The global political economy of development finance: myths and new realities in Latin American development finance

This work explores the limitations and bias of the two dominant and contrasting models of Development Finance in Latin America - Neoliberal and Neostructural - because of their rationale, political-economic orientations, and historical results. There are copious academic works that highlight the role of either the market-led (neoliberal) or developmentalist (Neostructural) perspective of development finance considering Latin America's political-economic configurations, political instability, and international insertion. There, scholarly research is divided in two prevailing viewpoints. On the one hand, those that focus on market-led development, the international virtues of comparative progress and the limitations of welfare state as the safe monetary base of development finance. On the other hand, the developmentalist viewpoint, as a wide-ranging label, considers that the base for stable growth and international insertion is an active import substitution policy focused on strategic productive sectors and a strict control on the national capital account. These opposing views are supported by well-founded studies, which generally embroil in an endless debate about ontological and epistemological essentialist factors. This chapter aims at making a critical review of these positions and discussing their rationale, their historical political-economic context, their results and their current limitations and perils for Latin America. Although methodologically the criticisms of the neoliberal model may be more convincing, given the current challenges that the region faces, evidence shows that both approaches have limitations and perils. The purpose of this work is to introduce the main lines for a research agenda oriented to explore the limitations of both models in the context of the rapid decline of the global political economy of development finance within the Neoliberal Order.