Policy directions for the new economic model in Latin America

The new economic model (NEM) has been extremely successful in reducing inflation and in increasing exports, but quite disappointing in terms of the growth of output and productivity. It is argued that this calls for a 'second generation' of reforms, especially centered at the plant level and its surrounding factor markets, to close the huge productivity gap separating firms from best practice and so enable the accelerated growth rates typical of successful 'late starters.' Policies should emphasize the systematic identification of those technologies and practices best suited to local conditions and their rapid transfer, adaptation and diffusion throughout the economy.