The nucleus of the recent global crisis revolves around the interaction of global imbalances and financial deregulation. This relationship arose in the framework of the highest level of economic interdependence the world has seen. Beyond considering whether Latin American ability to absorb the external shock was the product of better economic fundamentals, the favorable external context, or a combination thereof, in this case, the economies of the region managed to avoid systemic financial collapse. The current global economic panorama is complex and the variety of possible scenarios diverse and Latin American economies provide examples of both strengths and weaknesses. The challenge for these nations will be to consolidate their recent achievements and ensure sustainable economic growth.

One of the most dynamic forces in the contemporary world, financial globalization has increased substantially since the 1990s. A unique symptom of this globalization has been an explosion of financial and economic crises that have had an especially severe effect on developing countries at the end of the twentieth century. Moreover, the effects previously felt in developing nations are now having an impact on even the most advanced economies. This article begins by describing current financial globalization and introducing the causes of the recent global crisis, the most severe in the post-war period, only comparable to the Great Depression. Secondly, this work explains the onset of the global crisis in Latin America, how this crisis was transmitted to the region and how Latin America has performed in terms of external conditions and internal economic policies. Finally, this study describes addresses the features of the current global economic context and the strengths and weaknesses of Latin America, emphasizing the need for economies in the region to replicate successes and correct mistakes.

Financial globalization has significantly accelerated over the past decades. The phenomenon of globalization is linked to the international mobility of capital. The development of financial systems and advances in information technology have led to a global system of supply and demand for capital. The presence of a global capital market is considered a feature characteristic of our contemporary economy (Olivera, 2004).

The capacity of financial globalization to produce favorable effects is highly controversial. On the one hand, fast-growing flows of private capital have constituted the basis of economic growth and wealth creation for a considerable number of developing economies. On the other hand, these flows of private capital have also contributed to generating a variety of financial crises, especially severe for these economies. However, the phenomenon that previously affected mainly developing countries now afflicts even the most advanced nations. The global collapse that began in 2007-2008 in these countries is likely the most severe financial and economic crisis of the post-war period, comparable only to the Great Depression.

According to Krugman (2008), a crucial aspect of the ongoing process of globalization is greater connectivity between markets. The current globalized financial system is characterized by a greater level of interdependence. The international finance multiplier – by which changes in asset prices are transmitted internationally through their effects on the balance sheets of highly leveraged financial institutions – is more important than in the past. Krugman (2009) adds that a large part of investments in this new globalized scenario have come from highly leveraged financial institutions and have involved extremely risky operations. When circumstances were complicated in the United States, these cross-border investments served as a transmission mechanism through which a crisis whose epicenter was the real-estate market of a single nation produced a series of ripple effects beyond its borders.

The nucleus of the recent global crisis revolves around the interaction between global instability and financial deregulation. The origin of instability may be interpreted as a function of different approaches. The perception of deficient savings in the United States reinforces the idea that the drop in their savings rate since the beginning of this decade has been crucial to the deterioration of current accounts. Simultaneously, national savings were reduced because the fiscal balance went from a surplus in 2000 to a deficit over the course of a decade. The new economy maintains that the favorable tendencies of productivity have turned the US into an extremely attractive destination for the rest of the world to invest, which translated into a significant inflow of capital that financed the deficit of the current account of this nation. The excess of global savings shows that diverse factors such as financial development, high oil prices and demographic aspects encouraged saving outside of the US. In particular, emerging economies implemented new strategies to manage capital flows, going from net capital importers to net exporters. Finally, codependence between the US and China confirms that Asian countries, motivated by a high aversion to risk following the 1997-1998 crisis and commitment to export-driven growth, have opted to satisfy external demand rather than internal, achieving surpluses in their current accounts through the under-valuation of their currencies. The over-valuation of the dollar and deficits in current accounts have allowed the US to live beyond its economic means. It is important to highlight that these approaches, far from incompatible, can be understood as the components of a larger story (Eichengreen, 2009).

