Exchange Controls and Economic Development

The expressions economic development and economic development policies are used today with a variety of meanings.2 Here, having in mind the economic structure of most Latin American countries, economic development will be understood to mean the raising of the level of real income per capita, mainly through direct and indirect measures aiming at an increase in the rate of capital formation. There are three basic elements in the concept thus interpreted: first, a certain degree of state intervention, in order to promote objectives which would not be attained by the free play of economic forces: second, the direction of intervention more towards the increase of real production than towards its redistribution; and third, the position of paramount importance assigned to changing the institutional factors, political, administrative, legal, social, educational, or economic, which in a growing and developed economy can be taken as given, but which in an undeveloped economy have to be changed if economic development is to be possible. Recourse to intervention by the state does not necessarily imply regimentation of the economy, the public ownership of enterprises, or even socialism in the conventional meaning of the word. State intervention or direction can be made effective by indirect instruments of policy, which are quite compatible with capitalism or private enterprise. Fiscal, monetary, commercial, exchange, investment, and other policies may be used as instruments for this purpose.