United Nations ECLAC JOSÉ LUIS MACHINEA Executive Secretary ERNESTO OTTONE Acting Deputy Executive Secretary ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN CEPAL R EVIEW NUMBER 88 APRIL 2006 SANTIAGO, CHILE OSCAR ALTIMIR Director REYNALDO BAJRAJ Deputy Director United Nations ECLAC The CEPAL Review was founded in 1976 and is published three times a year by the United Nations Economic Commission for Latin America and the Caribbean, which has its headquarters in Santiago, Chile. The Review, however, has full editorial independence and follows the usual academic procedures and criteria, including the review of articles by independent external referees. The Review is distributed to universities, research institutes and other international organizations, as well as to individual subscribers, and is also consulted extensively on the Internet. The purpose of the Review is to contribute to the discussion of socio-economic development issues in the region by offering analytical and policy approaches and articles by economists and other social scientists working both within and outside the United Nations. Accordingly, the editorial board of the Review extends its readers an open invitation to submit for publication articles analysing various aspects of economic and social development in Latin America and the Caribbean. The opinions expressed in the signed articles are those of the authors and do not necessarily reflect the views of the organization. The designations employed and the way in which data are presented do not imply the expression of any opinion whatsoever on the part of the secretariat concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries. A subscription to the CEPAL Review in Spanish costs US$ 30 for one year (three issues) and US$ 50 for two years. A subscription to the English version costs US$ 35 or US$ 60, respectively. The price of a single issue in either Spanish or English is US$ 15, including postage and handling. A subscription form can be found in the Review, just before the section “Recent ECLAC publications”, and on the ECLAC web site (www.cepal.org). The complete text of the Review can also be downloaded free of charge from the above web site. Explanatory notes 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., 2004/2005. (-) Use of a hyphen between years (e.g., 2004-2005) indicates reference to the complete period considered, including the beginning and end years. The word “tons” means metric tons and the word “dollars” means United States dollars, 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. United Nations publication ISSN printed version 0251-2920 - ISSN online version 1684-0348 ISBN 92-1-121594-3 LC/G. 2289-P Copyright © United Nations 2006, April 2006. All rights reserved. Printed in Santiago, Chile Requests for authorization to reproduce this work in whole or in part should be sent to the Secretary of the Publications Board. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and to inform the United Nations of such reproduction. In all cases, the United Nations remains the owner of the copyright and should be identified as such in reproductions with the expression “© United Nations 2005” (or other year as appropriate). CEPAL REVIEW 88 S U M M A R Y Celso Furtado’s contributions to structuralism and their relevance today 7 Ricardo Bielschowsky Has investor protection been rendered obsolete by the Argentine crisis? 15 Michael Mortimore and Leonardo Stanley The rights-based approach in development policies and strategies 33 Victor Abramovich Can the Latin American and Caribbean countries emulate the Irish model of FDI attraction? 49 Ruth Rios-Morales and David O’Donovan The slow comeback of industrial policies in Latin America and the Caribbean 67 Wilson Peres A low-growth model: informality as a structural constraint 85 Mario Cimoli, Annalisa Primi and Maurizio Pugno The Argentine labour market in a financially globalized world 103 Mario Damill and Roberto Frenkel Social precarity in Mexico and Argentina: trends, manifestations and national trajectories 125 María Cristina Bayón The Fiscal Covenant in Guatemala: lessons learned from the negotiations 145 Juan Alberto Fuentes K. and Maynor Cabrera Changes in Chile’s production structure, 1986-1996: output and industrial interdependence 159 José Miguel Albala-Bertrand Guidelines for contributors to the CEPAL Review 173 CEPAL Review on the Internet 174 Recent ECLAC publications 177 A P R I L 2 0 0 6 CEPAL REVIEW 88 • APRIL 2006 7 CEPAL REVIEW 88 • APRIL 2006 Celso Furtado’s contributions to structuralism and their relevance today Ricardo Bielschowsky This article examines Celso Furtado’s three main analytical contributions to structuralism: (i) the historical-structural method, which incorporates the histories of Brazil and other Latin American countries in structuralist formulations; (ii) the belief that underdevelopment in the Latin American periphery has tended to persist over long periods owing to the difficulty of overcoming underemployment and to inadequate diversification of production; and (iii) the idea that the pattern of investments in the periphery is predetermined by the composition of demand, which mirrors and tends to preserve income and wealth concentration. Events in Latin America in the past twenty-five years show that Furtado’s analysis has lost none of its relevance. Ricardo Bielschowsky Economic Affairs Officer ECLAC Office in Brasilia ✒✒✒ [email protected] CELSO FURTADO’S CONTRIBUTIONS TO STRUCTURALISM AND THEIR RELEVANCE TODAY • RICARDO BIELSCHOWSKY 8 CEPAL REVIEW 88 • APRIL 2006 I Introduction This brief study outlines Celso Furtado’s main of Furtado’s contributions, which were written almost contributions to structuralism, that is, to the theory of half a century ago, reveals how overwhelmingly up- peripheral development developed by Raul Prebisch to-date those contributions still are. This is so for and ECLAC, and discusses why Furtado’s important unfortunate reasons, however. The levels of growth, analytical contributions to Latin American and employment and income distribution in the region in Brazilian debate on growth and development has had the past 25 years have confirmed Furtado’s scepticism such a strong intellectual and ideological impact, concerning the prospects for development in the especially in Brazil. A look at the main trends in Latin absence of well-designed and properly implemented America and Brazil between 1980 and 2005 in the light national development projects. II Prebisch and economic development under structural conditions of the periphery As a prelude to examining Furtado´s contributions, it with the “central” economies. The main argument is is necessary to turn briefly to Prebisch and his theory that the differences between the two are associated with of peripheral conditions of development with respect poor growth conditions in the periphery, which impose to Latin America.1 This is because Furtado was a constraints on the industrialization process and follower of Prebisch –the founder of Latin American technological progress and require growth strategies structuralism– and because Prebisch’s theory is rarely coordinated by the State, since, under those conditions, adequately addressed in the literature on economic market forces are not sufficient, in themselves, to development, most references being limited to the thesis sustain viable growth. on the worsening terms of trade. As Octavio Rodriguez Table 1 recapitulates the main elements of the correctly argued in his book on ECLAC thinking,2 Prebisch formulation on underdevelopment in Latin Prebisch’s theory constitutes an analytical corpus America and related problems, which was adopted by geared to the study of underdevelopment in Latin Furtado and other structuralist intellectuals. America. It was on the basis of such a set of structural problems According to this theory, constraints on growth of the periphery that Prebisch and ECLAC built their analysis stem from Latin America’s specific position on the of growth, peripheral development and centre-periphery periphery of the developed world. Prebisch used the relations as well as their fundamental thesis: the worsening term “peripheral” economies in order to contrast them terms of trade, non-convergence between per capita income in the centre and the periphery, structural imbalance in the balance of payments, external This study was presented at the special session on “Celso Furtado vulnerability, saving and foreign-exchange gaps, and and Latin America and the Caribbean. Trends and prospects”, organized by ECLAC at the Tenth Meeting of the Latin American dynamic of the import substitution process. and Caribbean Economic Association, held in Paris in October 2005. In such