WASHINGTON — In 2009, Latin America will move from a period of expansion to one of adjustment. Because of the global financial crisis, growth will slow down, unemployment rates will rise, and poverty will increase. And there will be fewer public resources to face enlarged social needs.
It is understandable, then, that policymakers are looking for ways to cushion the impact of the crisis, for ways to "stimulate" their economies. The problem is that they do not have many tools. There is, however, one particularly powerful tool that can boost both economic growth and social equity: transforming subsidies for all into subsidies for all the poor.
Traditionally, Latin American governments have paid for all or part of the cost of public services like electricity, gas, water, fuel, telephone calls or university education. And they have paid regardless of who uses those services, or of the purchasing power of the user.