A Post-Keynesian Approach
New Directions in Modern Economics series
Edited by Claude Gnos, Louis-Philippe Rochon and Domenica Tropeano
Chapter 11: Money and Institutions: The Long Path of the Latin American Financial Reforms
Eugenia Correa INTRODUCTION While the ability to finance development is one of the main issues of Mexican and Latin American economic history, the 1982 debt crisis cast into doubt all capabilities of financing domestic economies and foreign payments. Since those years, the problems of debt and domestic growth have waxed and waned with changes in the international financial markets and financial crises. However, the first emerging world financial crisis in the post-Bretton Woods era renewed structural distrust in local currencies and financial systems in Latin America (LA). Almost 30 years later, we can now identify this crisis as one of many successive episodes of financial market disruptions related to the implosion of credit bubbles. As in other credit crises, the principal origins can be found in the creditors’ framework of interests, and to a lesser degree, in bad decisions of borrowers. The approaches that ‘blame the victims’ within the study of financial crises were criticized even by Stiglitz many years ago. Such conclusions regarding the main forces of the financial crisis, especially in the relatively small world of emerging market financing, do not signify an outright credence in ‘dependency theory’, as many critics assume. It is merely a recognition that the ruling forces in financial markets reside in developed countries. Since those years, because of changes in domestic financial structures, the theories or presumptions regarding money and credit within developing economies have become insufficient or even wrong. This chapter proposes that as LA economies have been net capital exporters for...
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