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With the global financial crisis still causing problems for developed countries all over the world, especially the United States, it can be difficult to shift the focus from your country's financial issues to those present in other areas, such as Latin America. But we ought to do so from time to time, because what happens in one country affects all the others, as we have learned from the global financial crisis that was caused by bad investment practices in the United States. Therefore on this website we will focus on the financial issues of Latin America.
For many years before the global financial crisis hit, Latin American countries struggled with hyperinflation. Price rises - called inflation - are normal in the course of things, but dozens of times in the 1980s and beyond inflation got so bad in countries like Bolivia and Brazil would see interest rates rise more than 100% in a week, which meant people there had no idea what things would cost day to day and their wages could not possibly keep up with skyrocketing prices. The cause of these inflation crises were simple: the larger the deficit a country built up, the more inflation ran rampant.
Boom and bust was another traditional Latin American financial problem. With much of their economies being supported by exports of commodities such as bananas or ore, a crop failure or a seam running out had the potential to take down a country's entire economy. Similarly, during boom periods when countries were doing well, their spending would increase to match the new income, but then all of their best laid plans would come to ruin when the extra money dried up and there was nothing in reserve to carry people over until the next boom.
And then, of course, there's corruption. In the more unstable Latin American countries where political control frequently changes hands and bureaucrats have almost no accountability to the people they're ostensibly working for, the temptation to embezzle public and private funds from government coffers and banks is great. As a result, significant portions of Latin America's wealth have been siphoned off to numbered offshore bank accounts. Consequently there was often a huge gap between the rich and powerful and the poor and disenfranchised, even in democratic countries that were not run by a dictator or the military.
The good news is that things in Latin America have improved a lot in the past few decades. With better fiscal polices, more local investment, and a diversification of economies, Latin American countries were able to strengthen their financial security to the point where they were one of the regions least affected by the global financial crisis of the late 2000s. If you would like to learn more about Latin America, its financial situation, or the global financial crisis, there are plenty of articles on this website that can enlighten you.
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