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This volume presents the papers and proceedings of a conference held by the Institute for International Economics in November 1989 to reassess the course of Latin America adjustment in the wake of profound political and economical changes in a number of Latin countries after mid-1985. Experts from each of eight individual countries in the region and two groups of smaller countries analyze the extent end the results of recent policy reforms. Their analyses focus on three fundamental questions: Is there agreement on what policies are needed to restore growth and overcome the debt crisis? Have the Latin America countries begun to implement such policies effectively? Do the results so far confirm the wisdom of such efforts?

Latin American Adjustment: How Much Has Happened?

Chapter 2

No statement about how to deal with the debt crisis in Latin America would be complete without a call for the debtors to fulfill their part of the proposed bargain by ""setting their houses in order,"" ""undertaking policy reforms,"" or ""submitting to strong conditionality."" The question posed in this paper is what such phrases mean, and especially what they are generally interpreted as meaning in Washington. Thus the paper aims to set out what would be regarded in Washington as constituting a desirable set of economic policy reforms. An important purpose in doing this is to establish a baseline against which to measure the extent to which various countries have implemented the reforms being urged on them.
The paper identifies and discusses 10 policy instruments about whose proper deployment Washington can muster a reasonable degree of consensus. In each case an attempt is made to suggest the breadth of the consensus, and in some cases I suggest ways in which I would wish to see the consensus view modified. The paper is intended to elicit comment on both the extent to which the views identified do indeed command a consensus and on whether they deserve to command it. It is hoped that the country studies to be guided by this background paper will comment on the extent to which the Washington consensus is shared in the country in question, as well as on the extent to which that consensus has been implemented and the results of its implementation (or nonimplementation).
The Washington of this paper is both the political Washington of Congress and senior members of the administration and the technocratic Washington of the international financial institutions, the economic agencies of the US government, the Federal Reserve Board, and the think tanks. The Institute for International Economics made a contribution to codifying and propagating several aspects of the Washington consensus in its publication Toward Renewed Economic Growth in Latin America (Balassa et al. 1986). Washington does not, of course, always practice what it preaches to foreigners.

John Williamson

Dr. John Williamson is a Senior Fellow at the Institute for International Economics since 1981. He was on leave as  Chief Economist for South Asia at the World Bank  during 1996-99, economics professor at Pontifica Universidade Católica do Rio de Janeiro (1978-81), University of Warwick (1970-77), Massachusetts Institute of Technology (1967, 1980), University of  York (1963-68), and Princeton University (1962-63); Adviser to the International Monetary  Fund (1972-74); and Economic Consultant to the UK Treasury (1968-70). He is author or editor of numerous studies on international monetary and developing world debt issues, including The Crawling Band as an Exchange Rate Regime (1996), What Role for Currency Boards? (1995), Estimating Equilibrium Exchange Rates (1994), The Political Economy of Policy Reform (1993), Economic Consequences of Soviet Dis-Integration (1993), Trade and Payments After Soviet Disintegration (1992), From Soviet Disunion to Eastern Economic Community? with  Oleh Havrylyshyn (1991), Currency Convertibility in Eastern Europe (1991), Latin  American Adjustment: How Much Has  Happened? (1990), and Targets and Indicators: A Blueprint for the International Coordination of Economic Policy with Marcus Miller (1987).