South in Transformation: Nations Sell State Firms And Tackle Inflation, Debt
MEXICO CITY — LATIN America is undergoing an economic metamorphosis. The image of debt-ridden, protectionist, banana republics succumbing to hyperinflation is disappearing.
Thanks to the Brady Plan and lower world interest rates, debt servicing has eased in Venezuela, Mexico, Costa Rica, Chile, Bolivia, and Brazil. Inflation is down dramatically. Many nations are growing again. In 1988, Mexico's net external debt stood at 60 percent of gross domestic production. The debt load has shrunk to 20 percent of GDP.
Privatization of inefficient state-run corporations is sweeping the region. Chile and Costa Rica led the way. Now many others are following.
Argentina has sold its airline and telephone companies to private investors, reducing its debt load by US$7 billion. This year, Argentina plans to raise another $20 billion from privatization.
Mexico has pumped some $16 billion into its coffers by selling operations over the last three years, Mexican officials announced this month. By the end of this year, Mexico will have sold off 86 percent of the 1,155 government enterprises operating in 1982.
Free-trade pacts are being signed throughout the region.
The combination of policy changes and renewed growth is attracting foreign and domestic investors. The level of United States private direct investment in Latin America doubled between 1986 and 1990.
Private money flowing to Latin America now accounts for 17 percent of US overseas investment, second only to Europe, according to the US Department of Commerce. Mexico and Chile have been the main recipients.