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Latin American Economic Outlook 2008

image of Latin American Economic Outlook 2008
While democratic regimes seem to be firmly rooted in the region, Latin American economies continue to experience sustained economic growth, benefiting from the ongoing process of globalisation. This Latin American Economic Outlook, the first volume in an annual series by the OECD Development Centre, provides original insights and comparative indicators on four key issues affecting Latin America’s development: the impact of fiscal performance on democratic legitimacy; the relevance of pension fund reform and governance for national saving and capital markets deepening; the role market-seeking investments by the private sector can have at improving access to telecommunication services; and growing trade with China and India as an incentive to boost the competitiveness of Latin American countries. Policy recommendations and the identification of best practices in the areas under scrutiny aim to put OECD’s expertise and well-known analytical rigour at the service of Latin America’s development.

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Policy Coherence for Development

Better, Fairer, More: Fiscal Policy and Legitimacy

OECD Development Centre

Fiscal legitimacy — the trust people place in their government’s fiscal policy — matters for economic development and democratic governance because it affects the quality of a country’s fiscal policy. Many countries in Latin America suffer from a vicious circle in which poor-quality fiscal policy hinders the generation of tax revenue and the effectiveness of public expenditure, thereby weakening fiscal and democratic legitimacy, which in turn undermines the quality of fiscal policy. Brazil and Mexico illustrate: Brazil collects and spends much, Mexico collects and spends little, but neither performs well in terms of fiscal quality. In the 1990s, fiscal reform in Latin America focused with some success on insulating fiscal policy from politics, but many reforms ultimately failed because they did not take local political realities into account. Today, politics is returning to the front of the debate on fiscal and especially tax reform, with the link between fiscal policy and democratic governance beginning to gain the attention it requires. Decision makers need to exploit the linkages between fiscal policy and democratic governance to successfully implement fiscal reform and address Latin America’s urgent social challenges. Local think tanks can contribute by stimulating a debate on policy options and so play a crucial role in enhancing transparency, but they require financial autonomy to ensure their intellectual independence.

English

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