03/17/97 LATIN LESSON

LATIN LESSON

THE CAPITALIST REVOLUTION IN LATIN AMERICA
By Paul Craig Roberts and Karen
LaFollette Araujo
Oxford 214pp $25

It was no small feat for countries such as Chile, Argentina, and Mexico to cast aside protectionist, statist legacies and embrace free trade and market competition. But those reforms have proved dura-ble. The reason is that Latin Americans realize that yesterday's solutions--state intervention in the economy, relaxation of monetary policy to stimulate consumption--no longer work.
That's the theme of The Capitalist Revolution in Latin America, by BUSINESS WEEK columnist Paul Craig Roberts, chairman of the Institute for Political Economy in Washington, and research fellow Karen LaFollette Araujo.
The authors focus largely on changes in Chile, Argentina, and Mexico. They argue that wrenching economic crises made those societies ready for dramatic experiment. That allowed Chile, for example, to lead the way with such programs as privatization of social security. Argentina discarded Peronist statism and even privatized the oil company. Mexico not only balanced its budget and sold off more than 1,000 state-run companies, it overcame a centuries-old mistrust of the U.S. and inked a free trade accord with it.
Single-minded pursuit of reform is less feasible in Latin America's new democracies, where leaders must strike a balance between pain and gain, than under dictatorships, the authors argue. Another obstacle is widespread corruption, which continues to drain off the vital resources needed to raise standards of living.