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This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
'r-".tnt''"
\stL
C'ontents
Presirient's Message 2
Economic
Liberalizatiort
in tbe Americas 4
Tbe Year in Reuieu 18
Tribute to a Buildirtg 2O
Board oJ'Directors 21
Arluisot'y Crntncils 22
Olficers 2J
Statement o.f Conclition 24
Statement oJ'Operations 25
Statement of Sutytlus 26
Volume of Operations 27
President's
Message
To help tl-reDistrict take advantage of
this opportr-rnity,we are building a base of
During the past year of economic
weakness in ttre Unitecl States,the Eleventh
ResearchDepartment. to contribute to the
F-ecleralResele District fared better tl-ran
expansion of lree tlade by fbstering a
the nation as a t'hole. Having workecl
better understanding of the benefits of
through the clifllculties of 'rn earlier
trade rvith Canacla, Mexico and Latin
recession, tl'ris District r'vasbetter preparcd
Americe. This eflbrt has gained attention
to deal r.vithtl're challenges bror,rghton b1'
r.vithintl-reWestcrn Ilemisphere, and
the national econotttic clecline ancl, clespite
elreeclyin 1,992,rl''e have met with otlicials
sorne hardship, menagccl to sllstain
in N{exico City and elsenhere to in-iprove
moderate cconotuic grou'th dr.rring1991.
or,u'nnderstanclingof the challenges befbre
Factors contfilllrting to this gl'o$'th
.t
,il
knowledge and expertise, through our
r-rs.We belicve these efforts will improve
includecl improvecl manufecturing oLltpLlt.
traclc relations, increase exports, provide :rn
growing transportation employntent,
improved basis for econonic ancl financial
stabilized real estate values. increascd
stabilitv among'Western Hemisphere
constrLlctionactivitv. ancl e strengthenecl
nations. ancl strengthen the economies of
banking inclustry. In adclition, strong export
both the District and the United States.In
growth helpecl clrshion the clecline in the
this regalcl, q'e have devotecl this year's
energy and clef'enseindustrics. illustrating
Annual Report essay to promoting a better
the increasingly irnpoftant role ol exports
runclerstandingof fiee tracle ancl economic
i n c . r t rDr i s l r i t ts c ( ( ) n () t l 1.\
integration u,ithin the'Western Hemisphere.
The role of cxports in our District is
Tl-reFecleralReserweBank of Dallas
significant, in that our region tenclsto be
also r-rsesits voice to convey conditions
more sensiti'neto internationel tracle tl-ranis
within the Eleventh District in the fbrmula-
ttre l,nitecl Statesas a u'hole. in clifficult
tion of national economic policy. My
times, therefore, exports can make the
presence on the Federal Open Market
clilference between a gro*'ing District
Committee provides representation for the
cconomy ancl a cleclining one. This
potential for econon-iic glowth fr()m
District in m()netery policy deliberations.
'l'o
assistrne in developing monetary policy
international tradc offers a uniqrre opportu-
lecomrnendations, economists from the
nity for tl-reDistrict.
Dallas Fed continlrally conduct research on
the I)istrict economy ancl maintain direct
contact with District business and financial
leaders. This contact between the people of
the District and policymakers contributes to
a rlore effective policy and a stronger
econony.
Another Federal Reserwecontribution
to a strong economy is its role in maintaining financial safety and soundness through
tl-resupervision and regr-rlationof financial
institutions. During the past yeaf, we've
In the corning year, we will contribute
Hemisphere increase the importance of the
seen consicleralrleprogress in the health of
to our District through the representation of
U . S .d o l l a r .T h e i s s u eo f f r e e t r a d e .i n m y
the I)istrict's financial institLrtions.During
its uniqr-reconcerns and interests in the
view, represents a special case of free
1991. the rcturn on District banking assets
formulation of monctary policy; the
enterprise. Next, to pfomote a smoothly
improved and q..asjust above the national
'l'his
average.
rise represents an improve-
superuision of state member banks, bank
lunctioning and stable financial system, the
holding companies, and foreign banking
Dallas Fed will become more active in all
ment over the inclustry'sperformance in
entities; the provision of quality financial
aspects ol FecleralReserueSysternpolicy
recent years. Bank failures in the District
serwices;and research into important
formulation. Maintaining stability and
declined fiorn 105 in 1990 to 33 in 1991.fn
economic issues.Beyond these primary
functionality within the financial system is
addition, the nr-rmberof discount window
contributions, I am fbcusing the resources
c s s c n t i atl o s u s t a i n i n gf r e c e n l e r p r i s e .
loans declinecl fiom I,750 in 1990 to 127 in
of the Dallas Fecl on activities that promote
Finally, the Dallas Fed will explore critical
1991. These changes are signs of a more
understanding of fiec enterprise. I want the
central banking isslresand bolster its efforts
stable ancl hcaltl-rierfinancial environment.
l'-ederalReserveBank of Dallas to be
to provide infbrmation and insight that will
In 1991. Congress passed legislation
knc.rwnas the "F-reeEnterprise Fed," and I
enhance the understanding of the Federal
that altered the process of bank superuision
want us to make signilicant contributions to
Reserweancl its importance in a free
ancl discor-rntwindow lencling and recapi-
economic eclucation on that subject.
enterprlse system.
'W'e
believe this combination of
talized the deposit insurance fund. Tl-re
As command and control economies in
recapitalization was needed to allorv bank
Russia anci Eastern Europe have fallen, too
tending to daily business while providing
regr,rlat<>ry
authorities to deal more effec-
many of our citizens clon't unclerstandand
leadership in areas that support free
tively *ith the ltanking difliculties that have
appreciate the nature of the system that
enterprise lends itself to a prosperous
emcrged elservhere in the nation. The
won that icleological war. Too many don't
future for the Eleventh District and the
flnancial recovery in our District under-
really r-rnderstandhow capitalism works
natlon.
scores thc need for such effbrts to resolve
ancl hon'capitalism and freedom are so
troutrlecl financial institlrtions in order to set
intimately tied together. I want the Dallas
lhe st:rgefcrrglori tlr antl plosperity.
Fed to l>e a beacon of light on that general
In the area of financial seruices,the
Federal Resen'e System has continued
subject.
In sr-rpport of this, I an'r setting forth
measures k) ilnprove efliciency through tl-re
three broad goals fbr the Federal Reserwe
widening use of electronic alltunatecl
Bank of Dallas. F-irst,I intend that the
clealingl-rousetechnology and has initiated
Dallas lred become the FecleralReserve
tl-rer-rationwidcconsoliclation of some of
S 1s t c ms w i n d o w t ( ) N 4 e x i ( o: l n d L a t i n
oLrr operations. During 199i, the Federal
America as expanding trade and economic
ReserweLlank of Dallas was chosen as one
integration throughout the'W.estern
of three consolidation sites fbr the Systern's
'l'his
data processing opel'ations.
action was
taken to reduce costs ancl to provide better
sen'ices fbr flnancial institlrtions. \We are
proucl to have been chosen.
Ilobert D. r\lc'l'ccr',.Jr.
! )16i d( ] t ! d tt ( / al.) i4 | l.\cc l ! t i t \' ( )//i c(r
Economic
Iiberalization
intheAmericas
To complen-renteconomic liberalization, some Latin American nations are
taking a step not normally associatedwith
economic openness. Instead of allowing
Economic liberalization off'ersenor-
their currencies to f'llrctuatefreely, Mexico
rr"rouspotential fcrr growth but only in an
and Argentina have taken measures to pela
atmosphere of monetary ancl price stability.
their exctrange rates to tl-reU.S. dollar. (.lee
Economic liberalization has taken hold in
"A Gktssary o.fExcbange Rate Regimes".fr,tr
the Americas. Since lreginning rnajor tracle
dn explanation of excbange rate pegling
retonns in 1984. Mexico has regaineclits
and relatedpolicies.)
position as the Llnitecl States'third largest
trecling pxrtner. Argentina, Bolir,ia. Brazil.
