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F and D logo
A quarterly magazine of the IMF
  December 2005
Volume 42, Number 4

Latin America:
A Time of Transition

Latin America's Resurgence

Anoop Singh and Charles Collyns
Despite a better economic performance, many in Latin America remain dissatisfied with the level of progress. Latin America's economic resurgence provides a historic opportunity for the region to catalyze its considerable natural and human capital resources into sustained and higher growth, breaking the cycle of crises of the past.

A Fork in the Road
Arminio Fraga
During a period of elections, Latin America faces a choice between populism and deeper reform. Without economic growth, political support for macroeconomic stability will weaken, and the danger of a return to the ups and downs of the past cannot be ruled out.

Putting Latin America Back on the Map
Arturo Valenzuela
Consolidation of democratic institutions is a vital part of Latin America's recovery, so that it can become more competitive in a globalized economy. This means tackling the challenges of building state capacity, and improving accountability, representation, and governance.

Stuck in a Rut
Jaime Saavedra and Omar S. Arias
Although macroeconomic stability in Latin America has generally improved, the succession of economic crises in the late 1990s and early 2000s has proved devastating for the poor. But progress on reducing poverty can be made if governments focus on providing more opportunities through access to health, education, jobs, and financial services.

Latin America's Indigenous Peoples
Gillette Hall and Harry Anthony Patrinos
Despite greater political power, indigenous peoples still lag behind. More progress is needed in such areas as land rights, labor legislation, and access to credit, as well as better education programs and health services, and more data about the conditions faced by indigenous peoples.

spacer Taming the Monster
Agustín Carstens and Luis I. Jácome H.
Latin America's central banks have managed to beat back hyperinflation and have used their newly gained independence to cement price stability. But many challenges remain, including improving banking supervision, keeping fiscal deficits in check, and dealing with dollarization.

Building on CAFTA
Alfred Schipke
How the free trade pact can help foster Central America's economic integration. To ensure the greatest benefits while minimizing risks, the region needs enhanced policy coordination and harmonization, especially in the areas of taxes and the financial sector.

Also in This Issue

The Inequality Trap
Francisco H.G. Ferreira and Michael Walton
Considerable evidence shows that equity—defined as equality of opportunity and avoidance of absolute deprivation—plays a role in the pursuit of long-term prosperity for society as a whole. Policymakers must find ways to bring equity to the center of the development discourse and policy design.

A War Chest for Fighting HIV/AIDS
Maureen Lewis
With billions of dollars mobilized to fight HIV/AIDS, the challenge is how to spend the money wisely. Weak institutions and fragile budgeting undermine absorption of funds in low-income countries, while the focus on AIDS programs without the requisite attention to the broader health care system is neither sustainable nor good policy.

Islamic Finance Gears Up
Mohammed El Qorchi
Islamic finance is developing at a remarkable pace. But the industry faces unique regulatory challenges. Adopting best practices for supervision and accounting is critical for future market and industry development.


Letter from the Editor

Letters to the Editor
Survival of the fittest; Who should pay for university?; Not just for profit.

In Brief

News from international agencies
Bird flu action plan; Digital divide harms growth; Africa fighting desertification; Working longer.

People in Economics

Economics with a Social Face
Conny Lotze
Profile of Latin American economist Nora Lustig. She has been in the vanguard of development economists who not only insisted on the link between poverty reduction and macroeconomic policy, but also advocated well-targeted social policies to help the poor break out of poverty for good.

Back to Basics

Remittances: A Lifeline for Development
Dilip Ratha
Workers' remittances—earnings sent home as either cash or goods—have been growing rapidly and now represent the largest source of foreign income for many developing countries. But what is the downside, why are costs so high, and should governments do more to encourage the growth of remittances?

Picture This

Sending Money Home: Trends in Migrant Remittances
Dilip Ratha
The top three recipient countries for remittances in 2004 were India, China, and Mexico. But it is much smaller countries that top the list when controlling for the size of the economy, such as share of GDP. A chart-based look at remittance flows.

Book Reviews

The United States and the World Economy: Foreign Economic Policy for the Next Decade, C. Fred Bergsten and others

The Democracy Advantage: How Democracies Promote Prosperity and Peace, Morton H. Halperin, Joseph T. Siegle, and Michael M. Weinstein

Curbing the Boom-Bust Cycle: Stabilizing Capital Flows to Emerging Markets, John Williamson

Straight Talk

Aid and Growth: The Policy Challenge
Raghuram Rajan
The IMF's Economic Counsellor says we need more than aid to break the cycle of poverty. He argues that if the campaign to make poverty history is to succeed, then the failures of the past must be recognized, starting with recognition of the chequered history of aid.

Country Focus

In recent years, Peru has enjoyed robust growth thanks to sound macroeconomic policies, significant progress with structural reforms, and a favorable external environment. Continued strong growth will help further reduce Peru's still high poverty and social inequalities.


List of Articles of 2005