T e p n L R e v i e w , NUMBER 65 AUGUST 1998 SANTIAGO, CHILE OSCAR ALTIMIR Director o f the Review EUGENIO LAHERA Technical Secretary Notes and explanation of symbols The following symbols are used in tables in the Review: (...) Three dots indicate that data are not available or are not separately reported. (-) A dash indicates that the amount is nil or negligible. A blank space in a table means that the item in question is not applicable. (-) A minus sign indicates a deficit or decrease, unless otherwise specified. (■) A point is used to indicate decimals. (/) A slash indicates a crop year or fiscal year, e.g., 1970/1971. (-) Use of a hyphen between years, e.g., 1971-1973, indicates reference to the complete number of calendar years involved, including the beginning and end years. References to “tons” mean metric tons, and to “dollars”, United States dollars, unless otherwise stated. Unless otherwise stated, references to annual rates of growth or variation signify compound annual rates. Individual figures and percentages in tables do not necessarily add up to the corresponding totals, because of rounding. Guidelines for contributors to CEPAL Review The editorial board of the Review are always interested in encouraging the publication of articles which analyse the economic and social development of Latin America and the Caribbean. With this in mind, and in order to facilitate the presentation, consideration and publication of papers, they have prepared the following information and suggestions to serve as a guide to future contributors. —The submission of an article assumes an undertaking by the author not to submit it simultaneously to other periodical publications. —Papers should be submitted in Spanish, English, French or Portuguese. They will be translated into the appropriate language by ECLAC. —Every article must be accompanied by a short summary (of about 300 words) giving a brief description of its subject matter and main conclusions. This summary will also be published on the ECLAC Home Page on the Internet. —Papers should not be longer than 10 000 words, including the summary, notes and bibliography, if applicable, but shorter articles will also be considered. —One copy of the original text should be submitted, accompanied by a copy on diskette (Word for Windows 95 format), toc e p a l Review, Casilla 179-D, Santiago, Chile. In the absence of the copy on diskette, two printed or typed copies should be provided. Texts may also be sent by e-mail to: [email protected]. —All contributions should be accompanied by a note clearly indicating the title of the paper, the name of the author, the institution he belongs to, his nationality, his fax and telephone numbers, and his e-mail address. —Footnotes should be kept to the minimum,as should the number of tables and figures, which should not duplicate information given in the text. —Special attention should be paid to the bibliography, which should not be excessively long. All the necessary information must be correctly stated in each case (name of the author or authors, complete title (including any subtitle), publisher, city, month and year of publication and, in the case of a series, the title and corresponding volume number or part, etc.). —The editorial board of the Review reserve the right to make any necessary revision or editorial changes in the articles, including their titles. —Authors will receive a one-year courtesy subscription to theReview, plus 30 offprints of their article, both in Spanish and in English, at the time of publication in each language. CEPAL REVIEW 65 CONTENTS Income distribution, poverty and social expenditure in Latin America 7 José Antonio Ocampo Military expenditure and development in Latin America 15 Eugenio Lahera and Marcelo Ortúzar Growth, distributive justice and social policy 31 Andrés Solimano Equity, foreign investment and international competitiveness 45 Adolfo Figueroa Tensions in Latin American structural adjustment: allocation versus distribution 59 Daniel M. Schydlowsky Competitiveness and labour regulations 71 Luis Beccaria and Pedro Galin Latin American families: convergences and divergences in models and policies 85 Irma Arriagada Free trade agreements and female labour: the Chilean situation 103 Alicia Frohmann and Pilar Romaguera Macroeconomic trends in Paraguay from 1989 to 1997: consumption bubble and financial crisis 119 Stephane Straub The strategies pursued by Mexican firms in their efforts to become global players 133 Alejandra Salas-Porras Regulating the private provision of drinking water and sanitation services 155 Terence R, Lee and Andrei S. Jouravlev Quality management promotion to improve competitiveness 169 Hessel Schuurman Recent ECLAC publications AUGUST 1998 CEPAL REVIEW 65 Income distribution, poverty and social expenditure in Latin America José Antonio Ocampo Executive Secretory, Great social inequality has long been a frustrating feature of ECLAC, Latin American