Latin American in the Era of “Hot Money”

The Mexican devaluation and subsequent crisis of December-January, 1994-1995 put all Latin American governments on alert. The “tequila effect,” as the Mexican debacle was known, was the result of problems facing the whole region, despite avowals by government ministers in Brasilia and Buenos Aires that “we are not Mexico.” Even in Mexico, whose leaders claim that the economy has stabilized, the real crisis is not over. It is deeper than mere exchange rate disequilibria, and relates to the changing nature of global capitalism.

As global capital has expanded relentlessly into the former communist world and also into countries that had previously offered some degree of protection to national capital, the rules...