CAPITAL INFLOWS AND REAL EXCHANGE-RATE APPRECIATION IN LATIN-AMERICA - THE ROLE OF EXTERNAL FACTORS

The characteristics of recent capital inflows into Latin America are d iscussed. It is argued that these inflows are partly explained by cond itions outside the region, like the recession in the United States and lower international interest rates. The importance of external factor s suggests that a reversal of those conditions may lead to a future ca pital outflow, increasing the macroeconomic vulnerability of Latin Ame rican economies. Policy options, it is argued, are limited.