Overcoming crises resulting from adherence to the Washington Consensus: lessons from the Republic of Korea and Brazil

Considering the recent experiences of both the Republic of Korea and Brazil , the following lessons should be underscored. (1) Brazil's (and Latin Amer ica' s) liberalisation policies approved by the Washington Consensus, and e specially the inflation control programmes based on overvalued exchange rat es, placed the region's economies in a vulnerable position. (2) The Republi c of Korea's experience with liberalisation in the mid-1990s was much more superficial and shorter. However, in terms of its rapid and short-term exte rnal indebtedness, the country was quite imprudent. (3) The Republic of Kor ea's spectacular reversion in its external current account deficit during 1 998 clearly underscores the importance of having large national business gr oups that are sufficiently competitive, industrially and technologically, t o react quickly to national policies and decisions. In Brazil, the financia l, industrial, and technological weakness of large national business groups , explains, to a large degree, the difficulty of overcoming the balance of payments crisis, despite the reduced inflationary impact of the maxi-devalu ation in the exchange rate.