They can be considered as natural, evolutionary processes that accompany serious reform efforts, and cyclical symptoms can be valuable wake-up calls if they are acted upon quickly and appropriately. It is ignoring the cycles and their root causes that creates problems. When a country applies the right macroeconomic management, the cycles are less severe and more manageable. If policies are mistaken and needed reforms delayed, it can be a very bumpy ride indeed. So far only a handful of Latin American nations have completed the reform cycle and reached a sustainable economic plateau.
Chile stands out as a country that conquered the cycles.
It began its reform process more than 20 years ago, and its growth rate, which last year reached 7 percent, is the highest in Latin America. Inflation fell in 1996 and real wages rose 4.5 percent. And yet, arriving at the post-correction plateau of sustained growth was not easy for Chile. The country experienced a severe banking crisis and recession during 1981-82 that followed on the heels of a spending and credit boom. Now, with a savings rate of 30 percent and its reform cycle nearly completed, Chile is much less vulnerable to economic shocks.