De la Torre, Augusto
Chief Economist for Latin America and the Caribbean Region, The World Bank
Author Name Variants
Fields of Specialization
Macroeconomics, Financial development
Chief Economist for Latin America and the Caribbean Region, The World Bank
Externally Hosted Work
Last updated January 31, 2023
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.
Publication Search Results
Now showing 1 - 10 of 11
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.
Publication(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.
Publication(World Bank, Washington, DC, 2007-08) de la Torre, Augusto ; Gozzi, Juan Carlos ; Schmukler, Sergio L.Interest in access to finance has increased significantly in recent years, as growing evidence suggests that lack of access to credit prevents lower-income households and small firms from financing high return investment projects, having an adverse effect on growth and poverty alleviation. This study describes some recent innovative experiences to broaden access to credit. These experiences are consistent with an emerging new view that recognizes a limited role for the public sector in financial markets, but contends that there might be room for well-designed, restricted interventions in collaboration with the private sector to foster financial development and broaden access. The authors illustrate this view with several recent experiences in Latin America and then discuss some open policy questions about the role of the public and private sectors in driving these financial innovations.
Publication(World Bank, Washington, DC, 2008-06) de la Torre, Augusto ; Martínez Pería, María Soledad ; Schmukler, Sergio L.The "conventional wisdom" in academic and policy circles argues that, while large and foreign banks are generally not interested in serving SMEs, small and niche banks have an advantage in doing so because they can overcome SME opaqueness through relationship lending. This paper shows that there is a gap between this view and what banks actually do. Banks perceive SMEs as a core and strategic business and seem well positioned to expand their links with SMEs. The recent intensification of bank involvement with SMEs in various emerging markets documented in this paper is neither led by small or niche banks nor highly dependent on relationship lending. Rather, all types of banks are catering to SMEs and larger, multiple-service banks have in fact a comparative advantage in offering a wide range of products and services on a large scale, through the use of new technologies, business models, and risk management systems.
Publication(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.
Publication(World Bank, Washington, DC, 2005-04) de la Torre, Augusto ; Schmukler, Sergio L."Whither Latin American Capital Markets?" a study published by the Latin America and Caribbean Region of the World Bank in June 2004, analyzes the status and prospects for capital market development in Latin America. It reviews the evolution of securities markets in the region and related reforms and the factors driving their development. Importantly, the study analyzes not just domestic market activity, but also global capital markets trends, the participation of developing countries in those markets, and interactions and feedback loops between local and international markets.
Publication(World Bank, Washington, DC, 2009-10) de la Torre, Augusto ; Ize, AlainThis note questions two emerging views on ways to tackle systemic risk. As evidenced by the explosive growth of investment banks, which were regulated more lightly because they were assumed to be systemically less important, regulatory unevenness can trigger acutely destabilizing regulatory arbitrage. Hence, unless systemic footprints can be accurately measured and updated, something we think is unlikely, regulating differentially those institutions that are deemed to be the most systemically relevant looks like a perilous return to the past. Similarly, internalizing systemic liquidity risk by taxing maturity mismatches looks like a remnant of idiosyncratic thinking. Matching short liabilities with short assets can protect an individual intermediary's liquidity but at the expense of exacerbating systemic vulnerability.
Publication(World Bank, Washington, DC, 2008-06) de la Torre, Augusto ; Martínez Pería, María Soledad ; Politi, María Mercedes ; Schmukler, Sergio L. ; Vanasco, VictoriaThis study describes the business and risk management practices that banks use to serve small and medium enterprises (SMEs). To do so, we use recently collected evidence from Argentina and Chile for a significant number of banks in each country, gathered through on-site meetings, a tabulated questionnaire, and a detailed data request. We find that banks are setting up separate departments to serve the segment, targeting many SMEs from all economic sectors and geographic regions. Banks use relationship managers to seek out new clients. Risk management and loan approval is separate from sales, mostly centralized, but not largely automated. Knowing the client is still crucial to minimize risks. Overall, the patterns we uncover suggest that banks are in the middle of an on-going learning process, by which they are developing the structure to deal with SMEs in a sustainable basis over the coming years.
Publication( 2009-02-01) de la Torre, Augusto ; Ize, AlainThe Subprime crisis largely resulted from failures to internalize systemic risk evenly across financial intermediaries and recognize the implications of Knightian uncertainty and mood swings. A successful reform of prudential regulation will need to integrate more harmoniously the three paradigms of moral hazard, externalities, and uncertainty. This is a tall order because each paradigm leads to different and often inconsistent regulatory implications. Moreover, efforts to address the central problem under one paradigm can make the problems under the others worse. To avoid regulatory arbitrage and ensure that externalities are uniformly internalized, all prudentially regulated intermediaries should be subjected to the same capital adequacy requirements, and unregulated intermediaries should be financed only by regulated intermediaries. Reflecting the importance of uncertainty, the new regulatory architecture will also need to rely less on markets and more on "holistic" supervision, and incorporate countercyclical norms that can be adjusted in light of changing circumstances.
Publication(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.