The diverse hypotheses as to the role of global instability and financial deregulation in the 2007-2008 crisis vary widely. Obstfeld and Rogoff (2009) emphasize that global instability and the financial crisis were the result of common and closely linked causes, generated in the political economies implemented by a series of nations in the 2000s and by the disturbances that affected the transmission of these policies through the United States, as well as through global financial markets. In the United States, the combination of the monetary policy of the Fed, real global interest rates, failures in the credit markets and a wave of financial innovation would prove far from benign. The United States constituted the epicenter of the global financial collapse, but it quickly spread to other countries. At the same time, the economic policy of emerging countries such as China allowed the US to finance its macroeconomic instability through cheap debt. The voracity of foreign banks to acquire assets was effectively an immediate source of external financing for the deficit of the United States. In total, the policies in place maintained an artificial situation where China was far from its lowest autarchic interest rate and the US was far from its highest self-sufficient interest rate.

Similarly, Smaghi (2008) ascertains that global instability and the financial crisis interacted as two sides of the same coin. The crisis was generated as a result of both global macroeconomic conditions and the conditions of financial markets. It is tempting to attribute the origin of the crisis to the excesses of the financial system in the United States. However, other macroeconomic factors were behind the broadening of global instability, related to strong asymmetries of the international financial and monetary systems as well as insufficient macroeconomic discipline in a variety of economies.

From another perspective, Portes (2009) maintains that global instability was the fundamental factor involved in the outbreak of the 2007-2008 global crisis. Although ambition, financial innovation and deficient financial regulation are no small problems, the instability formed in the decade prior to the crisis drove the markets and financial instruments to being dysfunctional, and they finally proved to be highly problematic. At the same time, global oscillations led to reduced interest rates, the search for higher yields, significant leverage of financial institutions and excessive financial intermediation. Moreover, dispersion of current accounts in absolute values starting in 1996 and the pattern of capital flow from emerging markets and developing nations to developed countries were two distinctive features of global instability. It is useful to note that the new pattern of capital flow was not benign. Far from financing investment, capital revenue in the United States financed consumption and the government deficit. Nor did this pattern channel the savings of emerging markets to investment projects in these countries. Part of the funds financed the current account deficit in the US and the rest went through the US to markets in advanced countries.

Another position maintains that macroeconomic trends were crossed with financial innovation. The interaction between macroeconomic imbalance and the innovations of financial markets grew significantly in the context of financial globalization. However, the macroeconomic trends reflected in global imbalances solely encouraged colossal financial development in part. In the context of this macroeconomic instability, the demand for high returns facilitated a wave of financial innovation whose origin was the packaging, commercialization and distribution of securitized credit instruments. A new model of business emerged, whose fundamental features included growth of the financial sector, increased leverage, changes to maturity transformation, over-confidence in sophisticated mathematical models and high pro-cyclicality (The Turner Review, 2009).

For other authors, the global crisis was due to financial microeconomic factors. One particularly significant point addresses systemic risk. The facts have shown that there was a sort of massive failure in mitigating this risk. Central banks and supervisory agencies did not insist on developing macroprudential instruments that could have been used to address the increase of exposure to aggregate risk. The global regulatory structure was not entirely effective in reaching its objectives, leaving the responsibilities of central banks in the effort to obtain financial stability unclear (Nier, 2009). Ineffective supervision and regulation of financial markets in the United States and in other developed countries has been key to the global collapse. Financial innovation gave rise to new forms of moral risk (Dooley and Garber, 2009).

Borio (2008) explains that the 2007-2008 financial collapse demonstrates new or idiosyncratic aspects while also showing factors in common with other similar collapses. The former refer to the role of “structured credit products” and the model of originate and distribute, which both contributed to risk-taking and the magnitude of the crisis. Initially, new instruments gave their participants a false sense of security. However, when the crisis broke out, these factors aggravated the lack of confidence and led to a disappearance of market liquidity, increasing uncertainty with respect to valuations and the identification of risks in the financial system.

The unprecedented reach of the wave of reintermediation led to serious problems for financial institutions. At the same time, this can be explained by the magnitude of special purpose vehicles, financial instruments that in the context of the shadow banking system, managed to escape follow-up from many people, including the official community. However, the idiosyncratic aspects should not hide the fundamental nature of the crisis. Financial turmoil with an epicenter in the subprime market constitutes a typical example of financial instability with serious macroeconomic consequences that follow the accumulation of financial instability generated in times of prosperity. Although the predominance of the residential real-estate sector was a factor that differed from other episodes of financial turmoil, the qualitative factors are similar in their essence.

