Latin American financial markets have experienced evolution, not revolution, although it must be acknowledged that the effects of the evolution in the markets may have effects that feel revolutionary to certain segments of the population. Despite the fact that most Latin American countries have experienced some form of economic instability, and others have enjoyed unprecedented periods of sustained stability, while still others have converted to a dollar system, the fact of the matter is that a financial or economic revolution would only occur if complete system changes—such as a transition from capitalism to socialism–were instituted without the democratic support of the populace. It is possible that some countries in Latin America will experience economic revolutions in the coming years. Venezuela’s president, Hugo Chavez, for instance, has proposed a system in which each of the country’s provinces has its own unique currency, which will not be interchangeable with the currency of other provinces.
Cuba may also experience an economic revolution if there is a regime change; it is entirely possible that the almost 50 year old socialist economic system will be replaced by a capitalist model if exiles have their way. At the present juncture, however, the developments in Latin America’s financial markets can only be characterized as evolutionary. Latin American countries are increasing their participation in world markets, are diversifying traditional centers of production, and are moving towards achieving greater parity between import and export ratios. They are experimenting with various investment schemes and international partnerships, leveraging the power of combined resources and strength. Finally, the region has begun to lessen its historical dependence upon the United States as a primary trade partner, looking to other countries with which it can establish short- and long-term arrangements that will be mutually beneficial.
The most important innovations in Latin America’s financial markets and institutions include the diversification of trade relationships; the expansion of production to include new exportable items; the strengthening of banks through central banking and other regulation schema; and the strengthening of regional relationships, forming an informal yet powerful economic bloc. Historically speaking, Latin America’s primary trade partner has been the United States, which imported products including beef, vegetables, fruit, wine, minerals and ore, and textiles. In recent years, however, Latin American countries have begun to decrease dependence on that partner, seeking other trade relationships that will spread both profit and liability amongst a more diversified and numerous group. Venezuela, for instance, is exporting oil to China. At the same time, many Latin American countries have made inroads into the production of goods not traditionally made in the region. Chile and Argentina have expanded agricultural production, increasing the range of products they can offer to trade partners and, in the process, decreasing the vulnerability that occurs from being a single-product exporter.
The strengthening of banks and regulatory functions in Latin American financial markets has helped to stabilize the currency and general economic market, making the region more attractive to both internal consumers and external investors. The relative financial stability of the region has increased confidence and, by extension, has served to continue improving the economy. Regulatory efforts have been at least partially successful in decreasing corruption that has crippled the economic infrastructure of many Latin American countries, though there is still more work to do in this area. Finally, countries in the region are beginning to develop closer relationships internally, trading with one another and forging agreements for win-win economic strategies. This presents a more unified front and will facilitate the expression of the region’s interest in front of international economic forums.
There are many lessons that I have learned by studying the financial policies and financial crises that have occurred in Latin America in recent years. Some of these lessons were new, while others reaffirmed existing knowledge or impressions that I had. I recognized anew, for instance, that economic systems of any country or region both act upon those of other nations and are acted upon by external policies and practices; there is an amazing degree of interdependence in the world’s economic systems. What happens in one country can destabilize trade and finance in another country, or in an entire region, not just for the country taking a particular policy or program stance. One of the most surprising new lessons was seeing just how diverse the financial markets in Latin America are. In addition to having far more numerous types of production both for internal use and export than I realized, I saw that Latin American countries have dramatically different strategies upon which they have built the architecture for their economic structure. In some countries, the architecture has been deconstructed and reconstructed multiple times in the span of just a few decades, creating a variety of reactions among internal and external stakeholders: optimism for new possibilities, disappointment when that potential is not fulfilled, wariness when yet another new set of proposals is articulated and implemented. Finally, I learned just how dynamic the financial markets in Latin America are, and I developed a deep interest in keeping abreast of the evolution of the region’s economic activities. For an area that is so close to the United States, it seems that many Americans know relatively little about what is happening in Latin America. Yet developments in the region are likely to have a profound impact on North American economic issues, as well as an impact in the world financial markets. I look forward to continue learning more about this region’s financial developments and seeing how current policies fare over the long-term.
