privatization in latin America: the other side of the story

In line with the current global trends, most Latin American countries have adopted promarket reforms, including privatization, deregulation, and liberalization, under the auspices of various market-friendly regimes and international financial agencies. They carried out privatization exercises based on the rationales that privatization would enhance competitiveness and efficiency, overcome economic stagnation and fiscal crisis, eradicate poverty and unemployment, reduce external debt, and increase foreign investment. In opposition to these rationales, however, the actual socioeconomic conditions in most Latin American countries have hardly improved, and in many cases, the situation has worsened. This article attempts to offer a more critical account of the outcomes of privatization by evaluating the trends of economic realities in Latin American countries before and after privatization programs were adopted. It is found that except for a few cases, most Latin American economies have not performed well during the privatization period in terms of various economic criteria. The article then explores why privatization remains a favorite policy option in Latin America despite its dismal outcomes during the policy period.     

Private Water,Public Good: Water Privatization and State Capacity in Chile

In the global policy debate over whether water services in developing countries should remain public or be privatized, advocates for privatization call for reducing the role of the state in water services, while civil society groups argue that privatization violates the human right to water. This article examines water privatization in Chile, a crucial case in the debate over the role of markets and states in water services. Chile is known as a water privatization success story due to its high coverage of drinking water and sanitation under a fully privatized system. The article addresses two questions: How effectively does Chile meet the standard for fulfilling the human right to water within the privatized system? To what extent has privatization in Chile reduced the role of the state in water service provision? I find that the human right to water, narrowly defined, is fulfilled in Chile; however, this outcome is not attributable to the merits of privatization. Chile’s strong state capacity to govern the water sector in the public interest by embedding reforms in state interventions explains the relative success of the Chilean water sector. These findings support the argument that a strong state role is necessary to fulfill the human right to water, even in a privatized water sector.     

Privatization in developing countries: ideal and reality

In both developed and developing countries, governments finance, produce, and distribute various goods and services. In recent years, the range of goods provided by government has extended widely, covering many goods which do not meet the purist's definition of “public” goods. As the size of the public sector has increased steadily there has been a growing concern about the effectiveness of the public sector's performance as producer. Critics of this rapid growth argue that the public provision of certain goods is inefficient and have proposed that the private sector replace many current public sector activities, that is, that services be privatized. Since Ronald Reagan took office greater privatization efforts have been pursued in the United States. Paralleling this trend has been a strong endorsement by international and bilateral donor agencies for heavier reliance on the private sector in developing countries.

However, the political, institutional, and economic environments of developing nations are markedly different from those of developed countries. It is not clear that the theories and empirical evidence purported to justify privatization in developed countries are applicable to developing countries.

In this paper we present a study of privatization using the case of Honduras. We examine the policy shift from “direct administration” to “contracting out” for three construction activities: urban upgrading for housing projects, rural primary schools, and rural roads. The purpose of our study is threefold. First, we test key hypotheses pertaining to the effectiveness of privatization, focusing on three aspects: cost, time, and quality. Second, we identify major factors which affect the performance of this privatization approach. Third, we document the impact of privatization as it influences the political and institutional settings of Honduras. Our main finding is that contracting out in Honduras has not led to the common expectations of its proponents because of institutional barriers and limited competitiveness in the market. These findings suggest that privatization can not produce goods and services efficiently without substantial reform in the market and regulatory procedures. Policy makers also need to consider carefully multiple objectives at the national level in making decisions about privatization.     

Publicization,privatization, synthesis,tradition: options for public-private configuration (1)

In contrast to the attention paid to the privatization movement, relatively little heed has been given to a related and similarly large and important trend toward publicization. In publicization, a public sector organization proactively undertakes actions or responsibilities, and takes on characteristics, usually identified in that given setting with the private sector. An example of this movement appears at the local level of government: the ongoing funding available from Urban Development Action Grant and Community Development Block Grant programs is invested in development projects that private sector firms undertake. After discussing these examples, the article develops the concept of publicization and examines it in relation to the well-established concept of privatization. Based especially on the work of E.S. Savas, a typology is developed to place both publicization and privatization in a broader framework of public-private configurations. The typology indicates the relationship among publicization, privatization, and the additional categories of synthesis and tradition.     