Following a past of significant paradoxes in terms of progress and set-backs, the economies of Latin America demonstrated a highly favorable panorama between 2003 and mid-2007. Later, the global economic and financial crisis would bring an end to the longest and most intense stage of economic growth that Latin America has seen since the 1970s. This growth occurred in a context of international economic expansion in the same time period, and lasted up through 2008, when the difficulties of the high-risk mortgage sector in the United States began to spread.

Although the global financial environment was in a particularly grave state following the Lehman Brothers debacle in September 2008, there was a certain initial impression that Latin America might experience something different than the external conditions would indicate. However, this idea soon disappeared as the financial and economic turmoil spread throughout the world. It was of course impossible for the region to have remained immune to the external commotion, but the intensity of the effects varied depending on each national context. It is notable that although the crisis originated in the financial sector of advanced nations, Latin American economies were able to face these difficulties without panic and avoiding financial collapses. The capacity of the region to deal with extremely serious external issues without leading to a systemic financial crisis is a notable phenomenon in the history of the region. Likewise, the desire of the international community to provide liquidity to emerging markets at the maximum peak of the crisis is no small aspect in terms of the performance of the region. Bagehot's teachings with respect to lenders of last resort were put into full use (idb, 2010).

As has been commented, Latin American countries were not spared the difficulties experienced in global markets. In this case, on average, the reduction in remittances had moderate repercussions, but for a few small economies, the effects were drastic. With the Lehman Brothers debacle, global financial conditions worsened. However, the financial shock felt in the region was less severe than in previous episodes of crisis. By contrast, the strength of the effects of the global crisis can be explained by the strength of commercial repercussions (Ocampo, 2009).

The two main channels through which the crisis was transmitted to Latin American economies were impairment to the prices of raw materials and a reduction in global commercial volumes. In the developed world, a drop in exports was fundamentally due to a decline in the volume of exported manufactures. In the developing world, it was fundamentally due to a decline in the prices of raw materials. In this context, Latin America experienced a significant commercial deficit between the end of 2008 and the beginning of 2009. With the partial recovery of the prices of some raw materials, the inclusion of these products in investment portfolios, the gradual reestablishment of global capital flows and recovery in the levels of economic activity in various developed and developing countries, commercial flows in Latin America began to recover starting in the first quarter of 2009. The spike in exports in the region was concentrated in South America due to a high demand for raw materials in China. By contrast, this increase was more moderate in Mexico and Central America (eclac, 2010).

With respect to financial channels, the recent global crisis demonstrated specific characteristics. The epicenter of the crisis effectively took place in the financial sectors of advanced economies, while the significant reduction in the external public debt of Latin America gave its governments a greater margin for maneuver and stabilized private markets. Vulnerabilities were more related to financial innovation than to macroeconomic instability or the fragility of the banking sector. The financial effects of the global crisis in the region began in mid-2007, but increased significantly in September 2008. The deleveraging of the global banking system and undermined appetite for risk among investors led to a decrease in demand for the financial assets of emerging economies and an abrupt depreciation of their currencies. The reversal of gross capital flows in combination with strict financial conditions reduced the liquidity of local and foreign money markets. In this context, the energetic efforts of central banks to provide liquidity to these markets played a fundamental role. The partial repatriation of external assets accumulated b residents in some countries and the progress achieved in local debt markets in developing countries, especially for government bonds, would also contribute to maintaining the financial situation. However, episodes of instability in the local monetary and currency markets in Brazil and Mexico would reveal that the economies of the region were not entirely immune to the difficulties brought on by the global collapse (Jara, Moreno and Tovar, 2009).

Following a series of disruptive crises, Latin American nations experienced unusual prosperity from 2003-2007. These countries also saw the most significant economic growth since the post-war boom that ended around the mid-1960s. This growth was a result of a combination of four factors: high prices for raw materials, thriving international commerce, extraordinary financial conditions and high levels of remittances. The history of Latin America reveals that these factors had not co-existed in the region before (Ocampo, 2009).

The response of Latin American countries to the recent global crisis has given rise to various interpretations. The region, or more precisely, GrupLAC 7 (Latin American and Caribbean Group), which includes Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela and together constitute 91% of the regional gdp, went into the crisis with stronger conditions than in previous crises. Low levels of inflation, surpluses in external and fiscal accounts, healthy banking systems, significant international reserves and more flexible currency systems were all factors that strengthened the region. This situation allowed the economies to respond to the global crisis with anti-cyclical policies, which is different from how these economies responded to previous episodes. However, the most distinctive feature of the recent crisis lies in the strength derived from international assistance. On this occasion, the assistance provided was widespread, timely, unconditional and meant to be preventive, which is a novel approach, given that in the past, assistance had been limited, slow, conditional and not preventive. Although the institutionalization of a lender of last resort on the global scale has yet to fully solidify, actions taken by the international community all point in this direction (idb, 2010).

