Abstract

We studied the balance of payments data for a set of Latin American countries
between 1990 and 2019. We intended to quantify the main items of foreign exchange
income and expenditure. We were particularly interested in studying the magnitude and role
of financial flows, either as a source of external resources or as an item of expenditure. The
analysis was carried out in two dimensions: cross section (for a sample of 11 nations) for
the entire period and over time for the three decades covered by the data. This study offers
an empirical basis to reassess the traditional view that places an “external constraint” on
growth in the foreign trade. In contrast, the data analyzed here suggest that items related to
financial flows are the main responsible for external vulnerability of these countries.

JEL Classification: G01; H12; F32.