National administrative agencies in transition: A comparison of sweden and the united states

The abilities of national administrative agencies in Sweden and the United States to function effectively are influenced by their responses to three major phenomena: 1) growth in the responsibilities of government; 2) decentralization; and, 3) privatization. This paper delineates how these phenomena have affected the development of national administrative organizations in these two countries. Implications for administering national agencies in increasingly complex interorganizational environments are discussed.     

Public Perceptions of Privatization in Ethiopia: A Case for Public Good or Private Gain?

Ethiopia is one of the many countries in sub-Saharan Africa attempting to privatize various state-owned enterprises since 1994. This study examined public perceptions about Ethiopia's privatization policy and procedures. Results support the concerns over the public's inability to know about, be involved in and comment upon public policies affecting Ethiopia's future. Findings also support the literature that a privatization policy is effective only when institutional and technical capacities for proper implementation are in place. Further, findings raise questions about the efficacy of privatization in a national context where interests may be misrepresented.     

Privatization in Asia and Latin America

This article analyzes the political and economic predictors of privatization in 17 developing countries in Asia and Latin America, using an OLS regression model with panel-corrected standard errors and data from 1988 to 1999. The regression results show that two factors, which, have hitherto been either neglected or underemphasized in the privatization literature, play a crucial role in the pace and scope of, privatization. The first is a government’s revenue needs (defined in terms of interest payments on public debt as a percentage of a government’s total budget expenditures). An unsustainable interest burden leads to a significant reduction in the social and public spending of a government. This, in turn, impels incumbents to raise revenues through the sale of, state assets. The second factor that explains privatization patterns is the extant degree of, political opportunity (defined in terms of the governing politicians’ legislative strength and their security to remain in office). In addition, the results show that privatization is associated, with declining inflation and economic growth rates.     

Property rights in context: Privatization’s legacy for corporate legality in Poland and Russia

In the first decade after the collapse of Communism, Russia became notorious for conflicts around corporate property and corporate governance. In Poland, such conflicts were far less frequent. This distinction I argue, reflects the form of privatization in each country. In Poland, negotiation among potential shareholders and current enterprise stakeholders preceded privatization, whereas in Russia privatization procedures pitted these same groups against one another. The legacy of privatization in Russia expressed itself in long-running legal conflicts over the security of property rights. These developments highlight the importance of situational incentives to challenge or respect property rights, undermining various new-institutionalist arguments that link security of property rights primarily to the commitment and capacity of state bodies to enforce them, to the normative legitimacy of the law, or to coordination equilibria in a game-theoretic framework. The argument also enables a clarification of the political trajectory now leading to stronger corporate property rights in Russia. David M. Woodruff is associate professor of political science at MIT. His main interest is the politics of economic state-building in the post-socialist countries, especially Russia. His present research focuses on how Russia’s insertion in the international economy affects its ability to build legal institutions appropriate for a market economy. Professor Woodruff is the author ofMoney Unmade: Barter and the Fate of Russian Capitalism (Cornell University Press 1999) and articles inPolitics & Society, Post-Soviet Affairs, andEast European Constitutional Review.     

From London to Beijing: Training and Development as an Agent of Policy Learning in Public Management

The education and training of international public managers is a powerful mechanism for policy learning and transfer. In a way similar to the globalization of MBA studies, which has contributed to the international diffusion of Western derived management concepts, a number of countries are investing in overseas training programs for their public servants to bring back international “know how” and good practice. Although this practice has been coterminous with the expansion of relatively easier and affordable international travel, policy learning activity in the area of administrative reform appears to have intensified.

Though largely undocumented, the UK has witnessed a sharp increase in the number of cohorts of Chinese civil servants arriving to enroll in short courses. Many of these courses are conducted outside the University system and are arranged and hosted by independent organizations. Despite this being a growth industry, the impacts are unclear and raise a number of questions, such as, what is being learned about UK public administration and how much of it is being transferred back to China? What is it about UK public administration that has particular appeal to China? Although training and development may have a multiple agenda, the assumption is that its primary purpose is to facilitate knowledge transfer. This article sets out to understand whether this recent trend constitutes an agent of international policy transfer between Britain and China. To do this, the article analyses the nature of policy learning from the UK within a cohort of senior Chinese public servants.     

