De la Torre, Augusto

Chief Economist for Latin America and the Caribbean Region, The World Bank
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Macroeconomics, Financial development
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Chief Economist for Latin America and the Caribbean Region, The World Bank
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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.
Citations 23 Scopus

Publication Search Results

Now showing 1 - 8 of 8
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    The Conceptual Foundations of Macroprudential Policy : A Roadmap
    (World Bank, Washington, DC, 2013-08) de la Torre, Augusto ; Ize, Alain
    This paper explores post-Lehman macroprudential regulation by interacting two types of market failures (principal-agent and collective action) with two cognition modes (unconstrained and constrained) in the context of aggregate risk. Four paradigms with orthogonal policy justifications are identified. In the first time consistency paradigm, regulation offsets the moral hazard implications of efficient but time inconsistent post-crisis bailouts. In the second dynamic alignment paradigm, it protects unsophisticated market participants by maintaining principal-agent incentives continuously aligned in the face of aggregate shocks. In the third collective action paradigm, regulation arises in response to the socially inefficient yet rational financial instability resulting from uninternalized externalities. The fourth collective cognition paradigm is grounded on the need to temper the mood swings that arise from bounded rationality or severe cognitive frictions in a rapidly changing, complex and uncertain world. These four rationales give rise to important tensions and trade-offs in the design of macroprudential policy.
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    Can Latin America Tap the Globalization Upside?
    (World Bank, Washington, DC, 2014-04) de la Torre, Augusto ; Didier, Tatiana ; Pinat, Magali
    This paper discusses the theoretical arguments in favor of and against economic globalization and, with a view to ascertaining whether Latin America may be able to capture the globalization upside, examines the trends and salient features of Latin America's globalization as compared with that of Southeast Asia. The paper focuses on trade and financial integration as well as the aggregate demand structures (domestic demand-driven versus external demand-driven) that underpin the globalization process. It finds that Latin America is mitigating some bad side effects of financial globalization by moving toward a safer form of international financial integration and improving its macro-financial policy frameworks. Nonetheless, Latin America's progress in raising the quality of its international trade integration has been scant. The region's commodity-heavy trade structures and relatively poor quality of trade connectivity can hinder growth potential to the extent that they are less conducive to technology and learning spillovers. Moreover, Latin America's domestic demand-driven growth pattern (a reflection of relatively low domestic savings) may become an additional drag to growth by accentuating the risk of a low savings-low external competitiveness trap.
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    Should Latin America Save More to Grow Faster?
    (World Bank, Washington, DC, 2015-08) de la Torre, Augusto ; Ize, Alain
    Latin America’s historically low saving rates and sub-par growth performance raise the question of whether the region should save more to grow faster. Economists generally resist acknowledging a policy-exploitable causal connection going from saving to growth because domestic saving is perceived to be fully endogenous, optimally determined, or fully substitutable by foreign saving. However, to the extent that these three assumptions do not hold, three channels can be established through which higher domestic saving—by curbing persistent current account deficits—can promote medium-term growth. The channels are first, a real interest rate channel, whereby higher saving reduces the cost of capital and enhances macro sustainability; second, a real exchange rate channel, through which higher saving leads to a more competitive real exchange rate; and third, an endogenous saving channel, whereby saving follows growth and, hence, subsequently compounds the effect of the first two channels. Econometric evidence supports all three channels and suggests that the lower-saving countries in Latin America and the Caribbean, especially those with recurrently weak balance of payments and persistent domestic demand pressures on the non-tradable sector, would benefit the most from boosting their saving rates.
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    The Seven Sins of Flawed Public-Private Partnerships
    (World Bank, Washington, DC, 2015) de la Torre, Augusto ; Rudolph, Heinz
    There are three stakeholders in a public-private partnership (PPP), (a) the government in office, (b) private firms (financial and non-financial) and investors (individual and institutional), and (c) final beneficiaries (taxpayers or users, present and future). The raison detre of PPPs is threefold: (i) to crowd in private firms and investors into projects that they will otherwise not undertake; (ii) to transfer to the private sector a significant part of the risks and costs that the government would otherwise fully absorb; and (iii) to ensure that the projects efficiency/quality is at least equal to that obtained if the government alone carried all costs and risks. Important (yet often ignored) implications follow. First, outsourcing (e.g., construction and maintenance) to the private sector does not by itself constitute a PPP if all risks and costs are, in one way or another, still borne by the government. Second, a PPP does not reduce total risk; it simply distributes it differently, involving private sector firms and investors. Third, the total costs borne by the final beneficiaries would be lower under a PPP (compared to a project whose costs and risks rest completely in the governments balance sheet) only if the PPP achieves efficiency gains; otherwise, what beneficiaries save in taxes they will pay in user fees, although, under a PPP, more of the costs would be assigned to direct beneficiaries/users, than to taxpayers at large. Fourth, that a PPP can provide (cash) budget relief may be a welcome corollary for the government in office but it is not a core objective of a PPP.
