High inflation in Latin America during the 1980s and 1990s can best be attributed to flawed monetary and economic policies particularly given that the period characterized a major period for economic growth in the region. Additionally, the lack of proper institutional structures resulted in a fragile public distribution structure consequently aggravating the inflation problem (Franko 187).
Controlling inflation calls for the need to identify means and mechanisms of reducing the money supply in the economy. Governmental institutions are normally in the best position to control inflation through such mechanisms as monitoring the monetary, fiscal and reserve rate policies. By doing this, the various factors that result in the increased money supply will be put in check, thereby reducing inflation. Similarly, approaches used could be based on monetary or structural approaches. As such, orthodoxy focuses on stabilization mechanisms that are centered on a monetarist basis, like in Brazil between the 1960s and 1970s. This mainly involved the IMF’s attempts at maintaining the favorable monetary environment to facilitate stabilization (Franko 209). Besides, heterodoxy entails adopting a stabilization approach based on structuralism, much like was the case in Argentina. This mainly entails a combination of programs that aim to stabilize the economy through income plans, financial modification, and monetarist restructuring.
International trade has taken up the new role in Latin America by enabling globalization. Additionally, this has assisted the region in streamlining their economies in line with the global economy, thereby aiding integration between their policies and international levels. Moreover, international trade has eased the openness of trade with the region in light of improving international prices for commodities from the region.