The challenge of design of intergovernmental relations in economies in transition

The governments of Eastern Europe and the former Soviet Union are at a crucial juncture in their movement from highly centralized command economies to more decentralized market economies. While there is a belief in these countries that decentralization brings greater economic efficiency, the reality is that such a transition is a difficult process. This paper examines what types of administrative reforms are needed for the decentralization process, how far along the countries are with respect to these reforms, and what reforms are missing. As we discuss, many of the necessary administration reforms are missing and we argue that more attention must be paid to these elements for successful decentralization of these governments.

This paper examines the recent experience and reform needs of the key administrative aspects of the design of intergovernmental relations in countries in transition in Eastern Europe and in the former Soviet Union. There is a widespread realization in all of these countries that decentralizing government will help increase efficiency in the public sector just as privatization will improve efficiency in their economies. Decentralization of government operations is also attractive as a way to cement a democratic form of government. Despite the appearances of the existence of an already decentralized system, such as in the case of the Soviet Union, this experiment started in practically all cases with a lack of institutions and experience on how decentralized government operations should be organized.

As different as these countries are, there are many similarities in the reform process they are following in order to decentralize government structure. While the basic components of a decentralized system of government are emerging in many of these countries the structure of government has not fully evolved in a manner that can support such a decentralized system. Often, governments remain structured along a vertical hierarchy: information, budgetary authority, and revenue pass from the central government down to subnational levels of government while little communication or interaction exists at a horizontal level. In general, the assignment of revenue and expenditure has not been clearly defined among the two or three levels of government, central government transfers continue to occur in a relatively ad hoc manner, and the entire budgeting system still rests in many cases on more or less formal system of negotiations and bargaining among the different levels of government. There has been some change in this structure in certain countries. Over the last three years, both Poland and Hungary have legally increased the automony of subnational governments. In 1994 in Russia a new and more transparent system of intergovernmental grants has been established between the federal government and the regions. In 1994 also, Latvia introduced a more transparent formula-driven, transfer formula for the regional and municipal governments.

The focus of this paper is to develop a “blue print” for necessary changes in organization and administration of intergovernmental relations in countries in transition. While many experts have recently been discussing the public finance policy components of this new, evolving relationship among levels of government, less attention has been paid to the structural and administrative challenges and the information design issues that must be met in order to develop and support a system of intergovernmental relations.

The paper is organized as follows: First we review the major responsibilities and their allocation among levels of government, the assignment of revenue sources, and the system of transfers. We then turn to a discussion of the current experience of Eastern European and NIS countries in the context of the structural components of an intergovernmental fiscal system. Next, we analyze the organizational reforms that are necessary for the efficient functioning of a decentralized system of government in the economies in transition. Finally we “rate” the transition economies in relation to their current design of the system of intergovernmental relations and support mechanisms.     

The lessons of privatization

Privatization policies have swept the world and helped restructure economic activity. Although there are clear benefits to privatization initiatives, many attempts have been rejected. Unfortunately, most policy research has ignored this fact. Research on privatization has mostly focused on programs that have been accepted, and not those that have been rejected. This study, however, breaks new ground by examining the microeconomic, macroeconomic, and political factors that shaped both types of privatization outcomes. This work, based on the book, The Logic of Privatization: The Case of Telecommunications in the Southern Cone of Latin America, suggests that the implementation of privatization policies hinges on the ability and capacity of the political leadership to control the bargaining process during the divestiture of state-owned companies. Failure to control the process may expand the conflict beyond the scope of the original participants and result in its rejection. This study statistically examines the economic and political data of sixteen attempts to privatize telephone companies around the world between 1981 and 1993. The findings suggested that microeconomic factors were not very significant in determining the privatization outcomes: however, macroeconomic factors were found to be slightly more important. The political factors, nonetheless, proved to be the most important variables in explaining the different outcomes. These findings were supported by the statistical results.     

Privatization,efficiency and market failure : transforming ecuador's public sector

Much of the privatization that is occurring in Latin America is leading to improved efficiency. However, privatization in areas where markets do not yield efficient solutions, for example of public goods, like light houses, natural monopolies, mainly utilities, and goods with externalities, like education, can lead to lower output and higher costs in the long run. This paper first presents an outline of the shift in development theory with respect to the role of the public sector. It then examines the growth of Ecuador's public sector and its current debate on how privatization should proceed. It concludes that while careful privatization can be positive, privatizing natural monopolies like the electric utility and/or quasi-public goods, like highways are likely to be detrimental to long run economic development. In order for Ecuador's economy to continue to develop, the public sector still needs to play a significant role in developing human capital and physical infrastructure.     