These new currency pegs resr-rltfrom
attenpts not only to establish a stable, anti-
X{cxicc>-are clisman-
infletionary monetary policy but also to
tling trade barriers, cleregulatingthe private
rnake the policy credible. Credibility is
sector, and privatizing state-orvned
t n r t i r l l r c c l r r r s Le e t i nA m t ' r i (J n g o v c r n -
corp()retrons.
n-rentshad difficulty adhering to any one
Chile and Peru-like
Trade Iiberalization drives econotnic
policy cluring the instability of ttre 1980s.
liberalization. Opcn tracle n'ill raise
t-lnlesspotential investors expect financial
incomes throughout the Americas as
ancl monetary stalrility to continlre, Latin
c \ p o r l \ r i s c a n t l s p e ti : r l i z l t l i o ni n t r c ; t s c s
American nations will not attract invest-
Arnerican colnpetitiveness in lvorlcl
ment. Flven with freer trade. development
markets. Free tracle in goocls and sen'ices
of tl-reregion's economic base and financial
requires consistent policies in other areas.
markets u,'ill Lrelimited if governments fail
Barriers to trade include stete ownership of
to convince the dcxnestic and international
corporations, export subsidies, lack of
br-rsinesscommunities that monetary
clearly defined propcrty rigl'rts,and
stability will be sustained.
unstable prices and cLrrrencies.Hence.
Cr,rrrencypegs l-relpa government
liberalization in the Americas naturally
signal its comrnitment to stable monetary
involr.cs privatizing state firms, disnrantling
poLicy becar-rsedeviations from the policy
subsiclies,protecting propefty rights, and
are highly visible. If a country pegging its
ensuling the stability of prices ancl
cllffency to the dollar does not keep
exchange rates.
inflation in line with U.S. inflation, the
action becomes readily apparent through
pressure on foreign exchange reseruesheld
by the country's central bank and, ultirnately, througl-rpressllre on its exchange
rates. To the extent that U.S. monetary
policy ensures U.S. price stability, pegging
l o l h t ' d t r l l r r r : t l l o r , res c o u n t r yt ( ) i m P o r l
l-r.S.price stalrility.
A Slossaryof
RateRegimes
Exchange
Price stel>ilityfucilitatestracleancl
prices. not every price movement is car-rsecl
stimnletcs inr.estrncntby irnproving fin'ns'
by rnonetary expansion. When an event
abilitl, to preclict selling priccs ancl the
such :.rsa suclclcnjunrp in oil prices moves
costs of doing business. Exchange rate
foreign prices out of line u'ith domcstic
pegs cln enhance price stebilitvbecause
prices, a rnarket-baseclexchange rate c.ln
Latin Anrerican colrntrics thet flx the plices
shiit to bring externel ancl internal prices
of their clrrrencies in tern.rs<>fthe clollar, in
into balance. After convincing rvollcl
ef'fect.are irrporting Li.S.price stebility.If
finar-rcialm:rrkets ancl the pnblic thet they
Latin Anrclicen c()Lrntries
uere tc>inflate
rvill persistently ancl successfullyfight
their currencies br-rttrolcl their exchange
inflation, Latin American governments may
rates flxecl, I-etin Anrerican prices u'oulcl
n<>longer neecl the cxternal disciplinc of
risc rcletive to tbleign prices. With these
peggecl exchange rates t() prove thc point.
highcr priccs. proclucersin Latin Arnerica
Nlonetary stebility r.villcnhance the
r'r'oulclnot be :rble to colnpcte lvittr foreign
positir.'ccf'fcctson economic grou.,thof the
pt'ocllrcers.Itnports u'otrlcl rr.rshin. Exports
fieel tracle alreaclyemerging in Latin
u.'otrlclstagnatc, Consequently. as long as
Amcrica. As cor.rntlieslibcralize tracle uncler
thcv peg their exclur-rgerates t() the ckrllar.
a steble nronetary policy, tl-reyl'ill increas
Latin Arnerican countries tnllst fi)llo$'
ingly fircus on prodlrcti()n of goods ancl
monetxry policies consistent u ith those of
'fhr.rs.
thc L nitccl Stetes.
these currency tics
serr.icesthey cen procluce efficiently,
chalJengeell ccntlal ber-rksof the W'estern
u'l-renhigh trecle l>erriersprotect certain
Henrisplterc to aclhereto stable monetar,v
rnarkets fiorrr corrrpetition.rJ(/hata collntry
polic,r"in pr,rrsr-rit
of pricc stabilinr.
c:tnnot ploduce efficiently. or procluces
In the long tenn, rrurket l>esecl
insteaclof prodr,rcingu hat is profitable
leletivel.vless efliciently, it r'r'ill inport. Tlie
exchunge retes nrav bc rnore aclvantageous
resr,rltis morc tlacle, more efllciency, low'cr
firr llre Amcricus thxn peggecl retes.
prices rncl higher real incorrrcs among all
Althotrgh peggecl r:ltes lrxy help prornote
tleclingnations.
cleclilrlep<>licics
thet lvill leaclto strl>le
llccause Latin American coLlntries'
lnonet:lry ancl exchange ratc policies luve
often been rcsponses to thei| trlcle
erperiences ancl policies, an analysis of
tracle.grouth ancl excliange rate p(ticies
frelps to explain recent clevcl<>pments
in
the region.
by
Fxchanue
ral€scanbedelermined
melh0ds.
At0neexlreme
isapegged,
several
ralep0licy,inwhichthe
u lixed,exchange
fixeslheprice0filscurrency
al
central
bank
valueandexchanges
a l0reign
a constanl
suchas lheU.S.dollar,lor the
currency,
al thec0nstant
value.The
localcurrency
lhemain0rresidual
csntral
bankbecomes
tothemarket.
ofloreign
exchange
supplier
t0supporl
ilsown
Thecenlral
bank's
ability
valuedepends
onthe
exchange
currency's
bankd0llarholdings.
size0fcenlral
is a lloaling,
or
Attheotherextreme
na*et-based,exchange
rate p0licy,in
rales
which
exchan0e
aredsternined
completely
withlittleornointerinlhemarkel,
lflhemarket
for
venli0n
bythecentral
bank.
f o r e i g en x c h a n gi sen o lw e l l - d e v e l 0 p e d ,
for and
in thedemand
smallm0vsments
maycause
large
exchange
0fdollars
supply
ratemovements.
N u m e r o ue sx c h a n gr ae t ea r r a n g e 0f fixed
lhe e)dremes
mentslall b8tween
rafes.Themosl
ratesandmarket-based
isa ctawling
typeinLalinAmerica
common
peg.ln a crawling
pegresime,
lhecenlral
lheprice0l lhedollarovsr
bankincrcases
ol
lhe competitiveness
timeto maintain
goods
ln
ininternati0nalmarkels.
domestic
pegs
markelresemble
thissense,
crawling
raleregirnes.
exchanue
0ntheother
based
hand,thecentraI bankbuysandseIlsdollars
raleandc0nlinalanannounced
exchange
uest0 be themainsource0f l0reignexpegmorelike
making
thecrawling
change,
thelixedrateregime.
Trade
Policy
and
in Retrospect
Growth
produce. In other words, they pegged their
currencies at an "overvalued" level. Latin
American importers would be able to give
Althor-rghrecent exchange rate
relatively little of their currency for rela-
pegging represents 2rneu'tllrn in Latin
tively many dollars, so that the Latin
American currency policy, tl-reiclea tras
American price of U.S. capital goods would
been pursuecl in the past witl-t somer.vhat
be lon'. Meanr.vhile,the Latin Americans
diffbrent goals. Many Latin American
used l-rigtrtariffs to price U.S. noncapital
countries in the 1950s ancl 1960s pegged
goocls out of their markets, so that Latin
their currencies to the clollar to promote
producers cor-rldtrave those markets lor
price stability and t<'tcotnplement the
themselves.
growth strategy that rlost of thctu followed,
known ^s impotl substittttiotl.
Import strlrstitution u'as baseclon the
Aided by their protected manufacturing
sectors. Argentina, tsrazll and Mexico grew
rapidly dr-rringthe 1940s, 1950s and 1960s.
fear that the prices of ra\\, materials,q.'hich
Horvever, import substitr-rtionchanged the
Latin American countries exp<>rted.r,voulcl
rnix of in-rportsbr-rtfailed to reduce them.
fall relative to the prices of manuf:tcturecl
Import sr,rbstitutionhelped some inclustries
goocls, whicl'r thesc countries ir"nported.But
develop but not their suppliers. For
instead of initially fbcusing on manuflctur-
example, tl.relimited scope of internal
ing fbr export, the import sr,tbstitution
denrand denied large capital-intensive
thesis counseled continuccl exports of rarv
industries the economies of scale common
materials ancl the substittrtion of locally
in l:rrge cleveloped countries. As imports ol
manufactureclproducts fbr irlports. Under
finished goocls fell, imports of inputs rose.
import sul>stitution,Latin American
Also, by overualuing their pegged curren-
countries eimecl to protect their nranufac
cies. Latin American governments efTec-
tr,rrersby means of l'righ tariffs ancl other
tively subsidized imports, aggravating the
trade barriers. so that local prodr,rcerscottlcl
ploblern.
l r c g i n l r r r r i n c s sn i l l r o t t ts c r i c . r tpt sr i t c
competiti()n.
