De la Torre, Augusto

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De la Torre, Augusto

Chief Economist for Latin America and the Caribbean Region, The World Bank

Fields of Specialization

Macroeconomics, Financial development

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Chief Economist for Latin America and the Caribbean Region, The World Bank

Last updated January 31, 2023

Biography

Augusto de la Torre, a national of Ecuador, is the Chief Economist for Latin American and the Caribbean. Since joining the World Bank in 1997, he has held the positions of Senior Advisor in the Financial Systems Department and Senior Financial Sector Advisor, both in the Latin America and the Caribbean region. From 1993 to 1997, Mr. de la Torre was the head of the Central Bank of Ecuador, and in November 1996 was chosen by Euromoney Magazine as the year’s "Best Latin Central Banker." From 1986 to 1992 he worked at the International Monetary Fund, where, among other positions, he was the IMF’s Resident Representative in Venezuela (1991-1992). Mr. de la Torre has published extensively on a broad range of macroeconomic and financial development topics. He is a member of the Carnegie Network of Economic Reformers. He earned his M.A. and Ph.D. degrees in Economics at the University of Notre Dame and holds a Bachelors degree in Philosophy from the Catholic University of Ecuador.

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Now showing 1 - 9 of 9

Coping with Risk through Mismatches : Domestic and International Financial Contracts for Emerging Economies

(World Bank, Washington, D.C., 2004-02) de la Torre, Augusto ; Schmukler, Sergio L.

The authors argue that short termism, dollarization, and the use of foreign jurisdictions are endogenous ways of coping with systemic risks prevalent in emerging markets. They represent a symptom at least as much as a problem. These coping mechanisms are jointly determined and the choice of one of them involves risk tradeoffs. Various conclusions can be derived from the analysis. First, because of the dominance of dollar contracts over short-duration contracts, dedollarization might be much more difficult to achieve than often believed. Second, one-dimensional policies aimed at reducing currency and duration mismatches might just displace risk and not diminish it. Third, as systemic risks rise, the market equilibrium settles in favor of investor protection against price risk (through dollar and short-duration contracts) at the expense of exposure to credit risk. Finally, the option value to litigate in the event of default might explain this equilibrium outcome.
Living and Dying with Hard Pegs : The Rise and Fall of Argentina's Currency Board

(World Bank, Washington, DC, 2003-03) De la Torre, Augusto ; Levy Yeyati, Eduardo ; Schmukler, Sergio L.

The rise and fall of Argentina's currency board shows the extent to which the advantages of hard pegs have been overstated. The currency board did provide nominal stability and boosted financial intermediation, at the cost of endogenous financial dollarization, but did not foster monetary or fiscal discipline. The failure to adequately address the currency-growth-debt trap into which Argentina fell at the end of the 1990s precipitated a run on the currency and the banks, followed by the abandonment of the currency board and a sovereign debt default. The crisis can be best interpreted as a bad outcome of a high-stakes strategy to overcome a weak currency problem. To increase the credibility of the hard peg, the government raised its exit costs, which deepened the crisis once exit could no longer be avoided. But some alternative exit strategies would have been less destructive than the one adopted.
Capital Market Development : Whither Latin America?

(World Bank, Washington, DC, 2007-03) de la Torre, Augusto ; Gozzi, Juan Carlos ; Schmukler, Sergio L.

Over the past decades, many countries have implemented significant reforms to foster capital market development. Latin American countries were at the forefront of this process. The authors analyze where Latin American capital markets stand after these reforms. They find that despite the intense reform effort, capital markets in Latin America remain underdeveloped relative to markets in other regions. Furthermore, stock markets are below what can be expected, given Latin America's economic and institutional fundamentals. The authors discuss alternative ways of interpreting this evidence. They argue that it is difficult to pinpoint which policies Latin American countries should pursue to overcome their poor capital market development. Moreover, they argue that expectations about the outcome of the reform process may need to be revisited to take into account intrinsic characteristics of emerging economies. The latter may limit the scope for developing deep domestic capital markets in a context of international financial integration.
Stock Market Development under Globalization : Whither the Gains from Reforms?

(World Bank, Washington, DC, 2007-04) de la Torre, Augusto ; Gozzi, Juan Carlos ; Schmukler, Sergio L.

