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 - 10 of 31
  • Publication
    Financial Development : Structure and Dynamics
    (Oxford University Press on behalf of the World Bank, 2013-09) de la Torre, Augusto; Ize, Alain
    This paper analyzes the process of financial development over the last three to four decades from the perspective of the fundamental frictions (agency and collective) to which economic agents were exposed. A comprehensive statistical benchmarking analysis showed that financial development followed regular dynamics that can be largely explained by the underlying frictions. In particular, the sequencing, returns to scale, and shape of the developmental paths for various types of financial activities—including public debt, banking, insurance, asset management, and capital markets—broadly matched benchmark predictions. Reflecting financial innovation and the dynamic interaction between financial and economic development, financial development paths were also found to be strongly dependent on initial conditions. At the same time, policy differences, including the failure to improve the quality of the enabling environment and prevent financial crashes (the dark side of finance), were found to explain a sizable share of the deviations of individual country paths from the benchmarks.
  • Publication
    Natural Resources in Latin America and the Caribbean : Beyond Booms and Busts?
    (World Bank, 2011) Sinnott, Emily; Nash, John; de la Torre, Augusto
    Throughout, the history of the Latin America and Caribbean (LAC) region, natural resource wealth has been critical for its economies. Production of precious metals, sugar, rubber, grains, coffee, copper, and oil have at various periods of history made countries in Latin America-and their colonial powers-some of the most prosperous in the world. In some ways, these commodities may have changed the course of history in the world at large. Latin America produced around 80 percent of the world's silver in the 16th through 19th centuries, fueling the monetary systems of not only Europe, but China and India as well. The dramatic movements in commodity markets since the early 2000s, as well as the recent economic crisis, provide new data to analyze and also underscore the importance of a better understanding of issues related to boom-bust commodity cycles. The current pattern of global recovery has favored LAC so far. Countercyclical policies have supported domestic demand in the larger LAC economies, and external demand from fast-growing emerging markets has boosted exports and terms of trade for LAC's net commodity exporters. Prospects for LAC in the short term look good. Beyond the cyclical rebound, however, the region's major longer-run challenge going forward will be to craft a bold productivity agenda. With LAC coming out of this crisis relatively well positioned, this may well be possible, especially considering that the region's improved macro-financial resiliency gives greater assurance that future gains from growth will not be wiped out by financial crises. In addition, LAC has been making significant strides in the equity agenda and this could help mobilize consensus in favor of a long overdue growth-oriented reform agenda. But it remains to be seen whether the region will be able to seize the opportunity to boost long-run growth, especially considering the large gaps that LAC would need to close in such key areas as saving, human capital accumulation, physical infrastructure, and the ability to adopt and adapt new technologies.
  • Publication
    The Foundations of Macroprudential Regulation : A Conceptual Roadmap
    (World Bank, Washington, DC, 2013-08) de la Torre, Augusto; Ize, Alain
    This paper examines the conceptual foundations of macroprudential policy by reviewing the literature on financial frictions from a policy perspective that systematically links state interventions to market failures. The method consists in gradually incorporating into the Arrow-Debreu world a variety of frictions and sources of aggregate volatility and combining them along three basic dimensions: purely idiosyncratic vs. aggregate volatility, full vs. bounded rationality, and internalized vs. uninternalized externalities. The analysis thereby obtains eight "domains," four of which include aggregate volatility, hence call for macroprudential policy variants grounded on largely orthogonal rationales. Two of them emerge even assuming that externalities are internalized: one aims at offsetting the public moral hazard implications of (efficient but time inconsistent) post-crisis policy interventions, the other at maintaining principal-agent incentives continuously aligned along the cycle. Allowing for uninternalized externalities justifies two additional types of macroprudential policy, one aimed at aligning private and social interests, the other at tempering mood swings. Choosing a proper regulatory path is complicated by the fact that the relevance of frictions is likely to be state-dependent and that different frictions motivate different (and often conflicting) policies.
