Financial Intermediation and Policy-Based Lending: Policy Recommendations for Latin America and the Caribbean

This paper discusses the conditions under which policy-based lending may further economic development within a Latin American and Caribbean context, given the current state of financial markets in most countries of the region. The discussion is intended as a conclusion to the articles presented at the Conference on Policy Based Finance and Alternatives for Financial Market Development, many of which are included in this book. In some degree, this chapter is an attempt at a compromise; a position that does not recommend a formal adoption of policy based finance as it exists in East Asia, but rather proposes the incorporation of the universal lessons from the East Asian experience into the more market-based reforms currently under way in Latin America and the Caribbean. While the discussion in most of this book is centered on credit programs, the conclusions are equally valid for other varieties of government interventions in financial markets. This article was originally published in the book Policy-Based and Market Alternatives: East Asian Lessons for Latin America and the Caribbean in June 1997, by the Inter-American Development Bank.