International Financing and Development in Latin America

In the past few years the Latin American economy has undergone a serious financial crisis. After attaining high debt levels, the effects of international recession — and in particular the decline in the terms of trade, together with high interest rates and the delay in the application of adjustment policies — seriously affected the behaviour of the economy throughout the continent. The crisis is still not fully overcome and its implications will make themselves felt for a long time yet, making substantive modifications necessary in the management of economic policies. This chapter is intended to describe first the origins of the financial crisis, going on to examine the content of programmes put in motion jointly by governments and the International Monetary Fund, with a view to restoring access to external credit by the countries involved. A discussion follows of the negative and positive implications for Latin America of implementing such programmes, with guidelines for designing corrective policies.