As part of their import slrbstittrti()n
programs, I-atin American governlrcltts
maintained an exchange rate policy
designed to keep the price of irnportecl
capital goods lovu..In practice, this exchange rate policy involvecl pegging the
domestic currency to the t-'.S.d<tllarat a
rate belor.vu'hat a fiee r-narketu'oulcl
Thc exchange lete policy these
at horne u'hile maintaining lor'v prices for
L U u n t r i ( ' J\ i, l l ,r n t ' t l i n p u r s t r i n gi m p o r l
its exports, Brazil aclopted a cravn'lingpeg.
sr,rbstittrtion-ke'eping thc dollar artificially
\\rhcn ckrmesticpriccs lose, llrezil's
r ' l t r ' e pi n 1 . ' 1 1 1, r1frl l r r i r ( ) \ \ ' r , , " r ' a n .i . . -
policyrnakers r'voulclacljustthe exchange
problenrs in ttrcir treditional export
car-rsccl
rate. However. most other Latin American
sectolsas well. An exchangepolicy thet
countrics. such as Mexico, maintained their
kccps tl-rcprices ol irnportecl capital goocls
import sr,rlrstitlrtionStrategiesar-rclflxed
lcxl' w-ill allt()maticxlly nrakc a colrntry's
cxclrange rates. (',4 Chronolo.*v^o/.Eco
cxport priccs to loleignels artificially high,
nomic Ilt:ents in Latin America" briefl,y
The traclitional expolt sectors of thc Latin
highlights the recettt econonilc experiencec,f'
Anericun countrics. ir"rclr.rcling
agricr-rlture.
had clifliculty competing in n.orld markets.
Brazil anc| other counlries in the regiort.)
'I'he
earlier ties of Latin American
lJecauseegliclrltLlrew:1srn ir-nportant
currencies to the dollar had irnposcd
export inclllstry fbr many Latin Arnerican
cxtcrnal rnonetary cliscipline to hold down
c()untries while menr-rflicturingwas a net
inflation. As othcr Latin Americen crountries
irrrporter, tl-reimport substitr-ttionstratelly
loinecl Brazil in severing their currency
led tr>the verw balance of payments
links to the clollar in tl-relatc 1970s and
problcrns it hecl been clesigneclto check.
1980s,this solrrce of discipline clisap-
Investment ancl ec<>n<>rnic
gro\\'-thfcll. By
pearecl.
the l9(r0s. st>rneLatir-rArrerican collntries
begrn to seek clif'fbrentgrrxr,th stretcgies
that inr'olved altering thcir foreign
cxchangc policies.
llrazil. firr example, bcgan to fbcr.rson
manr-rfactnringfirr export br-rtcliclso cluling
a peliocl <>fclomestic infletion. If Brazil hacl
A Chronology
of
Economic
Eventsin
LatinAmerica
1S45-59
abouttheirdependence
on
Conrerned
products,
LatinAmeriforeignmanulactured
pr0grams
cancountries
begin
devel0pmenl
ofimport
substilubased
0nthephilosophy
t i o n"
raiselradebarriers
t0
Manyc0unlfies
protecllocalmanufasturers
frornforeign
goods.
competili0n
inconsumer
To cheapen
imp0rts
0t pr0ducli0n
mag00ds,
chi0ery
ussdt0make
c0nsumer
Latin
pegtheirexchange
rates
American
c0unlries
inexpensive
l0 lheU.S.d0llaralarlificially
rates.
ralesaidlocalconThese
exchange
sumerg{lodsmanufachrers
hut hurtexpods.
peri0d
LalinAmerica
a prokacled
begins
manu0fgfowlh,wilhlheaid0l itspr0tecled
taclurinq
seetor.
1960{9
lncreased
lmport
substitutien
hitsasnaU.
imp0rts
butalsocom0fn0l0nlymachinery
p0nenls
inc0nsumer
lhereduclions
0utslrip
g00ds
Industrial
suppliers
impons.
tailt0
dBvelop
ashoped.
T0
totargelexporl
markets.
Brazil
begins
lowerils priceslo loreignbuyers,
Brazil
lr0mlhedollarand
uncouples
itscurrency
imposes
a cnwlingpeg.Thisevenloccurs
yearsbelorethe breakup
0l the grefion
W00ds
whichlradlixedexchange
system,
ralesbelween
mostw0rld0urrenciBs.
pcggcci its (Lrrrenc)'to the clolhr. its
proclucts lvor:lcl har'e lreen priced otrt of
lvorlcl urarkets. r'uhile its irnport r'olnrne
'lo
rvoulcl h:n'e soarecl.
cope n'ith inflation
19?0*79
morethandouble
intheearfy
Oilprices
1970s
bytheend0l thsdeandredouble
cade.
quiskly.
Mexic0
LatinAmerican
dehtrisB$
andVenezuela
borrow
to inerease
oil produBli0n,
b0rfowsl0
fofestall
ecoardBrazil
n0mic
decline.
exchange
ralepoliciss
LalinAmerisan
uaryas s0mecounlries
the
floal.ne$pite
breakup
oltheBretton
W00d$
mo$t
syslem,
LalinAmerican
conlinue
lo peglo
c0unlries
thedollarbulundergo
al leaslonemaior
d e v a l u a tdi ounr i ntgh ed e c a d e .
g)
(Cantinued
on page
TheDebtCrisisof the1980s
andlts legacy
dramatic increase in worid interest rates in
the early 1980s.the declines in income
precipitated an international crisis. Latin
In the 1960s, financial markets became
American countries could not fully meet
increasingly international, and the rypes of
their debt payments, but unlike the
financial instruments available proliferated.
situation in the 1970s,new loans did not
These changes set the stage for what was
flow in to ease the problem.
to come in the 1970s,when a dramatic rise
To earn enough foreign cuffency to
in oil prices created a balance of payments
pay interest on their debts, many Latin
deficit and thereby restrained the growth of
American countries increased competitive-
most Latin American countries.
ness by lowering their export prices and
The 7973 oil-price shock triggered
raising import prices to encourage local
recessionsin the United Statesand Europe
production. They accomplished both by
and led international financial institutions
devaluing their currencies and uncoupling
to look elsewhere for lending opportuni-
them from the dollar. They subsidized
ties. Brazil chose to avoid recession by
domestic export producers to increase
launching a public spending program ior
exports further. To discourage imports still
nuclear and hydroelectric power generation
further, they raised tariffs and other import
and for alternative fuels production,
barriers. For the same reason, many
making the country an attractive candidate
countries also curtailed domestic demand
for loans. Nlexico and Venezuela borrowed
by imposing restrictive fiscal and monetary
to develop their oil reserves,while private
policies, at least for a while.
Argentine borrowers sought funding for
diverse projects (Figure 1).
By the early 1980s,falling prices for
But as Latin America's financial
problems worsened, its governments began
to reassessthe austere monetary policies
oil, metals and other raw materials led to
they had followed in the early stages of the
rapid declines in Latin American export
crisis. Domestic recessionswere reducing
income (Figure 2). Mexico and Venezuela
tax revenues in the face of mounting
could not sell oil at the high prices they
foreign and domestic debt obligations. The
had anticipated. Brazil's export prices fell
most expedient funding option many Latin
relative to its import prices. Given the large
American governments could devise was to
debts these countries had incurred and the
pfrnt money.