Between Apprehension and Support: Social Dialogue,Democracy, and Industrial Restructuring in Central and Eastern Europe

This article explores the attitudes of trade union organizations to restructuring and privatization of their enterprises to strategic foreign investors in Central and Eastern Europe's biggest steel producers: Poland, Czech Republic, Romania, and Slovakia. Contrary to advocates of insulating technocratic decision-makers from social partners, this article argues that higher quality of democracy and concomitant social dialogue carried out at the level of the sector with union organizations that are autonomous of the government in power (as was the case in the Czech Republic and Poland), are associated with greater restructuring and with support for privatization to strategic foreign investors. In these circumstances, the unions actually pressure reluctant governments to accelerate the privatization process. By contrast, politically motivated capture of individual enterprise-level unions and splitting them from sectoral-level organizations, as occurred in countries with lower quality of democracy (Romania and Slovakia), weakens the autonomous sectoral-level organizations, which are generally supportive of restructuring. Conversely, captured unions remain far more resistant to reform than their counterparts belonging to autonomous sectoral organizations. Thus, higher quality of democracy and concomitant vibrant social dialogue safeguard industrial restructuring.     

Party System Competition and Private Sector Development in Africa

Democratic transitions by many African countries have generated much analysis of the organisational features of political parties or their role in voter mobilisation during elections. Yet, scholars have largely overlooked how parties negotiate economic policymaking or interact with the private sector in countries that are incipient democracies and emerging markets. This article argues that the stability or fragmentation of the party system affects patterns of private sector development and shapes linkages between the state, business and labour. It compares Mozambique and Zambia to demonstrate how variations in party system characteristics influence the relationship between economic and political interests.     

THE DIFFUSION OF PRIVATIZATION IN EUROPE: POLITICAL AFFINITY OR ECONOMIC COMPETITION?

Privatization has spread around the globe. While a number of studies find empirical evidence for the diffusion of privatization, it remains unclear what the relevant linkages between states are. This article analyses whether it is economic competition or political affinity that influences the diffusion of privatizing public utilities. The sample includes telecommunications, postal, and railway providers as the main network‐based utilities operating at the national level in 15 European countries from 1980 until 2007. The results of the spatial regressions clearly show that governments follow each other for economic reasons. Trading partners strategically interact when privatizing their national public‐utility providers to form strategic cross‐border company alliances and to avoid competitive disadvantages in the global market. This applies particularly to economies that are highly integrated in the international market. Surprisingly, political and ideological similarities do not seem to matter for the diffusion of privatization.     

The new business environment of latin america and the caribbean

Latin America and the Caribbean Region experienced dramatic changes in the 1990s. Politically, all but one country, are governed by a democratically elected government. Economically, import substitution industrialization policies (ISI) followed in the past, were replaced by liberalization programs aimed at reducing inflationary pressures and creating a competitive environment.

The significant increase in capital flows to Latin America in one single year, 1990, buried the 1980s as the “lost decade,” and the successful implementation of privatization programs region-wide prompted to affirm that the 1990s might constitute the “Latin America's decade.” Where does the euphoria come from? Is there any implicit promise to be derived from such international capital flows? Will the pattern be sustained? Has Latin America begun a new era? Are unfolding events on defiance of fundamentals?

These and many other questions can be raised regarding the spectacular transformation of Latin America and the Caribbean, particularly when analysts still debate about the Mexican crisis of 1994, investors eagerly pursue the agenda of a second privatization wave, experts around the world get fascinated with the high-tech push found in Latin America, bankers apply Latin American lessons to deal with the currency crisis in Asia, and casual observers recognize the value-creation process added by Latin American entrepreneurs who challenge the most adverse circumstances. Indeed, Latin America and the Caribbean is a land full of promises and contrasts, where there exists a head to head competition between globalization and nationalism, the haves and the have-nots, capitalism and communism, literature and high-technology, markets and governments, East and West, North and South, myth and reality, and … “despair and hope.”

