An old vulnerability is re-emerging as an economic and political Achilles’ heel for several South American governments: exchange rates. Policies to defend or stabilize currencies may succeed in achieving short-term economic goals. But increasingly heavy-handed interventions may bode ill for economic and political stability in a region known for its bouts of hyperinflation and currency mismanagement.

Pay Now or Suffer Later: South America's Currency Dilemma

By , , Briefing

South America's history throughout the 1980s and 1990s is littered with the names of now-defunct currencies, such as the Argentine austral and the Brazilian cruzeiro. Now, an old vulnerability is re-emerging as an economic and political Achilles’ heel for several South American governments: exchange rates.

Some are clamping down on citizens' purchases of U.S. dollars, in attempts to prop up local money and stem capital flight. Others are promoting central bank dollar purchases and sales, or deploying derivatives contracts, to manage volatile exchange rates. ...

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