Democratic governance and insulated economic policy : the challenges of divided governance in Argentina and Brazil

Abstract

Emerging market economies in Latin America face the tremendous challenge of consolidating democracy and deepening market reform simultaneously. Concerns about the quality of democracy and the sustainability of market reforms have prompted policy-makers and scholars to revisit their original assumptions and traditional approaches to policy reform.

Essentially, the second-generation reforms embedded in the post-Washington consensus aim at strengthening the institutions of governance, and in particular the state and the rule of law. There exists, however, an inherent tension between the consolidation of democratic governance and the deepening of market reform: second-generation economic reforms aim, to a great extent, to regenerate those institutional foundations of democratic governance that have been undermined by first-generation market reforms.

More fundamentally, can second-generation reforms be launched using the same political strategies as first-generation reforms? The central dilemma of democratic governance in emergent market economies is how to retain the advantages of strong executive authority for market reform while at the same time providing the institutional checks and balances that guarantee accountability.

Contrasting the experiences of Argentina and Brazil, we will argue that consolidating democratic governance entails not only reforming the institutional architecture of the state, but also, and more fundamentally, restoring the effective capacity to govern and revising the modes of governance and the methods of government.