There is no question, however, that Latin America and the Caribbean, being she a detached wide-land, is a region of great opportunity. Since the external debt crisis of 1982 and its aftermath, democracy, open markets, economic reform and privatization have blended to offer great expectations and opportunities for business and investment in the region. The new vision strongly questioned the status quo to render a new business environment to open the doors and light up the roads of the upcoming millennium.

It is the purpose of the International Journal of Public Administration to offer to its readers, for the very first time, a special issue devoted entirely to the discussion of the new business environment of Latin America and the Caribbean. We are, therefore, grateful to all the authors who generously are sharing with us the findings from their scholarly research. Given the far reaching consequences of their contributions, we, as guest editors of this special issue, had no other choice but to incorporate the fruits yielded by this symposium of thirty-seven papers in four issues in one single volume. The papers have been sorted according to the following four focal points: Privatization of State Owned Enterprises; Mexico; Economic, Financial and Foreign Investment Issues; and Economic Integration, Trade and Cultural Issues.

Part I of this special issue on “The New Latin American Business Environment” looks at one element of the broad economic strategy followed by most Latin American countries: Privatization of State Owned Enterprises. The role of governments is to provide the framework that will allow the private sector to create wealth. Notwithstanding, this partnership between the public and private sectors must ensure the inclusion of the poorer sections of the population. In many ways, the long-term sustainability of these economic programs will largely depend on this. The ten papers selected for this part, provide insight on how this phenomenon is affecting different Latin American countries.

The first paper by Shamsul Haque argues that there is a need to analyze the social consequences of privatization programs. Further research is needed to identify the main advocates and beneficiaries of privatization programs. According to the author, “critical economic conditions have not improved significantly after privatization, and in many instances, the conditions have deteriorated.” About fifty percent of Latin America's population of 470 million people live under poverty.

The late Sister Martin Byrne (1) documents in her paper, “Cananea Consolidated Copper Company from Nationalization to Privatization: 1972-1991 ,” the problems of ownership and management faced by La Cananea, a Mexican copper mine. Sister Byrne argues that “The Cananea mines were profitable under entrepreneurial and MNC ownership, but proved to be a financial drain on the government during the paraestatal period.”

The third paper by Garcia and Dyner, examined the reform and regulation of electricity in Columbia. According to the authors, the regulatory framework adopted by the government is going to determine the success of these programs. Furthermore, “the challenge is the change of public intervention in the sector, so that it regulates, supports, and supervises the decentralized activities of the firms, and liberates resources to be invested in other areas.”

Walter and Gonzalez provide interesting philosophical arguments on technology and human resources management derived from the cases of privatized companies in Argentina. The authors consider two variants, “systemic modernization and revamping of existing teams” to invite a reopening of the old debate on technological blending. They argue, however, that “to compete you do not necessarily need to ‘ be on the frontier.’”

Joan B. Anderson examines, the “Privatization, Efficiency and Market Failure: Transforming Ecuador's Public Sector,” privatization in Ecuador through the shift experienced by development theory with respect to the role of the public sector. In this paper the author points out that “while careful privatization can be positive, privatizing monopolies like the electric utility and/or quasi-public goods like highways are likely to be detrimental to long run economic development.”

Doshi identifies the successes and failures of the privatization program in Mexico by analyzing the cases of Mexicana Airlines, Aeromexico and Telmex. The author argues that even though the government was able to sell a number of state owned enterprises, a “successful” privatization program required appropriate macroeconomic policies and defining the role of foreign investment in economic development. One can argue then, that even though the size of the state is shrinking, its role is becoming more important.

The article by Vetter and Zanetta analyze also the case of Argentina. The authors argue that in order to consolidate the economic reforms implemented by the national government, provincial reform has to take place. A number of important lessons were identified.

John M. Kirk and Julia Sagebien present, in “Cuba's Market Rapprochement: Private Sector Reform - Public Sector Style,” the highlights of Cuba's process of transition towards a market economy by analyzing the conditions that lead to a market opening as well as the ends, the means and the actors of the ensuing process of economic reform.

Walter T. Molano contributes a paper, “The Lessons of Privatization,” based on his book The Logic of Privatization: The Case of Telecommunications in the Southern Cone of Latin America by looking at privatization as a process that may end up in varied outcomes as seen from microeconomic-, macroeconomic-, and political perspectives of analysis.