  • Publication
    Inequality in a Lower Growth Latin America : LAC Semiannual Report, October 2014
    (Washington, DC: World Bank, 2014-10-10) de la Torre, Augusto; Beylis, Guillermo; Didier, Tatiana; Rodriguez Castelan, Carlos; Schmukler, Sergio L.
    As usual in this series, Chapter 1 reviews the configuration of global risks and assesses the outstanding short term opportunities and challenges facing the LAC region. We document the significant slowdown in economic activity across the region, and explore the possibility of this being the ‘new normal’. In Chapter 2 we assess if the major social gains achieved during the ‘Golden Decade’, in particular the decline in inequality, will hold in this less supportive environment, and discuss alternative policy responses to preserve and further the equity gains in the region.
  • Publication
    Latin America and the Caribbean as Tailwinds Recede : In Search of Higher Growth, LAC Semiannual Report, April 2013
    (World Bank, Washington, DC, 2013-04-24) de la Torre, Augusto; Pienknagura, Samuel
    This semiannual report — a product of the Office of the Chief Economist for Latin America and the Caribbean Region of the World Bank — examines the short and medium-term challenges for Latin America and the Caribbean (LAC) as the external factors that were instrumental in the region’s recent performance recede. Chapter 1 gives an overview of the global economy and its implications for the short- and medium-term prospects of the LAC region. Chapter 2 provides a detailed analysis of the general patterns of domestic demand and supply observed in LAC over the last decade. In particular we document the steady increase in LAC’s domestic demand, especially its investment component, as a share of GDP over the 2000s. Moreover, we show that the rise of domestic demand has occurred in tandem with an expansion of the services sector. We assess what are the pitfalls and challenges for LAC’s growth pattern in a less benign global environment.
  • Publication
    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.
  • Publication
    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; 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
    Latin America’s Growth: Looking through the Demand Glass
    (World Bank, Washington, DC, 2022-11) de la Torre, Augusto; Ize, Alain
    This paper revisits the historical roots of Latin America’s disappointing growth using a novel macro and trade-based growth decomposition and a simple model of industrialization in a commodities-exporting country with a large informal sector. The approach suggests the need to better qualify two opposite narratives: that the post-1982 (“neoliberal”) reforms have failed, and it is time to look back to the import substitution industrialization era for policy inspiration; and that the post-1982 reforms went in the right direction but must be completed to unleash significant productivity gains. Both can be misleading because they downplay the role of demand. The apparent “miracle” of import substitution industrialization does not provide a realistic point of comparison because it reflected an unsustainable, demand-induced boost in productivity. And the gains expected from Washington Consensus-style reforms alone can be overstated because they are derived from overly restrictive assumptions on demand. By allowing demand to play a more central role, the paper finds a close and revealing relationship between the growth patterns followed by Latin American countries, the quality of their macroeconomic policies, the nature of their trade, and the segmentation of their labor markets. Going forward, the policy agenda calls for an outwardly oriented growth strategy, supported by a more proactive role for the state that promotes not only efficiency in supply, but also the appeal to demand.
  • Publication
    Financial Globalization : Unequal Blessings
    (World Bank, Washington, DC, 2002-10) De la Torre, Augusto; 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.
  • Publication
    Latin America’s Deceleration and the Exchange Rate Buffer : LAC Semiannual Report, October 2013
    (Washington, DC: World Bank, 2013-10-09) de la Torre, Augusto; Pienknagura, Samuel
    This semiannual report examines the short and medium-term challenges for Latin America and the Caribbean (LAC) as the external factors that were instrumental in the region’s recent performance recede. In particular, we address the role of the exchange rate as a counter-cyclical policy tool to buffer adverse external shocks. As is customary in this series, Chapter 1 starts by providing an overview of the global economy and its implications for the short and medium-term prospects of the LAC region. It also examines the vulnerabilities of the region as tailwinds recede. Chapter 2 describes the new role of the exchange rate as a shock absorber in LAC amid the important transformations observed in the region in the past decade on the macro-financial front. Finally, Chapter 3 gives a detailed look at exchange rate-smoothing policy interventions.