José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net
Allende, Peron and Chavez are examples of this. Each time a populist government comes to power in Latin America, the economic scenario is quite similar: The regime begins a crazy monetary policy, printing money in excessive quantities and generating spectacular rates of economic growth in the medium term. The first few years everything is going well and the finance ministers of these governments believe they are the makers of something unprecedented in human history, so they compliment each other due to the revolution's achievements.
But time passes and the wild printing of money begins to cause side effects. This stage is characterized by an uncontrolled increase in the general price level, a serious budget deficit and an economy in recession or very slow growth. In this hangover, the massive electoral spending is insufficient to stimulate consumption because of the neglect of the real economy, while hyperinflation makes commodities become unaffordable. Then, everything degenerates in maxi-devaluations to balance the public accounts, a drop in domestic production due to the low private investment -driven away by the grim scenario- and desperate governmental controls that attempt to stop the disaster.
Therein comes the inevitable, the economy plunges into a deep recession until things return to some sense of normalcy after traumatic macroeconomic adjustments. Then start again, repeating the process over and over till the revolution and the currency can withstand.
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