Relative to the overall size of the economy, though, there has been considerable volatility and variation among countries. But Latin American governments performed better in some areas, collecting slightly more indirect taxes and considerably more nontax revenue. Spending patterns in the region also reflect a high degree of volatility although this pattern has calmed somewhat since some countries have achieved price stability. Once high or hyperinflation was halted, Latin American governments lost the use of an important adjustment tool that could be used without regard to legislative approval. In the past, governments could reduce their debts by postponing payment until inflation had reduced the value of the obligation.
Governments now face the more politically problematic task of implementing cuts in public spending.
In Argentina, Brazil and Peru, the pattern of volatility ended once relative price stability was achieved and expenditures reached a plateau. The plateau effect may well reflect the absence of the inflation tax as a means of fiscal adjustment after achieving relative price stability, but it also signals the difficulty that governments have encountered in making cuts. In Colombia, Ecuador and Venezuela, expenditures continued to rise through 1997 without clear evidence of topping out. Of this group, oil-dependent Venezuela is the most erratic, with a sharp rise in expenditures since 1995. Chile and Mexico made dramatic spending cuts between 1984 and 1990.