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The International Financial Crisis: Eight Lessons for and from Latin America

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  • Liliana Rojas-Suarez

Abstract

The international financial crisis of 2008–09 exposed the strengths and weaknesses of the current paradigm of development in Latin America, a paradigm based on liberalized capital accounts and significantly improved macroeconomic conditions. This paper presents lessons derived from the crisis, not only for the region itself, but also for other developing countries that might seek economic growth in the context of greater integration to the international capital markets. Some of the lessons are not new but have been reinforced by the crisis, such as Latin America’s imperative need for export diversification (not only in products but in partners). Other lessons break with longstanding myths about the region, such as its inability to undertake counter-cyclical policies—at least on the monetary side. Yet other lessons reflect new developments in the current growth paradigm, such as a renewed assessment of (1) the relative roles of foreign and domestic banks in shielding the financial system against external shocks and (2) the desirability of adopting blanket international financial regulations that do not account for a country’s degree of development. Taken together, the lessons in this paper bring a new sense of optimism for growth in Latin America.

Suggested Citation

  • Liliana Rojas-Suarez, 2010. "The International Financial Crisis: Eight Lessons for and from Latin America," Working Papers 202, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:202
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    File URL: http://www.cgdev.org/content/publications/detail/1423709
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    Cited by:

    1. Maria Abascal & Luis Carranza Ugarte & Mayte Ledo & Arnoldo Lopez Marmolejo, 2011. "Impact of Financial Regulation on Emerging Countries," Working Papers 1108, BBVA Bank, Economic Research Department.
    2. repec:ial:wpaper:4 is not listed on IDEAS
    3. Giovanni Andrea Cornia & Bruno Martorano, 2012. "Development Policies and Income Inequality in Selected Developing Regions, 1980–2010," UNCTAD Discussion Papers 210, United Nations Conference on Trade and Development.
    4. Liliana Rojas-Suarez and Carlos Montoro, 2012. "Credit at Times of Stress: Latin American Lessons from the Global Financial Crisis - Working Paper 289," Working Papers 289, Center for Global Development.
    5. UNDP Regional Bureau for Africa & Ayodele Odusola & Giovanni Andrea Cornia & Haroon Bhorat & Pedro Conceição & Ayodele Odusola & Giovanni Andrea Cornia & Haroon Bhorat & Pedro Concei ‹o, "undated". "Conclusions and Policy Recommendations," UNDP Africa Policy Notes 2017-18, United Nations Development Programme, Regional Bureau for Africa.
    6. Carlos Montoro & Liliana Rojas-Suarez, 2012. "Credit at times of stress: Latin American lessons from the global financial crisis," BIS Working Papers 370, Bank for International Settlements.

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    Keywords

    economic growth; development; finance; Latin America;

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