Ocampo (2011) takes a more critical approach to the GrupLAC 7, ascertaining that with a few exceptions, the greater margin for applying anti-cyclical monetary and credit policies in the midst of the crisis cannot be explained by improved policies implemented in the years of prosperity. Rather, this margin came from the accumulation of reserves and a reduction in external debt levels, which are the greatest legacy of the prosperous years. Obviously, the exceptional external boom is no stranger to these facts. On average, external and fiscal accounts tended to be pro-cyclical in the years of prosperity. Current accounts adjusted for the terms of exchange show a strong deterioration in those years. This pattern was verified in the majority of GrupLAC 7 countries, which implies that they spent revenue derived from favorable terms of exchange. A strong adjustment later on the order of around 2% took place in 2009. Likewise, favorable fiscal balances reflect exceptional revenue derived from high prices of raw material, where Chile and Peru were the only nations in the GrupLAC 7 to apply real anti-cyclical policy in the years of prosperity. In 2009, public spending as a percentage of gdp in the GrupLAC 7 continued to grow, reflecting an increase in spending but also a fall in the gross domestic product.

Katz (2009) wrote that even though "all that glitters is not gold," the macroeconomic policies of the majority of countries in the region tended to be more prudent. Although fiscal revenue and the resulting surplus of the external sector were favored due to exceptional external conditions resulting from high prices of raw materials that were exported, it is also true that a significant portion of economic performance was in response to a greater government commitment to seeking stronger macroeconomic policy. The fundamental tools in the performance of the countries of this region throughout the global collapse included more flexible exchange rates, lower fiscal deficits, greater financial regulation, a lower weight of external debt and greater international financial reserves. The improved macroeconomic policies implemented in the pre-crisis period allowed policymakers a greater degree of freedom to undertake anti-cyclical actions when the global crisis brought on adverse and unprecedented conditions for the economies of the region.

In summary, unlike what happened in past crises, the economies in the Latin American region dealt with external difficulties without widespread financial turmoil. At the beginning of 2009, gdps in these economies did fall. However, by the second half of the year, there was significant recovery, which consolidated and continued in 2010 and 2011. On the basis of more reasonable policies, the performance of these economies would indicate that policymakers and economic agents have learned from their experiences in past crises. Still, all of the nations must avoid falling into complacency and continue to persist in implementing prudent macroeconomic policies.

Following the global crisis, Latin America experienced significant recovery. In this case, the combination of internal factors, such as more prudent and reasonable macro-financial choices than in the past, together with external factors, such as a strong spike in the prices of raw materials for exportation and significant capital revenue, were of importance. The recovery varied among the economies of the region, but similar to developing economies, recovery exceeded that of advanced economies.

The current global economic context is one of uncertainty and complexity. On the one hand, it is clear that the major players of the developed world have shown unfavorable financial and economic indicators. These signs are severe in the Eurozone, not very strong in the United States, and hard to predict in China. Taken as a whole, these indicators could point to deceleration of emerging markets as a result of the commercial and financial linkages they share with the United States and the Eurozone (Roubini, 2012).

For Latin America, global risks have been reduced, at least in the short term. Economic policy in the United States and in the Eurozone has halted the threat of low global growth. Reacceleration of growth in China should raise raw material prices and exports from the region. Vast capital revenue and good conditions for external financing are favorable to the growth of internal demand. In the medium-term, these same factors could experience an unfortunate setback. The agenda for economic policymakers in the region must lie in strengthening economic fundamentals to broaden the fiscal-monetary space. Currency flexibility to mitigate external effects must continue while prudential financial supervision and regulation to limit system risk will also be a crucial policy instrument. The challenge of increasing productivity in the region is of no less importance either (imf, 2013).

