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What steps did Latin American countries take to tackle inflation in this era?

Latin American countries implemented economic reforms, stabilisation programmes, and adopted inflation targeting to tackle inflation.

In the late 20th century, Latin American countries faced severe inflationary pressures. To combat this, they undertook a series of measures. One of the most significant steps was the implementation of economic reforms. These reforms were often guided by the principles of the Washington Consensus, a set of policy recommendations that advocated for fiscal discipline, deregulation, and liberalisation of trade and investment. The aim was to create a more stable and competitive economic environment that would reduce inflationary pressures.

In addition to economic reforms, many Latin American countries also implemented stabilisation programmes. These programmes were designed to reduce inflation by controlling the money supply and stabilising exchange rates. For example, in the 1990s, Argentina adopted a Convertibility Plan, which pegged the Argentine peso to the U.S. dollar at a one-to-one rate. This helped to stabilise the currency and reduce inflation, although it also led to other economic problems down the line.

Another important step taken by Latin American countries was the adoption of inflation targeting. This is a monetary policy strategy where the central bank sets a specific inflation rate as its goal and then uses interest rates and other monetary tools to achieve this target. Countries like Brazil, Chile, and Mexico adopted inflation targeting in the late 1990s and early 2000s. This approach has generally been successful in reducing inflation, although it requires a high degree of transparency and accountability from the central bank.

Furthermore, some countries also sought external assistance to tackle inflation. For instance, many turned to the International Monetary Fund (IMF) for financial support and policy advice. The IMF often recommended austerity measures, such as reducing government spending and increasing taxes, to bring down inflation. However, these measures were often controversial and led to social and political unrest in some cases.

In conclusion, Latin American countries took a multi-pronged approach to tackle inflation, involving economic reforms, stabilisation programmes, inflation targeting, and in some cases, external assistance. The success of these measures varied from country to country, and they often involved difficult trade-offs.

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