Figurc 1
Figurc 2
Foreign
0ebtEscalates
LatinAmerican
Pricesof LatinAmericanExpottsCollapse
I n d e x ,1 9 8 0= 1 0 0
250
200
150
100
50
0
'1984',l986 ',l988 ',l990
1970 1972 1974 1976 1978 1980 1982
Ratio of export pricesto import prices
l'on adqe/)
Iconlinued
Figwe 3
Figurc 4
InllationRatesSoarin latin Amelica
Ratesin LatinAmeticaFall
lnvestment
Percenl
Pefcenlol grossdomesUcproduct
2.000
AverageInvestmentof eightlargestcountries
Averageannualinflation
in eightlargestcountries
0
1 9 8 1 1 9 8 2 1 9 8 31 9 8 4 1 9 8 5 1 9 8 61 9 8 7 1 9 8 8 1 9 8 91 9 9 0
Flxcessivemoney creation resulted in
qlrated. Because many of the countries had
l"righ inflation rxes (l'-igure J), creating
closed their markets and sr-rbsiclized
private-sector Llncertaintyancl suppressing
domestic exporters, Latin American
investrnent.These direct effects of inflation
expofiers faced retaliation in foreign
on investment, while alreaclyseverc, srere
markets. The United Statesand Er-rrope
compor-rncledby the consequent exchange
raiseclimport tariffs and pursued
rate instability, rl,'ith disquieting effects on
xntidLrmping procedures. Without assured
the plans of both exporters and irlporters.
accessto markets in the United Statesand
Tl-risadditkrnal uncertainty only accelerated
Europe, Latin American producers iaced
the decline in investmcnt that Latin
growing difficulties cornpeting in the
Arnerican llovernments had already helped
international marketplace. For Latin
pret ipit:rtc t Figura //. Tlreir previotts
America, the 1980s came to be known as
rno'nes towzrrclmonetary and fiscal austerity
Ihe lost Decacle.
hacl lovnered expected returns on investment, n'trile new import restrictions l"rad
raiseclthe cost of the foreign-made
equipment in wl-ricl-rexpanding or retooling
businessesmight have planned to invest.
The investurent collapse in the 19u0s
caused Latin Americzrnincomes to f'all even
firrther (Figure 5). Latin Ar-nericanprocluction facilities bec:lme increasingly anti-
latin Amelican
Incomes
Decline
T h o u s a n dosf 1 9 B BU . S .d o a r s
Per capitagrossdomesticproduct
1980-83
Theprices
occurs.
recessi0n
Worldwide
decline.
0l 0ilandolhercommodities
drop,
0f mostcommodities
As exports
nations
tallbehind
ontheir
LatinAmerican
debtobligations.
ol paymenls,
To adjusttheirbalances
counlries
allowtheitsxLatinAmerican
lhe dollar.
ralest0 slideagainst
change
thalhavelonglriedto fix
Evencountries
derales,suchasMexico,
theirexchange
curChilean
andArgentinB
Brazilian,
value.
againsl
thedollaratan
rencies
depreciale
pace.
acceleraled
try t0 protect
countries
LatinAmerican
producet$
withhigher
lradebarlheirh0me
letaliates
withils
riers.TheUniledSfates
ownproleclionism.
in manycountries.
crashes
lnveslmenl
close,
andunemploymenl
Plants
andmines
increases.
prinlm0ney
to
counkies
LatinAmerican
paytheirdebts.
low
withlraditionally
Evenin countries
andCosuchasMexico
ralesof inflation,
totriple-digit
accelerates
l0mbia,
inflati0n
withchronic
highinflati0n,
leuels.
Countries
Bolivia,
Brazil
andPeru,
suchasArgentina.
lation.
hyporinf
move
loward
paytheir
c0untries
cann0t
American
Lalin
if theyd0notexport,
s0lhe
U.S.bankdebls
Stales
airsplanst0bailetdebtrelief
United
forLalinAmeriandaccess
toU.$.markets
Thelirstproposal,
Gan
iladeliberalizati0n.
mainly
0n
Planandbased
theBaker
called
stabilizadebtrelief,lallsshortof helping
The
in LatinAmerica.
tionandrecovery
Plan,based
0ndebtteBrady
subsequenl
is moresuccBssful.
duction,
some
Latin
Toslabilize
theirecon0mies,
B0livia
such
asMexiG0,
American
counlries,
U.S.m0nandChile,importc0nservative
tales
policy
theirexchange
etary
bypegging
lo thedollar.
199l}-present
btoadens
anddeepTrade
liberalizalion
andtheUnited
States
Mexic0
ens.Canada,
lreelrade
movetowarda NorthAmerican
Ge0lge
whileU.S.Plesident
agreement,
planslor a hemisphereBushannounces
widefreelradearea.Otherliberalizalion
in LalinAmerica
and
materialize
schemes
lheGaribbean.
American
c0un0lherLatin
Argentina
i0ins
t0thedollar.
ilscurrency
lriesinpegging
Policyand
Monetary
fradeRefomin the1990s
governments returned to policies of
monetary restraint, the private sector
treated the new policies as only temporary.
In the aftermath of the debt crisis,
Instead of a return to pdce stability and
many Latin American collntries are altering
investment growth, investment remained
their stances on both trade and exchange
low, and producers continued to push up
rates. The protectionism of the early 1980s
their prices.
has given way to an opening of markets
throughout Latin America to restore
of Gtedibility
Thelmportance
economic growth. The opening of markets
will be effective ancl sustainable only when
free trade is coupled with price and
can only regain fr.rll credibility by maintain-
monetary stability. To stabilize their prices,
ing stable monetary and financial policies
Mexico, Bolivia and Chile began pegging
over a protracted period, there are ways to
their currencies to the U.S. dollar in the late
strengthen credibility in the interim. A
1980s,and Argentina began in 1991. other
government can couple its stable monetary
Latin American countries are expected to
policy with rules that would make a policy
follow. (7he progressMexico, Brazil anr)
reversal easy for the public to detect and
fff,'::'::'
Argentina are making in trade re,fonn is
described in "Tbe New liberalism: Tbree
Examples.")
The r-rncouplingof Latin American
currencies lrom the dollar in the early
1980s provicled some relief frorn balance of
payments problems. But without a rigid
external constraint on money creation,
many Latin American governments coltld
not resist the temptation to cover their
debts by printing money. When these
F$s
F*
c5*
WW
Although Latin American governments
Theilew liberalism:
ThrneExamples
costlv to the govcrnment. Pegging the
the devaluation would aggrxvrte inflation
excltange rate to x commoclity, slrch zts
by sharply increasing tl're price of imports.
golcl. or r llore stable currency is one sr:ch
A neu' rouncl of inf'lation, Lraclin and of
rule . If Latin Arnerican collntries inflated
itself, woulcl trigger a ncw round of
their cr.u'renciesbut held tlieir excl-range
economic clecline.
ratcs flxccl. prices of domestic goods r'r'oulcl
Thr:s, a c()untry witl-r a flxed exchange
rise f)ster than tl-rosec.rffbrcign goods. As e
rate has an aclcleclincentive to limit
rcsr:lt. cxports fbm these collntfies \\'olrlcl
inflation, and the privatc sectof knows it.
be priced ont of fbreign merkets, r.vhile
Moreovcr, :rny attcn-rptby the governmcnt
1e11-pricedintports r,voulclflood tl-re
to sholt circr-ritthis clisciplinc by reimposing
r-ullkets at horne. Econornic activity r,r'oulcl
trade ancl exchange controls signals that the
clecline.
government is not |eally committed to
t\1eenr,'r'hile.
t() ntaintain its fixecl
exchangc ratc, a !{overnment u'or-rlclh'.rveto
r n r r n t r i n i n gl r r u i n l l l r t i o n .
liventually, n'hen the public takes for
spencl its foleign cllrrency reserv'estc)
granted the gor,'ernrnent'scommitment to
ptrchase its orvn clrrrency in international
l.rold clon'n inflation, the country might
t t t : t r k t ' t s .f [ 1 ' l r r s so l - 1 1 r 1 1 - i g( 6t l l r c n ( )
safcly uncotrple its currency. rffith a
reserves n'c>ulcl be easily noticcablc,
l.ith
ancl
reserucs climinishecl ol clepletecl. the
govelnlnent
r'r'oulcl n<>longcr be ablc to
creclible.dem()nstrateclcommitment tc)
kccp inflation low, a governl-nentcan
pufslre a stable monetary policy, yet allorv
sllpport the price of its o\\'n currency. Not
its exchange rate to adjlrst to extcrnal
onlr. r"'or.rlcl1ln overt cler.alnation occur. l>ut
market fbrces ancl, thus, to accommodate
price rnovernents that are not tiecl to
excessive internal monetary cxpansion. But
flrst thc creclibility of monetary policy must
be establishecl.An exchange rate peg can
nature0f the Weslprn
Thepragmalic
greallyennewliberalism
Hemi$phere'$
f0rsuccesslul
reform.
hances
theprospests
pr0mi$es
dBblreduslion,
Liberalization
for
markelaccessandvasl opportunity
growth.
Bushannounced
lnJune1990,Ptesidenl
initiative,
a
hisEnlerprise
l0rlheAmericas
plant0sreate
a treclradearsaencompassHemisphere.
