At the end of the 80s and beginning of the 90s, after a decade characterized by a drop in savings and investment rates, shrinking employment and high inflation, many Latin American and Caribbean countries started to show signs of economic recovery. Thus, between 1991 and 1993, regional GDP per capita grew at 4.3 per cent accumulated rate, as opposed to the 8.9 per cent decline rate observed in the 80s. On the other hand, there was a certain stability of prices, a reduction in public deficit, an increase in intra-regional trade, and a substantial direct foreign investment inflow (CEPAL, 1993, pp. 1-4).
The change in the international economic situation and the agreement reached in most countries (captivated by certain Asian examples) to foster economic deregulation and liberalizations as a way out of stagnation made recovery possible. Economic programmes to reduce public expenditure were enforced, as well as tax systems reforms, credit control, currency devaluation, a drastic cut of barriers to foreign trade and public companies deregulation or privatization. In brief: less weight for the public sector and more opportunities for the private one.
Notwithstanding these policy changes, regional income in 1993 was still 5 per cent below the 1980 figure, and only equal to that in 1978. Moreover, economic growth was not evenly distributed. In Barbados, Haiti, Nicaragua and Surinam the GDP decreased; while in Argentina, Bahamas, Chile and Panama accumulative growth between 1991 and 1993 exceeded 20 per cent. By the end of 1993, internal savings had not improved; current accounts balances continued to worsen; national debt interests continued to absorb a large portion of foreign exchange acquired through foreign trade (almost 100 per cent in Nicaragua's case); and basic infrastructure (energy, transport, communications, ports, basic sanitation, education and health) continued to deteriorate. Between January 1991 and October 1993, bonds of Latin American external debt went up in the secondary market from a weighted average of 32.5 per cent to 62.8 per cent of their nominal value. Nevertheless, capital inflows as well as placement of bonds were, in many cases, short-term operations, and as such very sensitive to national and international fluctuations (PAHO, 1994c, pp. 315-325). The recent political and financial crisis in Mexico (the main Latin American country receiving foreign capitals to buy public debt) clearly illustrates this kind of growth weakness.