Beyond the external context, it is important to analyze the strengths and weaknesses of Latin America. One of its strength is the greater currency flexibility now present in many economies in the region. A variety of relatively new aspects in the regional scenario have allowed for greater flexibility of currency regimes to function efficiently. The partial de-dollarization of financial relations, a reduction in the fragility of domestic financial systems and greater opening of various economies in the region have all made it possible for greater currency flexibility to mitigate the effects of the external crisis. The depreciation of national currencies helped to balance external accounts while encouraging activities in the tradable sector and counteracting a trend towards falling internal production. Although vulnerability with respect to currency transactions fell in general, in some countries, the portfolios of local agents still showed a trend towards denationalization given sudden depreciations in the exchange rates. In these nations, the counterpart to expansion of economic activity was a decrease in liquidity and internal credit, brought on by a reduction in deposits in the domestic financial system (Katz, 2009).

In many cases, the fear of floating, or of significant currency fluctuations – which refers to the trend to intervene in the currency regimes of floating regimes to avoid sudden depreciation – was surpassed by the fear of appreciating, or the trend to intervene and depreciate or offset appreciation (Levy Yeyati and Sturzenegger, 2007). This type of intervention from economic authorities acknowledges two key factors. One, the boom in raw materials during the decade of the 2000s does not seem to have come to an end. Two, following the global crisis, capital inflows to emerging economies grew significantly.

A second strength has to do with improved financial regulation in various economies of the region. The recent global crisis gave rise to important lessons. Until recently, the role of monetary regimes consisted of ensuring price stability. Following the crisis, consensus grew with respect to the need for central banks to reinforce their objectives of financial stability by implementing regulatory instruments with a broader scope than they traditionally used. The application of a macroprudential approach to supervision and regulation of the financial system is crucial. This will allow better risk evaluation with broad coverage for all agents and their linkages with internal and external economic conditions as potential factors for systemic crisis. This new approach both differs from and complements the more traditional microprudential perspective of regulation. While the former focuses on limiting instabilities with systemic effects, the latter only seeks to limit episodes of tension in individual banks without the capacity to evaluate their effect on other entities or on the economy as a whole (Central Bank of the Republic of Argentina, 2009).

Calderón, De la Torre, Ize and Servén (2011) emphasize the relevance of implementing a macroprudential approach in Latin America. This argument is based not only on the fact that financial cycles in the region were more frequent and accentuated, with effects sometimes more severe than in other regions, but also on the fact that the region has had to face a potentially risky and volatile combination of external pressures as reflected in the strong inflow of capital, a boom in the price of raw materials and new risks of financial turmoil. In general, financial oversight has improved in the region and countries have deployed a set of macroprudential instruments that allow them to mitigate the risks of the crisis.

A third strength reveals that in general, the external financial balances of Latin America have experienced substantial progress. As has been mentioned earlier, this may be interpreted as the most relevant achievement that allowed the economies of the region to face the recent global collapse. Specifically, a significant reduction in external vulnerability in terms of net external debt of the accumulation of reserves in foreign money constituted a real milestone in the economic history of these nations (Ocampo, 2009).

Before the crisis, primary product exporting economies had resources to decrease their vulnerability by reducing gross liabilities and increasing gross assets. With fewer resources, the importers of these products found themselves in a more vulnerable situation. Following the crisis, the structure of balance sheets changed. Exporters of primary products received large portfolio inflows in the form of shares and debt. However, the liabilities of foreign direct investment are still double those of portfolio investment, both expressed as a proportion of the gdp. While the share of these liabilities in the private sector has increased, external public liabilities have strongly declined. For importers of primary products, public sector liabilities have not changed significantly while those of foreign direct investment have increased. Even so, banking and portfolio investment liabilities in shares are still very elevated.

In terms of assets, the international reserves of exporters of primary products have grown at a greater proportion than those of importers of the same products. Moreover, the composition of the public debt in the region has undergone a key change. In general, there has been a reduction in external public debt and an increase in debt issued in local currency (idb, 2012).

A fourth strength has to do with the application of anti-cyclical fiscal policies in the majority of economies in the region. At the beginning of the global collapse, Latin American countries implemented a broad set of measures to safeguard liquidity and maintain confidence. In the majority of the region, fiscal measures were expanded, allowing, in many cases, an increase in deficits with the objective of encouraging levels of activity. The fiscal stimulus packages encompassed three categories: anti-cyclical measures to maintain aggregate demand, including tax reduction, investment in infrastructure and other measures to drive the private sector; emergency measures to stimulate demand for employment, such as temporary jobs programs; and, finally, the expansion of social protection programs to protect the incomes of the most vulnerable sectors of society. The global panorama has shown that the fiscal realm of anti-cyclical policies varies among the countries in the region. As a result of this process, recent experience in fiscal issues aiming to deal with external global effects will help countries in the region to select fiscal policies subject to a more limited fiscal space than currently exists (idb, 2012).

