Fiscal Policies and the World Financial Crisis. Understanding the Experience of Three Major Latin American Countries

Abstract

Fiscal policies in the countries of Latin America have evolved within very different institutional landscapes resulting from a long history of financial crises. This article analyzes several of the economic and institutional transformations of the three largest economies of Latin America, namely, Argentina, Brazil, and Mexico, and their evolution during the past twenty years, in order to understand the ability to implement countercyclical fiscal policies during the great global crisis. It discusses the idea that open and emerging market economies do not possess conditions to exercise countercyclical fiscal policy. The main conclusion is that only Argentina has been able to fully exercise its capacity to pursue fiscal policy during the crisis, while institutional constraints on the fiscal policies of Brazil and Mexico remain.