Economic Survey of Latin America and the Caribbean 1993

image of Economic Survey of Latin America and the Caribbean 1993

Issued in two volumes - volume I gives insight into the economic trends, the international economy and the role of exchange rate policy in Latin America and the Caribbean. Volume II explores the economic developments by country. Complimentary statistical tables are included.



Macroeconomic policy and inflation

The macroeconomic policies applied by most of the countries of the region in 1993 were similar to those of previous years, with domestic price stabilization being the main objective. The increasingly effective fiscal adjustment was a key factor in the progress made by stabilization programmes, together with the application of prudent monetary policies and the monitoring of trends in the exchange rate, in order to maintain a context compatible with anti-inflation targets. Success in achieving these objectives was facilitated by the situation of the international economy, despite the recession affecting the main industrialized countries. The countries of the region benefited particularly from low interest rates in the dollar zone and the rising confidence of individual and institutional economic agents in the stability of the region’s economies, which attracted a huge flow of external resources. The widespread phenomenon of capital inflows in a context of mostly fluctuating exchange regimes led to problems for the real exchange rate in almost all the countries, even those which established minimum levels in order to defend their external competitiveness. These inflows also caused problems for monetary policy, leading some countries to adopt measures to restrict the inflow of financial resources, especially short-term capital. Nevertheless, in this scenario of abundant external capital, economic policies in general took advantage of the anti-inflationary effect of exchange stability. Tariff liberalization drives and programmes aimed at opening up the economy to foreign trade, which often coincided with a rise in the value of the local currency, also helped to dampen inflation, since a larger volume of imports, at lower domestic prices, tended to promote an expansion of total supply.


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