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    Risk Absorption by the State : When Is It Good Public Policy?
    ( 2011-12-01) Anginer, Deniz ; de la Torre, Augusto ; Ize, Alain
    The global financial crisis brought public guarantees to the forefront of the policy debate. Based on a review of the theoretical foundations of public guarantees, this paper concludes that the commonly used justifications for public guarantees based solely on agency frictions (such as adverse selection or lack of collateral) and/or un-internalized externalities are flawed. When risk is idiosyncratic, it is highly unlikely that a case for guarantees can be made without risk aversion. When risk aversion is explicitly added to the picture, public guarantees may be justified by the state's natural advantage in dealing with collective action failures (providing public goods). The state can spread risk more finely across space and time because it can coordinate and pool atomistic agents that would otherwise not organize themselves to solve monitoring or commitment problems. Public guarantees may be transitory, until financial systems mature, or permanent, when risk is fat-tailed. In the case of aggregate (non-diversifiable) risk, permanent public guarantees may also be justified, but in this case the state adds value not by spreading risk but by coordinating agents. In addition to greater transparency in justifying public guarantees, the analysis calls for exploiting the natural complementarities between the state and the markets in bearing risk.
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    The Washington Consensus : Assessing a Damaged Brand
    ( 2010-05-01) Birdsall, Nancy ; de la Torre, Augusto ; Caicedo, Felipe Valencia
    The authors analyze the Washington Consensus, which at its original formulation reflected views not only from Washington, but also from Latin America. Tracing the life of the Consensus from a Latin American perspective in terms of evolving economic development paradigms, they document the extensive implementation of Consensus-style reforms in the region as well as the mismatch between reformers expectations and actual outcomes, in terms of growth, poverty reduction, and inequality. They present an assessment of what went wrong with the Washington Consensus-style reform agenda, using a taxonomy of views that put the blame, alternatively, on (i) shortfalls in the implementation of reforms combined with impatience regarding their expected effects; (ii) fundamental flaws in either the design, sequencing, or basic premises of the reform agenda; and (iii) incompleteness of the agenda that left out crucial reform needs, such as volatility, technological innovation, institutional change and inequality.
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    Financial Development in Latin America and the Caribbean : The Road Ahead
    (World Bank, 2012) de la Torre, Augusto ; Ize, Alain ; Schmukler, Sergio L.
    The financial systems of the Latin America and the Caribbean region (LAC) are at a crucial juncture. After a history of recurrent instability and crisis (a trademark of the region), they now seem well poised for rapid expansion. Since the last wave of financial crises that swept through the region in the late 1990s and early 2000s, financial systems in LAC have continued to gain in soundness, depth, and diversity. The size of banking systems has increased, albeit from a low base; local currency bond markets have greatly developed, both in volumes and in reach over the yield curve; stock markets have expanded; and derivative markets particularly currency derivatives have grown and multiplied. Institutional investors have become more important relative to banks, making the financial system more complex and diversified. Importantly, much progress has been made in financial inclusion, particularly through the expansion of payments, savings, and credit services to lower income households and microenterprises. As evidence of their new soundness and resiliency, financial systems in the region, except in some Caribbean countries, weathered the recent global financial crisis remarkably well. The progress in financial development in LAC no doubt reflects substantial improvements in the enabling environment, lower macroeconomic volatility, more independent and better-anchored currencies, increased financial liberalization, lower currency mismatches and foreign debt exposures, enhanced effectiveness of regulation and supervision, and notable improvements in the underlying market infrastructures (for example, trading, payments, custody, clearing, and settlement). This regional flagship report aims at providing such a stocktaking and forward looking assessment of the region's financial development. Rather than going into detail about sector-specific issues, the report focuses on the main architectural issues, overall perspectives, and interconnections. The value added of the report thus hinges on its holistic view of the development process, its broad coverage of the financial services industry (not just banking), its emphasis on benchmarking, its systemic perspective, and its explicit effort to incorporate the lessons from the recent global financial crisis.
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    Containing Systemic Risk : Paradigm-Based Perspectives on Regulatory Reform
    ( 2011-01-01) de la Torre, Augusto ; Ize, Alain
    Financial crises can happen for a variety of reasons: (a) nobody really understands what is going on (the collective cognition paradigm); (b) some understand better than others and take advantage of their knowledge (the asymmetric information paradigm); (c) everybody understands, but crises are a natural part of the financial landscape (the costly enforcement paradigm); or (d) everybody understands, yet no one acts because private and social interests do not coincide (the collective action paradigm). The four paradigms have different and often conflicting prudential policy implications. This paper proposes and discusses three sets of reforms that would give due weight to the insights from the collective action and collective cognition paradigms by redrawing the regulatory perimeter to internalize systemic risk without promoting dynamic regulatory arbitrage; introducing a truly systemic liquidity regulation that moves away from a purely idiosyncratic focus on maturity mismatches; and building up the supervisory function while avoiding the pitfalls of expanded official oversight.