ABSTRACT
This chapter reviews the broad pattern of foreign capital flows, financial crises, and the policies that accompanied them in Latin America in the last decade. It summarizes the main features of capital inflows to the region in the 1990s. The chapter discusses the domestic factors that attracted NPKI to LAC in the 1990s. It deals with the extensive policy reforms that were implemented in the region since the late 1980s and how they may have fostered higher foreign capital flows. The chapter addresses the influence of policies that were specifically adopted to modify the level and composition of capital inflows. It discusses how domestic policies may have contributed to the emergence of financial crises and how they addressed these crises when they emerged. Finally, it is clear that no single policy will reduce an economy's exposure to financial instability, and countries should certainly not rely on a single policy instrument to reach that objective.
