boards require considerable internal discipline to work as intended. the benefits are potentially large, but the effort to maintain such a system and the risks associated with having to abandon such a system under duress are also large. – 5 – conclusions to summarize, much of the story of the evolution of latin american economies in the past decade has been a story about globalization. globalization has operated on many different levels to improve the performance and productivity of the region. however, participation in the global financial market does, as we have seen, entail risks for countries that have not followed prudent policies. on balance, globalization clearly has been a strong positive force in the region ’ s economy. latin america ’ s economies are sounder, more entrepreneurial, and more dynamic than they have been in many decades. and yet, grave problems remain. these include widespread poverty, tremendous disparities in wealth and income, and a level of per capita gdp that in many countries remains little higher than it was in the early 1980s. i believe that these problems are more likely to be resolved through continued participation in the global economy than by falling back on earlier models of economic development. in closing, since i am speaking to a group of bankers, i would like to reiterate the importance of good banks and good banking skills in contributing to the economic prospects for the region. by facilitating trade finance, providing funds for growing companies, and integrating domestic financial sectors into the global capital market, banks have played a key role in furthering the development of the latin american economies. latin american banking systems, benefiting in large part from rising levels of foreign participation, are providing increasingly competitive levels of credit and depository services, thereby laying the groundwork for future dynamism and growth. healthy banking systems also are crucial to promoting economic stability. the recent experience of several asian countries, where severely weakened banking systems helped contribute to financial crises, has reminded us that good banking skills and strong bank supervision are indispensable. albert hirschman ’ s wish for latin american development, which is captured in the title of his book, a bias for hope : essays on development and latin america, may eventually be fulfilled if the region stays the course and pursues sound fiscal and monetary policies and the needed improvements in underlying economic and financial institutions. * * *

saw prices of their exports plunge, interest rates skyrocket, and access to international capital being cut back severely. in this harsh new environment, the shortcomings of previous policies became even more apparent, and economic performance faltered. currency values plummeted as governments ran out of reserves, inflation soared, in some cases to as much as triple digit levels, and the output of the region contracted severely. key social and developmental priorities had to be scaled back as governments struggled to finance their budgets and find the funds to repay foreign creditors. domestic financial systems were thrown into disarray and many banks were severely weakened, both in direct response to the shocks hitting the region, and also as a result of misguided government policies undertaken in response to economic and political problems. the main discussions regarding latin america seemed most focused on issues of hyperinflation, high unemployment, and repaying the external debt. not surprisingly, under these circumstances, job creation during the 1980s was slow, many domestic businesses did not invest, and direct foreign investment was weak as well. these problems were not merely the result of uncontrollable, external shocks. they also reflected the fact that many governments in the region were slow to enact the reforms that would lay the foundation for future growth. in fact, in many cases governments responded to problems with policies that made things – 2 – worse, not better, including wage and price controls, freezes on domestic interest rates, and adoption of protectionist trade policies. these latter were in some ways particularly problematic, in that latin american countries in general did not focus on growing out of their problems through expansion of foreign trade. trade flows during the period were relatively small, compared with what one might expect from economies of their size, and the trade that did occur was highly tilted toward raw materials and semi - processed industrial products. in sum, notwithstanding some bright spots, the tone of discussion regarding latin america seemed biased toward discussion of problems and not of opportunities. current conditions i cannot say that all of the problems of the late 1970s and 1980s have evaporated. indeed, as is illustrated by the current situation in brazil, there are clearly problems still to be resolved. it continues to be important for brazil to implement macroeconomic and structural policies that restore international confidence and also reassure citizens that inflation will not reignite. however, much does seem to have changed with respect to latin america during the intervening period, and the region as a whole, even recognizing the ongoing challenges of the