economic development. Not in vain has Latin America been described as the region of the world with the highest levels of inequality of income distribution. Although the prevailing levels of poverty are lower than those typical of other parts of the developing world, they are still extremely high and, taking the region as a whole, are higher now than they were before the debt crisis. These are the conditions now con­ fronting the new elements which have changed the economic and social dynamics of the region. Special mention may be made of four of these elements; the structural reforms embarked upon in all the countries, the accompanying process of glo­ balization, the resumption of economic growth, and the new reforms initiated in the area of social expenditure and social services as part of the “second generation” reforms. This article puts forward some hypotheses about the effects of these new events on poverty and inequality and analyzes their implications for social policy. AUGUST 1 998 8 CEPAL REVIEW SS • AUGUST 1998 Poverty, inequality and their determinants The “lost decade” was a period of marked deteriora­ of poverty have gone down, but the indicators of tion in terms of poverty in Latin America. The region equity have not improved. The Chilean case is more suffered a setback in this respect, and in 1990 its complex: poverty has gone down markedly compared levels of poverty were even higher than those exist­ with the levels of the mid-1980s and even, perhaps, ing in the early 1970s. In the 1990s, in contrast, the compared with those of the beginning of that decade recovery of economic growth has given rise to a sub­ (for which no estimates exist), but it has nevertheless stantial improvement in these indicators, although the barely recovered the levels of the early 1970s,1 while regional average is still above the levels prevailing inequality of income distribution is greater than it before the crisis. Thus, whereas in 1980 35% of was then and has been reluctant to go down even households were in a state of poverty, that proportion during the recent period of sharp reduction in stood at 41% in 1990, and in 1994 the figure was still poverty. as high as 39% (figure 1). The 1980s was also a The attempts to explain these tendencies have period of deterioration in terms of income distribu­ given rise to a major controversy on the effects of tion. The expectations that the renewal of economic macroeconomic behaviour, of structural reforms and growth would reverse the latter trend have not come of globalization on the social indicators. Since the true, so that the levels of inequality today are still pioneering essay by Morley (1994), several studies above the already high levels which existed before have confirmed that poverty tends to go down with the debt crisis (id b , 1997; e c l a c , 1997). economic growth, which would therefore explain the These global tendencies conceal heterogeneous favourable behaviour displayed by this variable in patterns in the different countries of the region, of response to the higher growth rates that have accom­ course. According to the existing comparative stud­ panied the reform process. In contrast, however, there ies, there is only one such country -Uruguay- where is a growing group of studies which indicate that eco­ the levels of both poverty and equity have improved nomic liberalization and globalization have tended to compared with those observed at the beginning of the cause a deterioration in income distribution. 1980s. In several other countries -Brazil, Panama One of the authors who has been asserting this and, according to some studies, Colombia- the levels most forcibly in recent years is Albert Berry. This author has shown in various studies that there is evi­ F IG U R E 1 dence over the last quarter of a century that the appli­ Latin America: Percentage of households cation of economic liberalization measures has been In a state of poverty associated with deterioration (sometimes serious) in income distribution (see, for example, Berry, 1997). According to Berry, this information is taken from the experiences of Argentina, Chile, Colombia, the Dominican Republic, Mexico and Uruguay, whereas Costa Rica is an exception to this rule. The compara­ tive study by Robbins (1996) also shows that trade 1970 1980 1986 1990 1994 1 Although there are problems of comparability of the figures, ECLAC (1990) estimated that the proportion of poor households in Chile was 38.1% in 1987, compared with 17% in 1970, and the percentage of poor persons was 44.4% compared with 20% in those same years. Subsequent revisions slightly raised the 1987 estimates to 39.1% and 45.1% respectively. The most re­ □ This paper was presented at the First Conference of the cent calculations, corresponding to 1996, indicate that the per­ Americas, held by the Organization of American States in centages of poor households and poor persons have gone down Washington on 6 March 1998.