current situation, appears to be closer to achieving the promise that it showed a generation ago. most of the countries in the region have experienced growth since the 1980s. indeed, the growth rate of latin american countries has averaged about 3½ % annually during this decade. in addition, the scourge of inflation seems, in general, to have been brought under control. the costs were high, but the battle seems mainly to have been won. admittedly, the worst inflation rates, at about 40 %, are still high by the standards in the united states. however, they are much reduced from those that existed 20 years or even 10 years ago. last year, argentina ’ s inflation rate was under 1 %. that is down from nearly 5000 % in 1989! knowing that many of your institutions are involved in trade finance, you know that the trade outlook for the region has changed significantly from what it was a generation ago. the annual total merchandise trade of latin american countries has grown from $ 130 billion in 1978 to $ 522 billion in 1997. even adjusted for inflation, this represents nearly a doubling of its trade, allowing the growth of latin american imports and exports to roughly match the explosion in international trade experienced throughout the world economy during this period. moreover, in many latin american countries, exports have grown substantially as a proportion of total production, and the fraction of these exports accounted for by manufactured goods has also increased. finally, latin america has become an active participant in the flow of foreign direct investment and other forms of capital. in 1990, as the debt crisis was winding up, net direct investment flows to latin america totaled only $ 7 billion ; by 1997, this figure had risen to $ 51 billion. portfolio capital flows also have grown very substantially. although they have been more volatile as well, net portfolio investment rose from $ 18 billion in 1990 to a peak of about $ 61 billion in 1993 and 1994, and were $ 34 billion in 1997 in the wake of the asian crisis. obviously, the current problems indicate that participation in the global capital markets requires policy discipline and sound institutional structures, which many countries have put in place and others must continue to develop. causes and lessons as with any macroeconomic performance, there are many causes for the general improvement that much of latin america experienced since the 1980s. the most general statement is that many of the economies of latin america have adopted more prudent and open policies that foster competition and participation in global markets. the adoption of these improved policies did not

of policy committees, but it can make it challenging to arrive at a clear, consistent public explanation of a policy decision, because policymakers can arrive at the same policy position based on different rationales. good communication must also take into account uncertainty. understandably, market participants want to know what is going to happen next – to the economy and to policy. but we cannot say more than we know, and we should strive to avoid giving people the impression that we know more than we do. i'll touch on a number of these themes as i review recent federal reserve communications. before i do, i have one last comment : our communication strategy is a work in process – we are constantly looking for additional steps that could reasonably be expected to improve public understanding and policy effectiveness. however, we move slowly in changing what these views are my own and not necessarily those of my colleagues on the federal open market committee. we say in part because ill - conceived communication policy has the power to harm the economy, and, even if that harm were to be realized, the policy could be difficult to alter. enhanced economic projections as already noted, i believe that the additional information in the enhanced projections the fomc announced in november should be a substantial step forward in increasing public understanding of monetary policy decisions. 2 the enhanced projections give more information about the fomc's medium - term outlook for the economy. that's particularly important, because the lags in the effect of policy on economic activity and prices mean that policy decisions are necessarily based on a view of the likely path for the economy over several years, relative to the federal reserve's legislated objectives of maximum employment and stable prices. in that regard, one of the most significant aspects of the initiative is the lengthening of the forecast horizon from 1 - 1 / 2 to 2 years previously to about 3 years. shorter - term forecasts tend to be dominated by the interpretation of how recent shocks to the economy will play out. by lengthening the projection horizon, fomc members will also be giving a sense of their assessment of a number of important structural characteristics of the economy that influence the conduct of policy. for example, given the starting point for the outlook, the forecasts will trace out a path for the economy to preserve or reestablish maximum employment and price stability that will reflect fomc participants'views of the relative variation in output and inflation that is possible in the short run. in addition, fomc