Economic Survey of Latin America and the Caribbean 1986

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In 1986 the evolution of the Latin American economy was marked by contradictory changes. While the main variables used to measure domestic economic performance showed some improvement, the situation of the external sector worsened considerably. Thus, although the rate of economic growth picked up and unemployment and inflation slackened, the terms of trade worsened, the trade surplus fell and the balance-of-payments deficit increased sharply.




Three main factors had a strong influence on the performance of the Chilean economy in 1986. The first was the extended Fund facility programme which the government agreed upon with the International Monetary Fund, together with the structural adjustment loan granted by the World Bank in 1985. The second was the government's macroeconomic programme, which called for a major expansion of production activity in 1986 and for a suitable form of financing for the country's external accounts. This programme was based on a consistent set of exchange, fiscal and monetary policies which were in keeping with the objectives and restrictions set forth in the arrangement with the Fund. Finally, a third very important factor was that the external trade situation was much more favourable than had been expected; this resulted in a significant improvement in the terms of trade and permitted the government to apply a more expansionary monetary policy than it had initially projected without compromising its balance-of-payments position.


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