ABSTRACT
In the past, Latin America was wracked by macroeconomic instability rooted in unsustainable government budget defi cits. The Latin American debt crises of the 1980s epitomized the severe macroeconomic instability that curtailed growth in the region; however, since the early 1990s, fi scal and monetary policy has improved markedly in much of the region. The improvement sometimes took the form of a concerted and drastic policy effort. For example, in 1994 in the face of chronic infl ation, Brazil implemented the Plano Real (Real Plan) that combined currency reform with monetary and fi scal tightening. The consequent improvement in fundamentals helped Latin America weather the global fi nancial crisis of 20082009 well. Despite some major exceptions, there has been an unmistakable region-wide trend toward macroeconomic stability underpinned by fi scal responsibility. The improved fi scal performance is evident in key indicators such as fi scal balance ( Figure 8.1 ) and government debt ( Figure 8.2 ).
