ABSTRACT
In Latin America, the adoption of market-oriented reforms has been a source of anxiety for voters, a permanent challenge for politicians and an inevitable mandate from international fi nancial institutions. The term of market-oriented reforms refers to a set of measures that aim at reducing the role of the state in the economy by lowering trade tariffs, eliminating government subsidies, enacting privatizations, facilitating foreign investment, loosening labor laws, and promoting other banking and fi nancial reforms (Lora 1997; Morley et al. 1999; Weyland 2002).1 Market-oriented reforms sought to effectively reduce the role of the state in economic planning by eliminating the state-led import-substitution industrialization (ISI) model followed by Latin American economies during the sixties and seventies (Williamson 1990, Haggard and Kaufman 1995, Grindle and Thoumi 1993). The new “Washington consensus” type of policy recommendations included two stages of reform. The fi rst were stabilization or adjustment policies, aimed at achieving and maintaining macroeconomic equilibrium including fi scal balances, infl ation, and debt management. The second were structural reforms intended to reshape political and economic institutions in the long run, including privatization processes, central bank autonomy, civil service reform and other long-term tax and fi scal reforms (Haggard and Kaufman 1995; Lora and Panizza 2002).