The focal point of Part II is Mexico. It is very clear that since the beginning of the decade, Mexico has made major efforts to transform its economy in order to play a more significant role in the global economy. Different attempts have been undertaken leading to: first, address the aftermath of the debt crisis of 1982; second, modernize and open the economy through a structural change that have included, among other programs, privatization, deregulation, fiscal deficit reduction, and trade liberalization: and third, change the political landscape.

Ephraim Clark models, in his “Agency Conflict and the Signaling Snafu in the Mexican Peso Crisis of 1994,” the conflict as a government held option to default and introduce signaling by assuming that the Mexican government had monopolistic information on the economy's true situation. The author argues that “if steps had been taken in late 1993 and early 1994, the crisis element of the adjustment could probably have been avoided.”

Blaine's article examines the role of foreign capital in economic development. By studying the Mexican case, the author answers a number ofvery important questions: How are once protected markets going to react to a large inflow of foreign capital? How did Mexican authorities deal with these inflows? What are some of the lessons that could be derived from the Mexican experience?

Hazera's paper discusses the history and legal basis of Mexican financial groups. On the basis of various stock market and financial statement data, an examination is also made of the groups’ evolution from 1991 to 1994.

Eugene M. Salorio and Thomas L. Brewer consider, in “Expanding the Levels of Analysis of FDI for Improved Understanding of Policy issues: The Case of Mexico,” both macro-, and micro-level shifts of analysis which mutually complement one another, and yield, for example, a “components profile” of disaggregated national level FDI flows which depends on the type of the project. The authors identify far reaching implications for public policy that may be extrapolated from the case of Mexico to the new business environment faced by the Latin American countries.

Francis A. Lees suggests also, from another angle, that the crisis of December 1994 could have been avoided because the financial disequilibrium was clearly evident by mid-1994 just be looking at Mexico's GDP and balance of payments.

C. Bulent Aybar, Riad A. Ajami, and Marca M. Bear provide a comparative study of the recent experiences of Mexico and Turkey. The authors identify common elements in the development and eruption of the crises to conclude that “under capital mobility strong internal and external shocks may lead to explosive crises … even though overall macroeconomic balances are sound.”

James P. D’Mello shows in “An Analysis of Mergers and Acquisitions in Mexico: 1985-1996,” that the Mexican crisis has led to an escalation of corporate restructuring such as mergers, acquisitions and joint-ventures.

Jiawen Yang joins the current debate on the causes of the recent Mexican financial crisis by arguing that “capital inflows that are not well absorbed by the private sector will cause financial instability under a fixed exchange rate regime.”

Part III of the new business environment of Latin America and the Caribbean includes ten papers on Foreign Investment, Economic and Financial issues which add significantly to the understanding of the overall transformation carried out in recent years by this region of the world.

Christopher Korth and Ajay Samant, and Craig A. Peterson andK. C. O’Shaughnessy recognize, respectively in the following two papers, “American Depositary Receipts (ADRs) from Latin America: An Opportunity for American Investors.” and “Financial Investment Via ADRs in Mexico and South America,” the usefulness of ADRs for operationalizing international diversification.

Juan Espana surveys the literature on models and tools currently used to predict exchange rate movements, and aims to suggest market solutions, economic policy measures and institutional arrangements to currency crises. The author analyzes the origin and evolution of the 1994 Mexican Peso crisis, its contagion effects on other Latin American economies, and the measures taken by the affected countries to manage the crisis.

Prakash L. Dheeriya and Mahendra Raj provide, in “An Investigation in Exchange Rate Behavior of Emerging Countries,” insights on the role that exchange rate risk plays by identifying similarities and differences through international comparisons.

Kumar's paper examines the important role of foreign direct investment in promoting economic development. The emphasis here is on the transfer of technology through foreign direct investment.

Neupert and Montoya study the characteristics of’ Japanese foreign investment in Latin America, with a focus on Brazil and Mexico. The authors looked at the preferred modes of entry and the post-entry performance of these subsidiaries.

Thomas M. Fullerton, Jr. shows, in “Currency Movements and International Border Crossings,” through two ARIMAmodels that “northbound bridge traffic to El Paso is nonrandom and follows fairly well defined patterns each year.”

