ABSTRACT
Throughout the post-World War II period, international financial institutions (IFIs) have been active participants in Latin America's economic development. 1 They have left a clear mark in the region from the first World Bank loans and International Monetary Fund stabilization agreements in the early 1950s and the establishment of the Inter-American Development Bank in 1958, to the World Bank's increased emphasis on poverty alleviation a decade later, the temporarily reduced role of IFIs during the 1970s, and their reemergence as the vanguard of economic reform in the wake of the debt crisis. Whether the impact of IFI operations in Latin America has been positive or negative for regional development has been the subject of continuing and often-heated debate for nearly a half century. For good or bad, however, it is generally agreed that IFIs have exerted significant influence over economic decisions and the broader development trajectory of the region. Yet as the twentieth century draws to a close, the central role of IFIs in Latin American development is being challenged by dramatic changes in the international and regional contexts within which these institutions operate. No longer do IFIs operate in a world characterized by significant bilateral aid flows and exclusively national capital markets, and by a region composed of closed economies managed by interventionist, authoritarian states. Declining bilateral flows, the internationalization of financial markets, and the regional process of economic reform and democratization have markedly restructured the environment within which IFIs operate. To preserve its policy efficacy in this new regional order, each institution must modify the way it does business in Latin America. Although this process of institutional adaptation is already well under way, it is far from complete. The relative capacity of the IMF to promote economic stability in Latin America and of the World Bank and the Inter-American Development Bank to promote regional development into the twenty-first century thus depends on how effective this process of adaptation proves to be.
