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The Limits of Stabilization: Infrastructure, Public Deficits, and Growth in Latin America (Latin American Development Forum) Paperback – October 6, 2003

ISBN-13: 978-0804749725 ISBN-10: 0804749728 Edition: 1st

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Product Details

  • Series: Latin American Development Forum
  • Paperback: 232 pages
  • Publisher: Stanford University Press; 1 edition (October 6, 2003)
  • Language: English
  • ISBN-10: 0804749728
  • ISBN-13: 978-0804749725
  • Product Dimensions: 6 x 0.7 x 9 inches
  • Shipping Weight: 11.2 ounces (View shipping rates and policies)
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Best Sellers Rank: #4,270,212 in Books (See Top 100 in Books)

Editorial Reviews


"This fascinating book highlights a neglected cost of two decades of fiscal austerity in Latin America. The authors' careful analysis reveals that the decline in public investment in infrastructure may have been expensive not only for growth but for long-term fiscal solvency as well. Deserves to be read by every IMF economist (and many others besides)." —Dani Rodrik,John F. Kennedy School of Government, Harvard University

"The lessons from this research are likely to be valuable not only for developing countries but also for the European countries that are part of the Euro zone." —Sergio Rebelo,Kellogg School of Management, Northwestern University

From the Inside Flap

Latin America’s macroeconomic crises of the 1980s and ‘90s forced a severe fiscal adjustment across the region. More often than not, fiscal stability was achieved at the cost of a drastic compression of public infrastructure spending, accompanied by the hope that the private sector would take the leading role in infrastructure provision.
This book documents the major trends in infrastructure provision in Latin America over the past two decades n order to assess the consequences of this changed public-private partnership from the perspective of economic growth, public finances, and the quantity and quality of infrastructure services. It will be of particular interest to those in the fields of infrastructure, fiscal policy, and economic growth, and anyone concerned with Latin America’s development.
For orders originating outside of North America, please visit the World Bank website for a list of distributors and geographic discounts at or e-mail

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Format: Paperback
This book is a reaction to the Latin American fiscal crisis of the early 80s. When several countries ran up huge debts often denominated in foreign currencies. The debts were large relative to the countries GDPs. The International Monetary Fund and the World Bank weighed in with technical advice about reducing these debts. Often, one of the line items was a reduction in national spending on infrastructure.

The authors of the papers in the book argue that such cuts were extremely ill wrought. Because infrastructure is generally conceded to contribute from 19% or more per annum in terms of rate of return on the investment. Whereas the debts have lower interest rates. In sum, as the introduction suggests, this was a very short sighted measure. The bulk of the book goes on to expand on this thesis.

Now [2009], as the entire world goes into a recession, the book's argument takes on a new relevance. Granted, many key developing countries learnt from the 80s experience, and now have strong currency reserves, and much less foreign debt. The governments tend to understand the merit of running surpluses, both at the governmental level and for their citizens. But the returns from infrastructure investment are compelling enough that some deficit spending might be incurred here.

Ironically, one key measure for the US in the new [as I write this, Obama got inaugurated this morning] administration is a proposal for vast infrastructure spending. So maybe the book's thesis also applies to the US.
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