VIEWS: 12 PAGES: 8 CATEGORY: Social Sciences POSTED ON: 6/11/2010
More Things Change, More They...Never Mind In the mid 1970s, skyrocketing commodity prices made Latin America a preferred destination for the ample international liquidity that Middle Eastern petrodollars and lax U.S. monetary policy funneled toward financial institutions. [...] the IMF should also be recapitalized, possibly through an issuance of Special Drawing Rights (SDRs), in order to ensure that the organization has more than enough funds to help reconnect countries to finance.
Largely absent during the 2003–2008 boom and the post-2008 bust, IFIs can play a crucial role in restoring global liquidity and growth. Here by Ricardo Hausmann We Go Someone: FirSt LaStname a m e r i c a s q u a r t e r ly . o r g This time it was supposed to be different. position moved away from short duration and dollar Even as the world economy spiraled into a free denomination toward safer forms, such as long-term fall, Latin America seemed not only poised to break domestic currency debt. Credit ratings improved, and the boom-bust cycle of the previous three decades— a growing number of countries achieved investment– but to survive the debacle of 2008. With the econom- grade status, becoming at the same time less depen- ic expansion that started in 2003, the region looked dent on volatile capital inflows. Again stronger than it had ever been, thanks largely to the Decoupling was the fashionable concept in ana- structural reforms enacted as a result of previous cri- lysts’ minds, as the region seemed unaffected by the ses. Most national economies were more efficient first signs of trouble in the U.S. in 2007. With the and resilient. Fiscal accounts had been put on a solid price of food, energy and minerals buoyed by soaring track. Debt ratios had started to decline, and debt com- growth in India and China, Latin America became Someone: FirSt LaStname a m e r i c a s q u a r t e r ly . o r g spring 2009 americas quarterly 43 the destination of choice for investments in these Argentina, Mexico, Colombia, Peru, Uruguay, and Ven- market sectors. ezuela fueled a boomlet in the early 1990s—only to Alas, to apply the words of Brazilian samba com- collapse in late 1994 with the Tequila Crisis. In hind- poser Vinicius de Morais: “Tristeza não tem fim, feli- sight, the growth seemed less a product of reform cidade sim.” (Sadness has no end, but happiness than of the temporary upsurge in short-term capital certainly does.) Just as Latin America was getting inflows brought about by the easing of Washington used to growth rates that topped 5 percent, the music monetary policy during the 1990–92 U.S. recession. As stopped abruptly in the fourth quarter of 2008. The soon as the U.S. started to raise interest rates in 1994, fabled decoupling disappeared and the so-called com- international liquidity tightened, and the region fell modity super-cycle shrunk super-quickly. into currency and banking crises. Can Latin America, and the world, recover momen- The boom-bust cycle continu
Pages to are hidden for
"Here We Go Again"Please download to view full document