ABSTRACT
In the mid-1970s the Southern Cone countries of Latin America implemented drastic reforms in the financial sector, within a context of profound political, institutional, and economic changes. These changes stemmed from the collapse of the democratic regimes in Argentina, Chile and Uruguay—and their replacement by authoritarian governments—and from a global criticism of the development strategies that had been prevalent in those countries since the middle of the century. The financial reforms in the Southern Cone were discontinued owing to the foreign debt crisis that affected Latin America from 1982 on. Many of the problems experienced by the financial sector arose because of errors in macroeconomic policies-particularly as a result of the detrimental effects derived from using the exchange-rate policy as a key instrument in the stabilization programs. From the Southern Cone experience one could hardly say that there was much efficiency in the allocation of resources by the deregulated financial system.