The region also exhibits major weaknesses. The first is related to the fact that the region is dependent on raw materials. The super-cycles of raw materials are not a novel phenomenon in the history of the region, and in fact, South America in particular has benefited from the boom of these products. Even so, the issue of dependency poses serious questions.

It is unclear if raw materials constitute a threat or an opportunity, although many high-income countries were developed through the exploitation of their natural resources. Still, the theory of the curse of natural resources cannot be ignored. There are a variety of questions surrounding the abundance of natural resources. Proper management of the quantity of primary goods available requires turning natural capital into other forms of wealth, which also requires effective handling of macroeconomic policy and improving the competitiveness of economies dependent on natural resources. Reality has shown that a large proportion of income from natural resources is merely consumed, rather than invested. There is a special challenge in applying fiscal policy capable of managing short-term cycles and maintaining real wealth in the longer term as well. Three aspects are deserving of attention: the diversification of fiscal revenue, support for diversification of the tradable sector and equitable distribution in a synchronic and diachronic manner (De la Torre, 2011).

A second weakness is related to the risks that vast capital inflows could bring to the region, which could include both macro and microeconomic aspects and even toxic interactions between the two. A particularly significant risk is that of overheating, which refers to an excess of demand for local goods and financial assets that could lead to strong currency appreciation, inflation in consumer prices, and most importantly, an increase in the price of non-tradable goods and local assets with restricted supply. This overheating could conceal serious macroeconomic risks. Although a constant increase in the inflow of capital may also be favorable for the region, a significant and sudden increase in this inflow could lead to a series of potential adjustments. Capital inflow levels could stay the same, fall or even suddenly be withdrawn, generating great uncertainty for the economies of the region (idb, 2011).

Regulating capital flows may be the proper macroeconomic tool to implement by addressing the origin of cycles of expansion and contraction: unstable capital flows. These regulations would provide a margin for maneuver and act during periods of boom by applying prudent monetary policy with lower pressure. The effectiveness of this tool lies in its capacity to ameliorate or eliminate the quasi-fiscal costs of the sterilized accumulation of currency. Likewise, on the other extreme of the cycle, where there are dominant external restrictions, they may provide a margin for applying expansive monetary and fiscal policy (Ffrench Davis, 2008).

Finally, dependency on European banks is no less important, as the subsidiaries of these foreign banks in Latin America play a key role in financial intermediation. If the situation in Europe does not become too severe, the process of deleveraging European banks may occur rapidly. However, if the situation worsens, they could transmit their vulnerability to Latin America, either through direct or indirect channels. The former would include cross-border loans and the presence of their banks in the region. Although the majority of foreign banks are locally anchored, deleveraging could have negative repercussions on the region by restricting capital and loans. Indirect channels are also important, as the international banking structure is extremely intricate and exposure may not be derived only from direct loan relations, but rather also from connections with banks that lend to countries or institutions in crisis (idb, 2012).

Financial globalization has made economic growth possible for a large number of developing economies, while also contributing to a variety of financial and economic crises in these same economies. In the context of greater connectivity among markets, which was previously a phenomenon that mainly affected developing countries, developed nations were affected in 2007-2008. Factors behind global instability and financial deregulation made clear that financial globalization can bring with it severe problems.

Although international conditions have been favorable to the external and fiscal accounts of Latin America, it must also be recognized that a considerable portion of their economic performance was due to greater governmental commitment to implementing more prudent macroeconomic policies. The capacity of the region to deal with such severe external challenges without leading to a systemic financial crisis is notable in the history of the region.

Currently, Latin America is facing a complex and uncertain international scenario. Following the global crisis, recovery in the region has been significant. In the short-term, high prices of raw materials and favorable conditions for external financing have been extremely interesting for many economies in Latin America. In the longer term, aiming to sustain economic expansion, the economies of the region will have to face the challenges of emerging markets, particularly in terms of prudent macroeconomic management and increasing productivity. The challenge for these economies consists of consolidating their recent advances and ensuring sustainable economic growth. Despite its difficult history, Latin America has the potential to build a promising future.

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