Themeasute
inqlhsWeslern
eftortst0 crealelully intec0mplements
qrated
lradeareas,
whichinclude
regional
FreeTrade
lhe pf0p0sed
NorlhAmerican
(Canada,
Uniled
Mexico,
$tates),
Area
Chile,
t h e C a r i h b e aCno m m u n i(l yB a r b a d o s ,
thB
Jamaica,
Tfinidad
andT0bag0),
Guyana,
(Argeniina,
C0mm0n
Mafkel
Soulhern
Cone
Uruguay),
lhe Andean
Brazil,Paraguay,
Ecuador,
Peru,
Colombia,
Group
{Solivia,
American
ComVenezuela),
andtheCenttal
(C0sla
Guafiica,El$alvador,
monMarkel
Nioaragua).
Honduras,
lemala,
liberalization
t00k
lhepastdecade,
Ouer
deSlacehylits andstarlsandin varying
gress
LatinAmerica.
Thelollowlhroughout
fiiqhlight
lheexperiences
0l
ingexamples
Mexico,
Brazil
ardAfgerlina.
Mexico
help establish this creclibility, but pegging is
movemenl
t0 libMexic0's
Tosomeextent,
not en easy or a foolproof apploach to
andun0edainty
eralize
retlefi$
debtfaligue
p0licy
t0war[
Mexican
expgrts
i0
0vErU.$.
price stability.
Stales.
A milestong
in Mexico's
theUnited
etforlcamein 1986withlhe
liberalizali0n
AgreenBgotiated
intotie General
enlrance
Trade
The
menl0n Tarilfsand
{GATT),
wasdramatic,
wilh
liberalizali0n
c0unlry's
larilf
l0wering
ils
highest
banier
Mexico
t0 ?0percentattvaturem
from100percBnl
mosln0nlaritl
barriers,
such
andeliminaliIg
licenses
onm0slpr0ducts,
export
asimp0rt
Fur
subsidios
andoflicialimp0rlpriceE.
0lg0vernmenl-0wned
thBr,lheprivalizali0n
lherelaxati0n
0fr8slriclions
sn
enlerprises,
andtheamenddirectloreigninvestment,
patenllawrcflecttheslrong
ment0fMexican
(Continuetl
on page13)
Thelmpoilance
of Consistency
financial footing, Mexico's government
shonld be more successflrlin carrying out
Exchange rate pegging cannot be
l
,
a
t;: l:":"'
''
,,.,,,a,
t
its announced intention of moclernizing the
appliecl successfully r.rnlessthe government
agricultural sector and irnproving social
combines an open tr2rclestance u'ith other
services,ecltrcationancl infiastructure. Also,
consistent and creclible policies. In the late
Mexic:rn policymakers have deregr,rlated
1970s and early 1980s,fbr exan"rple,the
financial and capital markets sLrbstantially
Southern Cone countries of Argentina,
a n t l h : r v eh c g r r np r i v : r t i z i n g o \ c r n m r n t -
Chile ancl Urugr,rayfirllor.vedexchange rate
or',.neclcommercial banks to enhance
policies similar to Mexico s policies of the
competition. Moreover, Mexico has
1990s.Argentina and LJruguay,hor,vever.
broadened its range of export industries,
did not support their exchange policies
making the colrntry less susceptible to
with fiscal measlrrestl-ratu.'or,rldperrnit the
monetary stabiliry implied by linking. As
serious fluctuations in the price of oil.
'l'he
same principles at work in Mexico
their fiscal deficits rrountecl, these countries
may be l-relpingArgentina overcome a 20-
severed their cr,rrrencies'ties to the clollar.
year cycle of l-ryperinflation and devalua-
to a fiscal sr-rrplus.Br-rtthe country's krose
tion. In the throes ol hyperinflation in July
1989, Argentine prices tripled in one
financial regr-rlatoryenvironment and
rnonth! In 1991, however, Argentina
unstable cepital flows, along n'ith strict
pegging the austral to the dollar
cor.r.rbined
labor regr-rlationancl schemes that pro-
witl-r strong fiscal refonn and a monetary
Chile's policies, on the other hancl, lecl
tected wages from inflation, resulted in
rr,rlethat enslrres fr.rllconvertibility of the
balance of payments difllculties. Cl.rile
Argentine crlrrency with the dollar. Ry early
could not maintain a stable exchange rate
1992, Argentina had a substantially
policy, particr,rlarlyafter the country's
cleregulatedeconomy rvith low inflation.
c x p o r l p r i rc s l c l l r c l : r t icr t () i l n p () r t p r i (c \
in the early 1980s.
TheRoadAhead
In contrast, Mexico appears to be
achieving sllccessr.ith an exchangc rate
tlnlike the exchange rate pegs of the
policy that is part <>fa Lrroadreform
import sllbstitution era, the new cllrrency
program. Mexico has taken measllres tc)
linking has been approacl-reclagainst the
achie\.e fiscal responsibility, preserve tl-re
backclrop of a liberalizecleconomy. Freer
stability of financial rnarkets. ancl support
trade shoulcl help keep Latin American
its central bank in responsible monetary
domestic product prices in line with
policies. Most obsencrs believe that the
internltional prices. The possibility of
comprehensivenessof Mexico's policies
balance of payments crises sl-rouldhelp
enhances their creclibility, giving then.r
keep the central banks of the region fiom
greater prospects fbr sr,rccess.
Mexico has
printing too much money. Any attempt to
turned its high governrnent cleflcitsof the
subvefi tl-ris cliscipline by reintrodr-rcing
late 1970s and early 1980s into surplrrsesin
tradc barriers would call into question the
tl-re1990s.llaving regainecle more solid
credibility of government policy and
reslrrrectthe specter of the high inflation
and low gr()\\,'thof thc 1980s.
Stability of the exchange rate in the
context of consistent policies to fight
#,
%i,
,
.l*
inflation. hou,'ever,should create an
atmosphere condtrcive to the expansion of
trade and the development of financial
(Continued
fton pagel1)
mrrkcls, incluclingfi>reigncxchenge
beseclrate rvill be conclr-rcir,e
to lor.v
commitment
to liberalization
OltheMexi-
r.r.rllkclsin the Antelicas. Iinclelclevelopecl
inlletion only if the region's centlel ltanks
canec0nomy
startedin thede la Madrid
flnenciel nLr|ketscun henclle<tnlyu sntall
\'olunre of firrcign excliunge tl'xnsacti()ns.
ct>nsistentlykeep rnoncy grorvth low and
administration
andinlensified
in theSali-
maintain creclibility \\'ith respcct t() thcir
nasadminislralion"
Accor-clinglr'.u,hen exchengc l'1ltesare
ellonecl to floet, policl,-ntakcrsmet' f'ear
inf'letion goals. An iniportrr-tt step in
Mexioan
Consequently,
tradewithlhe
UnitedSlateshasgrownsubstanlially.
thet cven e stnall changc in the suppll' of
or the clenrancltirr clollers \\'olll.l cause
achieving krrv rnonev gro\\,th is to safeguarcl the indepenclence of the central
b:rnk. N'[aintainingan inclepenclentcentlel
Mexico
has0ncea0ainbec0me
theUniled
partner.
Slales'third
largs$l
lradinu
More
rates. Incleecl.this cctncernu,as the
bank separatesthe p()wer t() print lroney
florn tl-repower to spcncl noney (as
imp0rlant
lromlheU.$.standpoint
is the
r.rnclerll-ingluotivati()n fi)r strong central
clcteilecl in thc 1990 ALnurdl l?elnrt of tlTe
bank intcrlcntion in tltc pest.
|ccleral Rescrve Ilank of Dalles). Ilut
large ancl r,rnst:rl>le
lr()vctnents in cxchange
laclthatU.S.exporls
t0Mexico
havenearly
doubled
asa res[ll0f Mexico's
[nilateral
of itself, lnay not lre sufTicientto restore
liberalizalion
eflorl.Thetinalslepin this
process
is theNorth
American
FreeTrade
exchengc rnlrrkets.Gcnerellv.expofters are
cleclibilityto ntonetarypolicy. If central
Agreemenl
nowbeing
neg0liatBd
byMexieo,
rcqr,rircrlto surrenclerfitreigr-rexchenge t<r
l>ankscan sLlsteinI<>\\rnoney gr()wth and
Canada
Stale$.
andtheUnitBd
For norr'. Letin Americun ccntral lxrnks
are tlre printurl egents in their fil'eign
tl-recentral bunk, ancl importers buy tnost
of their foleign exchangefi>rn it. Gro*,th
in Latin America's flnancial rlarkets rvor,rld
give thc private sect<>rsufficient clepth t.)
rll<>u'thc centrel benks of the rcgion to
ciisrrantle their controls on fi>reign
exchange.
