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The Decline of Latin American EconomiesGrowth, Institutions, and Crises$
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Sebastian Edwards, Gerardo Esquivel, and Graciela Marquez

Print publication date: 2007

Print ISBN-13: 9780226185002

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226185033.001.0001

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Establishing Credibility

Establishing Credibility

The Role of Foreign Advisors in Chile's 1955–1958 Stabilization Program

Chapter:
(p.291) 8 Establishing Credibility
Source:
The Decline of Latin American Economies
Author(s):

Sebastian Edwards

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226185033.003.0009

This chapter investigates an important historical stabilization episode in Chile, a country with one of the longest histories of chronic inflation in the world, and which, starting in the late nineteenth century, suffered recurrent and increasingly frequent inflationary outbursts. Of the many stabilization programs adopted to tackle this problem, the 1955–1958 package implemented with the advice of the United States consulting firm Klein-Saks, is, undoubtedly, one of the most fascinating. The chapter argues that the foreign advisors of the Klein-Saks Mission gave initial credibility to the stabilization program launched in 1955, playing the role of independent, nonpartisan technocratic arbiters. However, providing initial credibility was not enough to ensure success. In spite of supporting trade reform, foreign exchange rate reform, and the deindexation of wages, Congress failed to act decisively on the fiscal front.

Keywords:   Chile, inflation, stabilization programs, Klein-Saks Mission, trade reform, foreign exchange, rate reform, deindexation, wages

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