ABSTRACT
This chapter clarifies the concepts of competitiveness and sustainability and, more specifically, highlights their relevance to international financial market failures, macroeconomic stability, and growth. It examines the relevance of the concepts of competitiveness and sustainability to policy making, in light of the recent Latin American experience. The chapter presents a set of stylized facts on the failures of international capital markets in the Latin American context. It analyses competitiveness and sustainability on the fact that Latin American countries have imperfect access to international capital markets. The chapter shows that there is an association between growth and the availability of external finance. It analyzes the volatility of aggregate consumption and argues that it implies that financial markets are highly incomplete. The chapter presents econometric evidence of a negative relationship between growth, the external transfer and volatility. The forces which run from micro to macro are intimately related to the kinds of market failures and institutional weaknesses.
