This paper shows how the analytical framework developed in <A HREF="#Lal96">Lal-Myint (1996)</A> and <A HREF="#Lal98">Lal (1998)</A> can be used to think rigorously about the role of culture and politics in addition to traditional economic factors like factor-proportions in explaining divergent economic performance can be applied to Latin America. It is in particular used to explain the cycles of repression and reform and to judge the long-term sustainability of the current period of economic reform in Latin America