As trrcle end financirl integrxtion
expancl. rnarkets firr Latin Arnerican
cLrrrenciescan clcvelop t<>fiLcilitatethe
grou'ing r'<>lumeol goocls ancl asset
transrctions. As privete firreign cxclunge
rnarkets clevclctp,central ltanks i.r'ill
inclependcnce of the central bank. in and
high crcdihility, fixecl exchange rates may
l>ecomeLlnnecess:lly
shackles.tlntil that
l i r t t t ' .h o u e r c r . l . : r t i nA l t t c t i (a n g , u \e r n ments rnay tctnper the pon'er to print
rn()ney \\,'ith a str()ng constraint. sr-tch:rs
sornc lcrrnr of exchange rate regirne
u'hclcby their currencies are linked to a
Iou-inflation clrrrency, like the LI.S.clollar.
Brazil
Some
maythinkBrazil
observers
islagging
pti0n.
inIiberaIizalion,butthisisa misc0nce
Brazil
levelwasnever
s prolection
ashigh
asthatofolherLalinAmerican
countries
al
lheirworst.
Brazilbeganliberalizing
in 1990.The
c0unlry
ha$abandoned
ilsso-called
lawol
pr0similars,
whichprotected
induslries
g00ds
ducing
withimp0rls,
thateompeled
andby1994,Brarilplansto havereduced
avefage
tariflslrom34percent
l0 14 psr-
probalrly pley e cleciiningrole in defcrmin
ing cxchange retes, At some point in the
0enl.WithcrBdible
andenduring
liberaliza-
firttrrc. Letin Anterican countrics rnav fincl
li0nnow,Brazil
shsuld
besucee$sful
bothin
thet urerket-beseclexchange rxte regimes
havc bec<>r.ue
lhe errlngentent most
its internalional
maintaining
competitive-
bcneflcial kr thcir econonlles.
'l
he clifficulties Latin Anterican central
manufacturing
andin str8ngthening
olher
banl<scncounterecl in nteintaining fixecl
cxchrLngelates in tlic- 1970sancl 1980s
slrggesttliut. in the long run. a nrarket-
nessin suchseclors
aslightandmedium
sect0
rs.
An evenlihat coufdgalvanircBrazil's
future
with
liberalization
cameinearly1991
lhesigning
olthe$oulhern
Cone
Free
Trade
Agreement
Agreement}
by Af{Mercosur
gentina,
Paraguay
afldUruguay.
Brazil,
Underlhe agreement.
lradebarriers
among
lhefournations
arel0 becompletely
eliminated
integralioo
incapiby1995.$ectotal
tal g00dshasbeenunderwaysincethe
signing
in 1986.
0fagreemenls
Theelfecpr0gram,
tivBness
0fthepre$ent
asalways,
depends
0n Btazil'seffortsal macroec0nomic
stabilizalion,
anarea0l limited
successinlhepasldecade.
(Continued
onpage| 5)
Gonclusion
Chile and Argentina by passing laws to
create central banks with sufflcient
More and more countries thror-rghout
the world have concludecl that price
pressllfe to covef their governments' debts
stability and economic openness are the
by issuing more money. Credibility,
r-rnderpinningsof economic growth. In
however, increaseswith both the number
attempting to put t\\'o clecadesof volatility
of steps taken and the visibility of steps
bel-rinclthem, rnany I-atin American
g o v c r n r n c n l sn o l ( ) n l ) : r r cp u r s u i n g
governments mLlst take to undo new
monetaly stability bLrtare implementing
their visibility, the more dilficult is their
policies to conr.ince their business colrrnlr-
reversal. The highly visible policy of
nitics that stability u'ill continue long
enough to justify investment.
linkage of a nation's currency to a stable
The long-terrn credibility of central
?
t,
policies. The more steps and the greater
anchor, cor-rpledwith other clearly defined
monetary rules, wonld increase credibility
bank policies is essentialto successful
still firrther. Eventually, such arrangements
reform. Already, sorle Latin American
can give wry to policies that rely only on
have providecl models fbr
€aovernrnents
others seeking the benefits of fiee tradc.
internal discipline, thus eliminating the
They l-ravecomplementecl tracle libelaliza-
a
independence to withstand political
need for fixed exchange rates.
The Federel Resele Bank of Dallas
tion with monetary and exchange rate
believes that open rnarkets and stable
polices that :rre consistent n'itl-rfiee trade.
prices end currencies are in the best
Sornc countries rnay fbllor.r'the exar-npleof
interests of all countries ol tl-re\festern
Hemisphere. Open markets and stable
prices ancl currencies can help speed the
recovery of tJ.S. exports to Latin America,
as clernonstratedby the recent growth of
7
r*
U.S. exports to Mexico. For the United
States,exchange rate stability facilitates
l'rernispherictr2ldeflows in a period of
intensifying competition with other
countries. Economic libcralization and price
(Cailllitued fton paga 13)
stxl)ility througlioi-rt the hemisphere
cnhence the glorvth prospects for the
flnitecl Statesencl its trading partnels in the
1990s.
Tracle and flnanciel integretion nill
Argentina
Inearly1991,
Argentina
altenpt€d
t0break
itsdevalualion-hyperinllati0n
cyclewitha
plan,butinfiscaladlustment
broad-based
c()ntinLlein the Western Ilentisphere, ancl
llation
in1991,
Argentina
didnollall.LatBl
program
rate
l0 help
adopted
anexchange
sonle Lrtin Arnericen countlies n'ill likely
policy.
ensure
thecredibility
0l m0netary
n'isl'r to stfengthen theil ntr>netaryties tcr
'l'he
the tinited States.
L.-r-ritccl
Statesslt<>nlcl
Thelegislation
tequires
thBcenlral
l0
bank
n()t shy ar'r'aylnl-n sr-rchan oppoltr-rnity
lrr,rt,nrther',shor-rlclstrive to set I stanclarcl
of economic ()pennessancl price stebility
100-percent
ofthemonmainlain
backing
(currency
plilscomincirculati0n
etarybase
withthe
mercial
bankreserves
0ndeposit
tion in the Anrclicls clepenclson it.
centralbank),wilhl0reignreserves
at an
e x c h a n gr sa l Bn 0 g r e a t el rh a n1 0 , 0 0 0
Liberalizatior-rin the Antericas, how,er.er,
perdollaf.Moreover,
afleryear$
auslrales
increasesthe burclen on the lrcclerel
buying
0l restriclions
0nforeign
currency
lbr others to elnulate. Economic libelaliza-
lleserr"eS,vstcnr.No*, ntore thln el'er.
fromthecenlralbank,lheaustral
became
steble Ll.S.lnonetllr)'policv purstreclbv en
inclepcnclentccntlel bank is criticelly
poliThese
fullyconvertible
withlhedollar.
generaled
reducli0ns
ininfladramatic
cies
ilnp()rtentlol the econontic heeltlr ancl
intlows
fromabroad,
and
tion,large
capital
gro\\'th of oLlI c()Llntn trncl olr| hemisphe|e
hoom
durinq
lheremainder
a slockmarkel
0f1991.
Encouraged
bylhe
success
0llherelinking
policy,
Argentina
lihemlized
even
lurlher
by
n0nlariff
dlastically
reeliminaling
baffiers,
exportlaxes
ducingtariffrates.andreducing
qu0las.
Then,in lale1991,Presidenl
and
Menem
introduced
legislation
todeCarlos
regulate
theeconomy
euenmore.Byearly
1 9 9 2 ,A r g e n t i nhaa db e c o m ae n o p e n
wilh low inllalion
anda fixed
e00n0my,
ratB.
Thel0ng-term
0lthe
exchange
success
pr0gram
condepends
0nwhelherArgenlina
linsesl0 impr0ve
thec0mpetiliveness
0fits
ec0n0my.
Y
& **
X-
Acknowledgment
ErJuurds. Sebastian, ancl Alejanclra Cox
Tbis essa.yLtas uritten b.y.lobn H. Welch
Edutarcls ( 1987), Monetarism and Liberal-
and \Yilliam C'. Gntbert.
iza;jon: The Clrilean Experiment (Cambridge, Mass.: Ballinger Publisbing
Selected
Bibliography
Compatt.y).
Agbeuli, Bijan 8., Xlohsin S. Khatt, artd
PeterJ. Montiel (1991), Dxchange ltate
Ferleral Resene Bank of Dallas 1990 Annr,ral
Policy in Developing Conntries:Sorne
llcport ( 1991), "Ttuo Tlpes of Pcrper: The
Analytical Issr,res,l1{l Occctsional Paper rrc.
