Multilateral lending to Latin America has been facing along the 80s a growing conditionality. The net transfer of funds has been falling and even turning negative, while conditionality has tended to become tougher. Toughness has been associated, in particular, to the addition of WB conditionality to that of the IMF on issues related to overall economic and development policies of debtor countries. Conditionality is generally recognized as needed and/or unavoidable when borrowing from multilateral lenders. The same holds for domestic adjustment when basic macroeconomic balances depart from equilibria. The question is what sort of domestic adjustment is to be implemented, and what are the features of lender conditionality that would contribute to a sustainable adjustment with growth, equity, and political stability. The following points are stressed in this article: (i) There is no single structural adjustment rule or model valid for all economies. A flexible approach, free of rigid conditions, would be preferable. (ii) Structural adjustment must be implemented gradually; the important point is the economy’s overall trend, even though at times there may be delays or regressions. A gradual process is preferable to a shock treatment. In other words, there can be a trade-off between the speed and intensity of the adjustment and its continuity and persistence. (iii) Since the result of the suggested measures is uncertain, it must be possible to carry out rectifications, i.e., there should be an ongoing evaluation and dialogue on the economy’s evolution and performance vis-a-vis the implemented measures.
