The political economy of capital controls in Latin America: assessing the heterogenous effects of the Left Turn

The article assesses the determinants of cross-border financial regulation in Latin America for the period between 1995 and 2019. Building upon the literature on the Left Turn and the re-regulation of capital flows, I contend that the impact of government partisanship is conditional to the targeted capital flows. In this sense, the gradual change of the position of mainstream economists and the International Monetary Fund led to the depoliticization of inflow controls, eroding partisan differences on this policy tool. On the other hand, restrictions over outflow capital flows remained outside the mainstream consensus, being only adopted by post-neoliberal left-wing parties that challenged capital mobility to gain policy space for their inclusionary goals. The estimation of time-series cross-section models for 17 Latin American countries and the analysis of selected regulatory choices in Argentina and Brazil provide support for this theoretical argument. Specifically, I found that administrations led by post-neoliberal parties have been associated with an increase in the level of outflow controls but had non-significant effects on inflow restrictions.