C'ase.fbrFederal ReserueIndependence, "
78 ( Wasbirtgtort,D.C.; htenntiottal
6-18.
M o n etctry-I'.u n cl. Mar cb ) .
Fentanrlez, Roque 13.(1985), "The Expecta-
@irl*,
I3aer, Werner ( 1991), 'tl.S. Latin Ameicant
tions Management Approach to Stabiliza-
Trade Relations:Past. Presett, and Future"
tion itt ArgeLttina Durin54 1976-82, "\X/orld
(Paperpresented at "Be-yortdtbe Border;
Development 13, nct. B: 871-92.
Exltanding Trade .for Prosperit-r-." o confbr
ence spctnsoreclby ltederal ResenteBank o.f'
l'r'ydl, EduarclJ.. anri Dorotby M. Sobol
Dallas, Dallcts, Texas, October 24-25).
( 19BB), "A Percpectiueon tbe Debt Crisis,
:r$}{lx;
x{}*r
. :.: i
. ....
..
''
',.:'i'::llli
1982 87," in l;ederal ReserueBank oJ'New
Corbo, Vittorio, and-laime de XIelo ( l9U7),
Iork, Sevcnty+hird Annual Report, For the
"Lessons.frcm.lbe Southern Cone Polic-y
Year EnclerJDecember 31, 1987, ,29.
Reforms,"Worlcl Bank ResearchObserver 2
(lul.Y): 111-12
Laird, Sam, anriJulio Nogu4s (1989,
"TrctdePolicies and the Higbl.y Indebtecl
Deuctrafan. Sbantayanan. arrcJDarti Rodrik
C'ountries,"'Jforld Bank Economic Review
( 1991). "Do tbe BeneJits oJ'Fixed F;xchange
.j (Mrt.y): 211-61.
RottesOututeig,b Tbeir Costs?The F'ranc Zone
I
:::"::,
in Africa," NISERWorking Paper Series, no.
McLeot4 Da.nil, and.lobn H. Welch (1991),
3727 (Cantbridge, Mass.:National Bureau
"Nofih American Free Trade and tbe Peso:
r1fEconomic Research,Jtrne).
Tbe Casefr-tr a Nr.trthAmerican Cttrrency
Area," Federal ReserzeBank o.fDallas
Dontbt tscb, Rudi.ger( 1982 ).'Stabilizcrtion
Research Paper no. 9115 (Da.llas, August).
I\tlicies in Deuektping C'otuttfies: What
Haue We LearnerJ?"'$/orldDevelopment 10,
Qu irk, Peter.l., Ilenedicte Vibe Cbristensen,
no.9; 701-8.
Kt-tmg Mo Htrh, and kxhihiko
Sasaki
(1987), Floating Exchange Ratesin
Dcvcloping Countries: Experience with
Auction ancl Interbank Markets. IMF
OcctrsiortalPnper no. 5.J(Washirtglort.
DataSources
for Figures
D. (,'.: I t t Ient at i o tt tt I M rt t tetcttl lrt t I t d, XId.t-).
Figure 1:
fritsertxte i,q,.le.ffre.yAI a rt ( I 9U5), "Iimpi ric a I
The VorkJ Bank
llrsa.).sr-rnthe Dollar Area" (Ph.D. dissertdtiorr. XI ttsscr
cb u setts] | tst i t t.tte ctI' Tech rto ktgl',
I.'igure 2,
/tnte ).
I nter-Americ a n Deuebpn.ent Ba n k
Sektu:sky.Mcrrcelo (1990). ".Stagesitt the
Figure .J.
Recoueryof'Latirt America's Grotcth, "
Inter Anterican DeueloptnentBank
Financeanc'lDevekrprttent27 (lurc);
(Auerage annual inflation rates ueighted b!
28--l I .
grossdom.esticprodttct Jir Argetiirtd.
lloliuia. Brazil, Chile, Colombia, illexico,
Sin,ga.H. V/. ( 195O), "TheDLstibrttiort c.tJ
Gctiru
'
Iletu'een Inuestitt,qcutclllonrn.hry Cbtut.trie;,
Pent ancl Venezuela)
Arrrericanlicononric Rel'ie'r,v1O (,1'kt1,.
PaSNn
f'i.qurc 1:
arul Proceedittgs.1919. 17.1,95.
I nter A mericctn Deuekrytmettt I3an k
(Auerc.tgedrrnLrdl inueslmenf .t.sd percent-
Su rtkel, Osta lclr,t,a rtd (l ttstculo Z trlet a
trge o.f grossdom.esticproduct.fitr Argentinct,
( 1990), "Neo-Stntcntralism VersttsNeo
llr tliuitr, Brazil. C'hile, C:olomb ict, l,[exicc\
Liberalism in the l99os, CEPAL Revicu,,
Pent ctnrJ \,Tnezuela)
rto. 12 (I)ecetnber).-1151.
Figure 5.
( .h i tecl N ttt k.ttt s Ecctrt r u'nic Co m m issi o rt .fb r
'fhe
Lalin Atnerica ( 195O),
Econontic
ItTter-Americart Deuektpntertt IJdnk
Devckrpnient ()f Lrtin Americl ancl Its
At gentina. Bahamas. BarbarJos,IJoliuict,
Principal Prcrlrlems.L/CN. I 2/89/rer.7.
Ilrazil. Chile. Criontbia, Costa Rica.
(Gross tktmestic prrrlttct per capita.fitr'
Dctniricctn Reptrblic, Ecuador, El Saluackr,
t'mt lYtijnbergert, Su,erJer( 1991), "Mexico
(;t.tdlem.tlct. Gttltana. Haiti, Hot'Lduras,
crtttl lhe Brorl-yPkttt. "Ec<>nomicPolicy, no.
./amaica. Mexicr,t,Nicaragua, Panarna,
12 (April): 1116.
Prtraguay, Petu, Sutinctme, TrinirJad anrJ
'l'obago.
[.intgud-, artd ltetrczu ela )
TheYearin Review
will alter the process of bank superuision
ancl lending.'I'he new law places limits on
Superuision
and
Regulation
andloan
discount q..indow loans to undercapitalized
institutions. lt :rlso prescribes a range of
actions to be taken il a bank's
sr,rperr,'isory
Eleventh I)istrict benking conditions
'l'he
continued to ilnprove in 1991.
specificd limit. Aclditionally, the law
profitability of District benks increasccl
rlanclates annr-ralon-site bank examina-
frorl 1990 and surpasseclthe protitability of
-l'he
LI.S.benks ovcrall.
retr-rrnon District
fbr banks
tions, reqlrires outside ar-rclits
banking assetsrose to 0.7 percent in 1991
the alrthority of the Federal Reserwein
fiom 0..1percent in 1990. tVidening net
supervising Ll.S.olfices of fbreign banks.
interest margins, graclnal in-lprovementin
cepital position deteriorates below a
above urspecified asset size, and increases
TI're changing financial and regulatory
local real estatc markets, 'lnd continuecl
environrnent ol tl-re1990s brings new
governmcnt resolLltioneflirrts all contrib-
opportunities ancl challenges firr Eleventh
uted to the gain in profitability.
l)istrict financial institutions. l'lie Dallas Fed
I)istrict bank failr,rresdeclined fion.t
rernains cledicatedto promoting the safety
105 in 1990to 33 in 1991.Also ref'lecting
ancl sounclnessof tl're financial industry
itrrproved flnancial conclitions. the nr-unber
cltrring tl-risperiod of ongoing change.
of loans extended by the FeclerulRcsen'e
Bank of Dallas'discount ninclou declinecl
frorn 1,750in 1990t<>421 in 1991,ancltotal
Financial
Seruices
crcdit extencled by the Dallas F'ed's
discount window fell fiorrr 5,1.6billion to
Financial services remained one of the
$1 billbn.
prirnary areas of emphasis for the Federal
As the supen,isor of state rnember
banks ancl bank holcling cornpanies in the
Eleventh District, the Dallas Fecl pertirrnrs
ro#3r
A[t
;[fitlrwwrwx
I
three consolidation sites to sLlpport data
serwicesand alltomation effi>rtsfor the
fbr cornplience rvith both the Cotnrnunity
Fcdclal Itcsenc System.After an extensive
ReinvestmentAct ancl consumer protection
rn:rlysis of 39 possible locations, the
Iar,vs.In 1991,the Dallas Fed's exauriners
selection committee chose Dallas, along
conductecl 556 examinations rclatecl to the
with llichrnond, Va., and East Rr.rtherfbrd,
supervision of District flnancial institlrtions,
NJ. Site selection was based on each
including 14 exan'rinationsof LI.S.agencies
location's environrnent, labor and space
of foreign banks and .15conslrurer af1airs
availability, and cconomy and culture. A
examinations. In adclition, the Dallas l.-ecl
trensition plan fbr consolidating operations
processed114 applicationsfbr ntergersand
over the next several years is being
xcqlrisitions, changes in control ancl
developecl. Llnclerthe consolidation
m:rnagement,and other actions requiring
concept, each of the three centers will back
regulatory approval.
