Competition policy and institutional reform in Latin America : exploring the institutional foundations for economic growth in developing countries
Until recently, institutional reforms implemented under the so-called 'apertura' economic strategy has emphasized the correction of macroeconomic imbalances through specific policy measures (i.e. privatization, open trade, fiscal balance, stable exchange rates). As overall imbalances have been corrected, policy makers are considering the introduction of a second generation of 'institutional reforms'. Consequently, the focus of reform would shift into the promotion of productivity, competition and innovation at the entrepreneurial level. These institutional goals presuppose a new regulatory framework, amenable to market functioning. Antitrust policy is one example among many regulatory initiatives being advocated to support market reforms. This thesis shows how the broad misconceptions about the nature of markets still pervades policy-making throughout the region. Antitrust policies could threaten to reproduce, under powerful new forms, the former interventionism that characterised 'development' policies of the 1960s and 1970s. Paradoxically, this interventionism would be justified in the name of preserving market transparency. Advocate of antitrust policies often share a subtle anti-market bias: Markets are regarded structures, where density of concentration determines how competitive they are. Following the welfare implications drawn from the neoclassical models of equilibrium, economic exchange is examined under severely constrained conditions: individuals are assumed to possess complete information and transactions are 'timeless'. The aftermath of this perspective is that all business arrangements are regarded 'restrictions to competition', some of these suspected of sheltering monopolistic purposes. The effects of these policies in the region could be particularly harmful in Latin America, as business interacting in the domestic markets of the region have developed over time numerous forms of unofficial institutional devices, most of them addressed to complement the lack of transparency of the enforcement of the official legal framework. In the wake of apertura, these institutional devices, coupled with high levels of economic concentration, appear to favour monopolistic conducts, but in fact they attempt to correct the adverse effects of decades of dirigisme and uncertainly of a stable rule of law upon business activities. Latin markets are undergoing a fast transformation since aperture began. Due to the lifting of trade regulations, there is a significant wave of mergers and acquisitions, privatization processes, setting up joint ventures, selling undervalued assets, and proliferation of new corporate forms and other forms of efficient association reshaping old inefficient structures and replacing them with new ones. Young Latin American antitrust agencies have already challenged many of these udertakings as sheltering some form of monopolistic endeavor. Under a perspective emphasizing the evolutive nature of market interaction, these conducts appear simply as modalities by which the economic knowledge of each market participant is passed on to others in the system. These seemingly monopolistic attempts are in fact efficient arrangements allowing businesses to plan in advance their activities relating to conjectural future business scenarios. These arrangements sometime encourage mergers, vertical integration, and even collusion, but they are also responsible for new market discoveries, innovation and increased production. To support this conclusion, this theses is supported on the heuristic process view of markets initiated by the School of Subjectivism in economic science. To promote competition and innovation within Latin America's weak institutional setting, a strong policy of deregulation, and limitation to government intervention through political accountability and judicial review is advocated in place of conventional antitrust policy, which would retain a marginal role.