Over the past decades, many countries have implemented significant reforms to foster domestic capital market development. These reforms included stock market liberalization, privatization programs, and the establishment of regulatory and supervisory frameworks. Despite the intense reform efforts, the performance of capital markets in several countries has been disappointing. To study whether reforms have had the intended effects on capital markets, the authors analyze the impact of six capital market reforms on domestic stock market development and internationalization using event studies. They find that reforms tend to be followed by significant increases in domestic market capitalization, trading, and capital raising. Reforms are also followed by an increase in the share of activity in international equity markets, with potential negative spillover effects on domestic markets.
The Basic Analytics of Access to Financial Services

(World Bank, Washington, DC, 2006-10) Beck, Thorsten ; de la Torre, Augusto

Access to financial services, or rather the lack thereof, is often indiscriminately decried as a problem in many developing countries. The authors argue that the "problem of access" should rather be analyzed by identifying different demand and supply constraints. They use the concept of an access possibilities frontier, drawn for a given set of state variables, to distinguish between cases where a financial system settles below the constrained optimum, cases where this constrained optimum is too low, and-in credit services-cases where the observed outcome is excessively high. They distinguish between payment and savings services and fixed intermediation costs, on the one hand, and lending services and different sources of credit risk, on the other hand. The authors include both supply and demand side frictions that can lead to lower access. The analysis helps identify bankable and banked population, the binding constraint to close the gap between the two, and policies to prudently expand the bankable population. This new conceptual framework can inform the debate on adequate policies to expand access to financial services and can serve as the basis for an informed measurement of access.
Financial Development in Latin America : Big Emerging Issues, Limited Policy Answers

(World Bank, Washington, DC, 2006-07) de la Torre, Augusto ; Gozzi, Juan Carlos ; Schmukler, Sergio L.

This paper argues that the dominant policy paradigm on financial development is increasingly insufficient to address big emerging issues that are particularly relevant for financial systems in Latin America. This paradigm was shaped over the past decades by a fundamental shift in thinking toward market-based financial development and a complex process of financial crises interpretation. The result has been a richly textured policy paradigm focused on promoting financial stability and the convergence to international standards. It argues, however, that there is a growing dissonance between the current paradigm and the emerging issues, which is illustrated by discussing challenges in three areas: stock markets, small and medium enterprise loans, and defined-contribution pension funds. The paper concludes that the dominant policy paradigm is ill-suited to provide significant guidance in relation to the big emerging issues. It emphasizes the need to take a fresh look at the evidence, improve the diagnoses, revisit expectations, and revise the paradigm.
Back to Global Imbalances?

(World Bank, Washington, DC, 2009-07) de la Torre, Augusto ; Schmukler, Sergio L. ; Servén, Luis

The 2008-2009 financial crisis has shaken the prevailing equilibrium of the global economy, with a collapse in capital flows and international trade. How will the post-crisis constellation of current account imbalances look? Will the world resume financing the United States (US), and continue sustaining large external imbalances there? Contrary to what many expected, some forces unleashed by the crisis have kept US assets attractive and the dollar strong, decreasing the need for an immediate reduction of global imbalances. Over the long run, however, real sector and financial sector forces are likely to impose a correction, perhaps involving a depreciation of the dollar and a major reallocation of international portfolios.
Financial Globalization : Unequal Blessings

(World Bank, Washington, DC, 2002-10) De la Torre, Augusto ; Levy Yeyati, Eduardo ; Schmukler, Sergio L.

The authors present a framework to analyze financial globalization. They argue that financial globalization needs to take into account the relation between money (particularly in its role as store of value), asset and factor price flexibility, and contractual and regulatory institutions. Countries that have the "blessed trinity" (international currency, flexible exchange rate regime, and sound contractual and regulatory environment) can integrate successfully into the world financial markets. But developing countries normally display the "unblessed trinity" (weak currency, fear of floating, and weak institutional framework). The authors define and discuss two alternative avenues (a "dollar trinity" and a "peso trinity") for developing countries to safely embrace international financial integration while the blessed trinity remains beyond reach.
Emerging Capital Markets and Globalization : The Latin American Experience

(Washington, DC: World Bank, 2007) de la Torre, Augusto ; Schmukler, Sergio L.

The book should stimulate a vigorous discussion on how to best revise the reform agenda for capital market development in emerging economies going forward. This effort should involve not only country authorities but also academics and advisers from multilateral agencies such as the World Bank. The complexities highlighted in the book invite intellectual modesty, eclecticism, and constant attention to country specificity. While it does not provide detailed policy prescriptions, the book does point to issues that cannot be ignored and puts forward provocative questions for the policy debate. The policy discussion in the book is particularly interesting with respect to the following aspects: internationalization of stock markets and local currency debt markets. This paper contains the following headings: whither capital market development; developments in capital markets; factors behind the development and internationalization of capital markets; and whither the reform agenda.