Trevor Campbell makes, in “A Note on the Current and Capital Accounts Compilation of Barbados under the Fourth and Fifth IMFEditions,” a comparison with respect to the composition and structure of the current and capital accounts of Barbados.

Janet Kelly and Alexeis Perera argue, in “Antitrust Policy in a Hostile Environment: Institutional Building in Venezuela's Procompetencia,” that the theories of bureaucracy in Latin America generally stress institutional weakness, political volatility and the politicized nature of government agencies which motivated, in Venezuela, the creation of the anti-monopoly agency called “Procompetencia.”

G. Scott Erickson and Andrea Nhuch recommend in ‘The Latin American Business Environment: Patent Protection Issues” a general hybrid system to deal with patent rights issues.

Finally, Part IV deals with a blend of Trade, Economic Integration and Cultural issues. Since much of the world still tends to view Latin America and the Caribbean in terms of stereotypes, it seems appropriate to end this special issue on the new business environment of the region with a group of papers that revisits the rich mosaic of Latin America, and permits appreciate her new reality.

Isaac Cohen argues, in “Hispanics and Foreign Policy.” that though the primacy of economics in Hemispheric relations provides an opportunity for Hispanic businesses, yet this community will have to act deliberately to benefit from the opportunities that are emerging.

Eva Kras contributes, in “The Viable Future of Mexico and Latin America: A New Business Paradigm,” with a South looking North approach for doing business that challenges the traditional view of business relations.

Guillermo Duenas argues, in “Cultural Aspects in the Integration of the Americas,” that managing cultural integration successfully requires a process of “intercultural learning.”

Andres A. Thompson, Francisco B. Tancredi and Marcos Kisil introduce, in “New Partnerships for Social Development: Business and the Third Sector,” the novel argument that corporate philanthropy can make the difference in social development because grantmaking is still the least frequent used strategy in Latin America and the Caribbean region.

Chris Robertson, Pol Herrmann and Kevin Duffy measure, in “Exploring Perceptions of Technology Between the United States and Ecuador,” perceptions of technology on the basis of the typology of motivators and inhibitors of technological growth.

Melissa H. Birch argues, in “Mercosur: The Road to Economic Integration in the Southern Cone,” that Mercosur represents, in contrast to the historical record of economic integration in the region, an adaptation to the contemporary political climate.

Wu and Longley discuss the rationale for extending NAFTA to Chile. Their study examines also how NAFTA negotiators may address issues such as trade and investment rules, intellectual property rights, and labor and environmental standards among other things.

Roger Kashlak and Srinath Beldona identify, in “Partner Reciprocity, Telecommunications Flows and Balance of Trade Patterns Between the United States and Latin America,” partner reciprocity as the issue at the core of the international long-distance industry.

Ines Bustillo extends, in “Overview of Economic-wide NAFTA Models” computable general equilibrium models to the case of NAFTA.

We hope that this special issue is informative and interesting to business-decision makers, regulatory policy makers, and students concerned with gaining an understanding of the ongoing transformation of Latin American and the Caribbean.

Finally, we are again most grateful to the contributors of articles for making this special issue possible. We would also like to thank Jack Rabin, editor-in-chief of the International Journal of Public Administration, for trusting us the delicate mission of providing to the readers a fresh view of the new business environment of Latin America and the Caribbean.     

Chalk and Cheese: A Comparative Analysis of Local Government Reform Processes in New South Wales and Victoria

A substantial empirical literature exists on the consequences of local government reform programs. However, much less effort has been directed at examining how reform processes affect the outcomes of reform programs and little work has been invested in the comparative analysis of local government reform processes. To address this neglect in the literature, this article provides a comparative analysis of the contemporary municipal reform initiatives in the New South Wales and Victorian state local government systems. It is argued that the much more deliberative and inclusive Victorian approach represents a superior approach to the hurried “top-down” New South Wales method.     

Decentralizing supervision to attain higher productivity: the case of the ecuadorian health system

There is growing interest in developed and developing countries about how to best administer public programs in order to maximize the return on invested resources. This paper examines the extent to which decentralized supervision can help improve health worker productivity. Data on health workers in Ecuador are analyzed. The results suggest that local (or decentralized) supervision is conducive to higher productivity and more hours worked per day by Ecuador's health promoters. The implications for higher health status, and for improving health care in other developing countries are discussed.