Williamson at the 1989 conference?

John Williamson presented 10 main reforms, including fiscal discipline, tax reform, interest rate liberalization, financial liberalization, trade liberalization, foreign investment liberalization, privatization, and property rights protection.

What was the purpose of fiscal discipline in the Washington Consensus?

Fiscal discipline aimed to suggest balanced budgets and a reduction in fiscal deficits, ordering public spending to reduce unnecessary subsidies and support health, education, and infrastructure.

What does trade liberalization entail according to the Washington Consensus?

Trade liberalization involved eliminating trade restrictions and transforming them into tariffs that would gradually decrease, protecting national industries from foreign competition.

What was the role of privatization in the Washington Consensus?

Privatization was based on the idea that the private industry is managed more efficiently and better than state-run enterprises.

How did the Washington Consensus impact wealth distribution in Latin America?

Although the Washington Consensus led to an increase in wealth, the distribution was not equitable, with the benefits primarily accruing to the same groups, leading to increased inequality.

What were the main criticisms of the Washington Consensus?

The main criticisms of the Washington Consensus were its focus on solving the urgent issues of the 1980s, such as debt repayment, without addressing long-term economic stability and its limited vision for equitable wealth distribution.