Latin America’s banking system was no stranger to breakdown even before the Mexican peso devaluation spawned the tequila crisis. Even Chile, which has one of the region’s most solid banking systems, experienced a serious banking crisis in the early 1980s. Its banks then underwent massive state-sponsored shock therapy and are now completing a thoroughgoing consolidation.
That pattern has been repeated throughout the region to varying degrees. Although devastating devaluations or severe economic instability are often pointed to as the triggers for banking crises, the shaky foundations of national banking systems are more to blame.
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