Good-Bye financial crash, hello financial eclecticism: Latin American responses to the 2008-09 global financial crisis

1985 saw the publication of Carlos Díaz-Alejandro's classic article, “Good-Bye Financial Repression, Hello Financial Crash” (1985). Writing in the wake of drastic financial blowups in the Southern Cone, Díaz-Alejandro nonetheless argued that “a believable alternative system could be designed, avoiding many of the inefficiencies of financial repression … and blending both public and private financial agents” (18). Nearly three decades after the publication of this prescient work, there are credible signs that such an arrangement is now emerging within some Latin American emerging economies (EEs). Just as Díaz-Alejandro studied how the 1982 debt shocks both exacerbated and shed light on financial sector policies and institutions in the Southern Cone countries, we use the 2008-09 global financial crisis (GFC) as a lens through which to examine the policymaking capabilities of six Latin American countries. We find that several of the countries successfully weathered the 2008-09 financial shocks and argue that this is due to: institutional modernization that facilitated policy learning and a more business-friendly climate; and, to sustainable improvements in income distribution that may have facilitated consensus-building. These factors, we suggest, gave policymakers both the expertise and the political space to employ more nuanced fiscal and financial policies.