South American Economies

Paper Summary:

This paper studies the three strongest South American economies: Argentina, Chile and Brazil. The paper explains that despite their prosperity, each of these three countries also experienced considerable economic change and tumult during the 1990s. The paper analyzes one example of fiscal policy from each of these countries during that decade. All of the policies studied have the common characteristic of being liberally instituted, with the goal of increasing foreign direct investment. After examining each policy, the paper compares and contrasts their effectiveness. The paper concludes by arguing that Argentina's 1993 decision to place foreign investors on equal footing with domestic investors was not only the most successful but also the most theoretically proper of the three policies.

From the Paper:

"The policy that Argentina instituted in 1993 was known as Decree 1853. It was passed on 8 September of that year and remains the primary document governing foreign investment in the country. One source describes the content of the law: "Foreign companies may invest in Argentina without registration or prior government approval on the same terms as investors domiciled in Argentina." This means that foreign companies wishing to establish themselves in Argentina may do so without undue restrictions. It should be noted here that Argentina has not routinely offered incentives to foreign companies, as some other nations have done. This ensures that native Argentinean firms will not be at a disadvantage-at least not a disadvantage of policy. The result is a sort of synthesis of liberal and conservative economic policies: on the one hand, the government has allowed foreign firms the same privileges that domestic firms enjoy, but has not simply left the economy of Argentina alone, entirely subject to the winds of financial change."

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