significant gains in growth. as a result, 1997 was the year of fastest growth in 25 years. this same process led to unprecedented resiliency in the face of serious challenges during 1998 - 99. in fact, with the exception of ecuador, fiscal discipline was maintained, inflation was tamed, and there was no uncontrolled currency crisis, widespread banking crisis, or external payments crisis. the reforms are solid : they were not rolled back, but withstood the 1998 - 99 recession. much has been said about an alleged reversal of reforms. such a reversal has not taken place. in spite of the serious difficulties caused by the international financial crisis of 1998 - 99, virtually all countries of the region continued to deepen the structural reforms instituted in earlier years. of 14 countries evaluated by the bank, 10 promoted major fiscal or tax reforms in 1999, 7 were discussing significant reforms in their social security systems, 4 had made major progress in their privatization programs and 4 were discussing deep labor reforms. the review noted an additional 25 cases of reforms in financial systems, in legislation to promote competition and in other areas of economic and social policy in those countries. 2. recent experience with financial turmoil if reforms were so effective and fundamentals so strong, why did latin america have a serious growth slowdown and recession during 1998 - 99? the answer is the combination of negative external shocks, to which the region remains quite vulnerable. in their absence, the region was poised to maintain a path of relatively high growth. international terms of trade and commodity prices deteriorated substantially in 1998, in large part as a result of the east asian crisis. most latin american countries are still quite vulnerable to changes in commodity prices. some countries were severely hit by natural disasters, including el nino. these external shocks could have been accommodated with additional external financing, but it was not available. worse yet, normal external financing dried up and became the main problem. not only were international capital markets not there for latin america when they were most needed, but they actually aggravated the problem. unfortunately, this procyclical pattern with external financing, drying up when external conditions ( such as terms of trade or interest rates ) deteriorate, is typical in latin america. right there you have a core problem in our region : precarious access to external financing that disappears when it is most needed. that is why our hosts, our mexican friends, decided to arrange a special stand - by financial package under the umbrella of the imf, “

enrique v iglesias : economic trends in latin america – the context of a globalized economy statement of mr enrique v iglesias, president of the inter - american development bank, at the meeting of the bank for international settlements, in mexico city, mexico, on 13 november 2000. * * * dear governors and friends : i am honored that bis invited me to speak to this distinguished audience of central bank governors from so many countries. that our host, the bank of mexico, is celebrating its 75th anniversary makes this a particularly special occasion. as you may expect, my topic today is latin america. i would like to use this opportunity to convey the views of the inter - american development bank on the state of economic affairs in the region and also to share with you some of our concerns about the future. i hope that some of these concerns may be of interest to the bis as they relate to its important work of strengthening financial systems. i shall divide my remarks in three parts. first, i shall briefly talk about the deep reforms that our region undertook in the past decade, which have radically transformed for the better the economic landscape of latin america. however, despite the strong policies and institutions that were put in place, as you know, our economies were overwhelmed by the external shocks suffered in recent years. second, i shall tell you how our region has experienced recent international financial turmoil and how it is currently recovering from a growth slowdown. the key question now is whether changes have been made to prevent the same experience from happening again and, after this painful episode comes to an end, whether growth and stability will prevail. i certainly hope so, but, finally, i shall close with some of my concerns about our continuing vulnerability to a sometimes hostile external environment, which i think are of interest to the bis and others involved in reforming the international financial architecture. 1. the reforms undertaken by the region in the last decade the reforms were deep : in the last decade, latin america embarked on a broad range of macroeconomic stabilization efforts and structural reforms that radically changed the economic environment. macroeconomic stabilization has been the result of a very important effort to correct our traditional fiscal imbalances throughout the region. fiscal deficits larger than 3 % of gdp were common in the eighties and are now exceptional : the average fiscal deficit in the last ten years has been just 1. 4 % of gdp. fiscal consolidation has been supplemented with sound monetary policies, which has resulted in much lower levels of inflation in most