They have risen bit by bit. But since the financial crisis in 2008, the Fed has kept interest rates in the United States exceedingly low. Now with healthier economic growth and employment in the United States, that may be changing, and Latin American countries need to be on their guard. Latin America's major economies have accumulated large amounts of foreign corporate debt … [Read more...] about Dealing with Corporate Debt and Rising Interest Rates
Promoting Competition to Boost Welfare Through Social Programs
Since the mid-1990s, governments in Latin America have used conditional cash transfers (CCTs) to reduce poverty, improve health, and boost school enrollment for tens of millions of people. But like any social program that increases income and hence demand, CCTs pose their own risks if they allow for goods and services to be purchased in a non-competitive environment. That is … [Read more...] about Promoting Competition to Boost Welfare Through Social Programs
Latin America: The Story Behind Falling Inequality
In the early 1800s, the Prussian scientist and explorer Alexander von Humboldt wandered the streets of Latin America and wrote of his astonishment at the misery and wealth; the "nakedness" and the “luxury", the "immense inequality of fortune." Today, that image of inequality endures. The region, along with Sub-Saharan Africa, is the most unequal in the world. But things are … [Read more...] about Latin America: The Story Behind Falling Inequality
Guatemala: The Crisis of Rule of Law and a Weak Party System
In mid-2015, tens of thousands of ordinary Guatemalans poured into the streets to protest against a multimillion-dollar corruption scheme at the highest levels of government and demand reform. By September, key ministers and advisers had been fired. The nation's president sat in jail. But today, two years after that euphoric demonstration of people power, little has changed in … [Read more...] about Guatemala: The Crisis of Rule of Law and a Weak Party System
When Expectations Push a Country to Default
Countries have long relied on the issuance of debt to finance their expenditures and investments. However, it can be risky. Episodes such as the worldwide debt crisis of 1983, with its dramatic effects on Latin America, and the more recent European debt crisis, show that countries need to be cautious when choosing their debt levels. High levels of debt coupled with periods of … [Read more...] about When Expectations Push a Country to Default