Government of Chile Reduces One Essay

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Similar to what happened in Chile happened between the 1930s and the late 1970s in most countries in Latin America that used the import substitution industrialization model (ISI) to build their industry and therefore reduce their dependency upon imports from foreign countries. The result of the ISI in these countries has included the rapid urbanization of one or two major cities and a growing urban population of the working class and a membership in the world economic system via globalization through the vehicles of the IMF and the World Bank. Much of this was done in response to the economic crisis of 1997 when the leaders of these countries very quickly adopted and the implemented new neoliberal policies. In countries such as Argentina, Brazil, Chile, Mexico, Peru, the United States and Uruguay, capitalism and central private banking are now the norm with firms and economies being one intact whole (Taylor, 1997, 145-146).

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Based upon this, if Chile cuts its interest rates, this will cause the value of the currency to devalue. The other currencies in the Americas will follow in due course in the same actions. This is done via the central banks of the various countries as coordinated by the World Bank in order to set interest rates. AU.S. firm would find its exports cheaper in the Latin American country that the exports are going to if the exports are denominated in that country's currency.

Conclusion

As we have seen, the economies of the American countries are linked together via the central banks and the World Bank. Interest rate cuts in one will devalue a currency, causing concurrent adjustments in other countries. For the purpose of stability, U.S. firms denominate their exports in the currency of that local country......

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