This past year, many in Latin America have again been learning this lesson the hard way. The Return of Volatility A year ago in Cartagena we all took cautious good cheer from the fact that the first six months of the Asian crisis had mainly passed Latin America by. These major shocks will take their toll on the region for some time to come and no country will be left untouched. But past policies made some countries more vulnerable to these shocks than others. Further steps to build up these economies' defenses will only help them continue to ride out the storm.
Brazil can succeed only with resolute pursuit of sound and strong fiscal and monetary policies.
But these steps, along with the removal of past exchange rate pressures and the return of capital as normal conditions are restored, should provide a basis for the reestablishment of confidence and growth in a country that, on some measures, achieved the fastest average rate of growth in the world in the hundred years before 1980. In this context the indications of support for sound policies in Brazil that have been received in recent days from both the private and the public sector have been encouraging. What will be critical will be to resist mis-diagnosis. It would be a mistake if the external element allowed the more important and fixable domestic roots of the crisis to go unaddressed. We can all take pride in the fact that, among other things, the FSO funds agreement has allowed the IDB to commit major new funds to rebuilding Central America.