Economic Survey of Latin America and the Caribbean 1995-1996

image of Economic Survey of Latin America and the Caribbean 1995-1996

This publication gives insight into the economic trends, the international economy and the role of exchange rate policy in the region. It also explores the economic developments by country. Included also is a statistical annex on diskette.



The fragility of Latin America's financial system

Loss of confidence in Mexico’s economic stability led to a withdrawal of foreign capital in 1994, and the capital outflow was exacerbated by the devaluation of the peso in December of that year. The situation did considerable harm to Mexico’s banking system and sent shock waves throughout the region, damaging financial institutions in a number of countries, especially Argentina, through effects on liquidity due to deposit volatility and through the high real interest rates characteristic of severe macroeconomic adjustment. To these factors were added the internal problems, dating from late 1993, plaguing Venezuela’s economy and financial markets. The most severe banking crises occurred in Argentina, Mexico, Paraguay and Venezuela. To a lesser extent, Bolivia, Brazil, Costa Rica and Ecuador also ran into difficulties.


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