r-rpthe other tw<r,providing clual backup
Legislation passed by Congress in 1991
r>
The Dallas Fed was selected as one of
examinations fbr saf'etyancl sounclnessancl
ffigwwffiryww,
*-*,
Reseruellank of Dallas in 1991.
for each location. As a resr-rlt,the reliability
and availal>iliq, of Fecleral Resele sen'ices
l-tASH-Light, a receive-only electronic
Financial institutions will accept, process
will improve. Cr-rrrenfly,the System'sone
access method designecl for institr,rtions that
and forwarcl customer orders to the Federal
contingency center in Culpeper, Va.,
receive a minimum nllmber of ACH items
Reserue for bond issuance and mailing. The
supports 10 of the 12 Districts. The
per day.
entire process will take a maximum of 15
Culpeper center, now capable of support-
In currency and coin operations, 50
ing one District at a time, is being up-
percent of the $1 notes issued by the Da1las
graded to support fwo simultaneor_rsly.
Fed now come ftom the new Bureau of
The Federal Resele System initiatecl a
days. Implementation for the Dallas and El
Paso territories is schedulecl for 7992.
In check processing, the conversion to
Engraving and Printing'Western Currency
Check ProcessingControl System (CPCS)
program to move all commercial alltomated
Facility in Fort \fforth. The Fort ril/orth
software was completed at the three Dallas
clearinghouse (ACH) transactionsthat
f:tcility, the flrst U.S. currency production
Fed Branches. The CPCSsoftware allows
flnancial institutions originate or receive
plant outside Washington, l).C., began
the Branches to process checks through the
througl-rthe Federal Resele Banks to
operation in April 1991. By 1994, the plant
Dallas Office computers more qr-ricklyand
electronic :rccessno later than June 30,
is expectecl to be proclucing 4.5 billion
with greater reliability. In addition, as a
1993. The Dalles Fed is working closely
notes per year, or 40 percent of the Federal
leader in the improvement of return item
with its customers to corlplete this
Resele Systen-r's
requirements. The plant is
processing, the Dallas Fed helped slrccess-
transition byJanuary 1993. An all-electronic
expectecl to lessen the workload of the
fully introduce a return item intermingling
ACH irnproves the efllciency of the ACH
prograni (cun-ently ir.r the pilot stage) that
mechanism by promoting timely posting of
Bureau of Engraving and Printing in
'Washington,
D.C., which reached its
ACH payments to custolner accounts and
printing capacity several years ago.
collection items to be conrbined in a single
enhances the attt?ctivene.s.s
of the ACH
In September 1991, the Fecleral
allows qr-ralified return items and forward
cash letter. The benefits of intemingling
systcm lry allo\\ ing greatcr processing
Reserwebegan issuing Series 1990 $100
incltrdesmoother processing.easier
flexibility. Electronic accessalso enhances
nc)tes,the first currency with two new
reconcilement, less paperwork, less time to
the integrity of the ACFI mechanism by
secr-rrityenhancements. They aLlgment
prepare cash letters, and a significant
reclucing creclit anci fraud risk, providing a
existing counterfeiting deteffents and will
savings on service f'ees.
higl-rerlevel of security, and irnproving
help deter the use of high-technology
contingency ancl disaster recovery capabili-
systems,such as color copiers and laser
continued support and enhancement of its
ties. At year-encl,about 33 percent of the
scannefs, tbr counterfeiting. The enhance-
cost accollnting program lbr financial
Dallas Fed's receiving points for ACH items
ments are a security thread and
institutions, Functional Cost Analysis. The
were connecteclto its electronic RESPONSE
microprinting, neither of which can be
Dallas Fed will continue to receive and
nets.()rk. The netu,,orkf'acilitatesboth ACH
reproduced easily by a photocopier. The
p r ( ) ( e s sd r t a l i o m i n s t i l u t i o n so r r i n t o m e .
transr-nissions
and accessto all other online
Bureau of Engraving and Printing plans to
expenses and item-count information for
sen'ices.
print other denominations with these
various functions. The reports that the
security features.
Dallas Fed compiles from these data will
By the end oi 1991, the Dallas Fed hacl
con-rpletecicLlstomerconversion to Fedline.
Training for and implementation of the
Finally, the Federal Reserveannouncecl
help institutions compare and price
the new personal compllter softwale for
Regional Delivery System (RDS) were
products, control costs and evaluate
the RESPONSEnctw'ork. Feclline will
completed in the Houston ancl San Antonio
operatrons.
enhance the efficiency of accessto the
territories in 7997. RDS, the new metl.rodof
Dallas Fed's flnancial seryices.Conversion
purchasing U.S. savings bonds, was
continue to strive to meet the financial selices
of the Dellas Fecl'sRESI,ONSEusers
introducecl by the Treasury Depafiment as
needs of depository institutions throlrgh an
inr.'olveclextensive internal resources and
a cost-eff'ectiveand efficient means of
emphasis on electronic technology and the
cooperation on the part ()f net[,ork
inscribing ancl clelivering savings boncls
efficiency, c<;st-effectivenessand reliability it
participants. Also introcluceclin 1991 was
sold to the public over the colrnter.
provicles the banking indr-rstry.
The Federal Iteserue tsank of Dallas will
Ttibute
to a Building
milestone in the historical development of
the area. In tribute to the enduring
For more than 70 years, the imposing
significance of its desipJn,the Dallas Fed
granite and limestone building at 400 S.
building was designated a historic land-
Akard Street in downtown Dallas has been
mark in May 1979.
the home of the Federal ReserveBank of
Remarkably, the building stands today
as a monument to the vision of the first
Dallas.
Designed by a prorninent Chicago
Federal Reserveleaders, who understood
architectural firm ancl first occupied in early
the need to create a structure strong
1921, the Dallas Fed builcling reflected the
enough to transcend the years and, more
same revival-style architectr,rreas other
important, the need to create a work
Federal ReserveBanks built during the
environrnent that would be flexible and
1920s.The liberal use of arches, stonework
useful in eras its planners could not even
and ironwork in the clesign helped create a
ima!aine.
symbol of the stability of the Fecleral
As men and women of the early 1990s
ReserweSysten"rand of its vital role as the
work behind the same walls that welcomed
country's central bank ancl fiscal agent.
the first Federal Resele staff in 7927, the
The Dallas Federal Reseruebuilding
building verifies that the high standards
was constructeclwith 1,300 tons of steel, 1
that were its foundation stand firm at the
million bricks and 20,000 square feet of
F-ederalReserweBank of Dallas almost
limestone and granite. The cornerstone was
three-quartersof a century later.
laid on April 2, 1920, and 11 rnonths later,
the building's doors opened for business.
Although the distinctive edifice
In 1992, the Federal ReserveBank of
Dallas will experience yet another milestone as it prepares to move lrom its
visitors seemed more impressed that the
landmark home on Akard Street to a new
'We
can only
btrilding at 2200 Pearl Street.
Dallas Fed headquarters was the first
hope that the years ahead will be as
commercial building west of the Mississippi
memorable as the past 71 have been at 400
River to be eqr-rippeclwith air condition-
S. Akard.
attracted tourists from across the state,
ing-a
miracle to most Dallas residents at
the time.
A stately structure with elaborately
sculpted cornices ancl a front entrance
flanked with massive columns, the br-rilding
representsan important architectr,rral
BOARD
OFDIREGTORS
Federal Reserue Bank of Dallas
El Paso
Chairman:
Maj. Gen. Hugh c. Robinson
U.S. Army (retired)
Chairman of the Board and
Chief Executive Officer
The Tetra Group, Inc.
Dallas, Texas
Chairman:
W. Thomas Beard, III
President
Leoncita Cattle Co.
Alpine, Texas
Depury Chairman:
Leo E. Linbeck,Jr.
Chairman of the Board and
Chief Executive Officer
Linbeck Construction Corp.
Houston, Texas
HenryG. Cisneros
Chairman and Chief Executive Officer
Cisneros Asset Management Co.
San Antonio, Texas
J. B. Cooper,Jr.
Farmer
Roscoe, Texas
Chades T. Doyle
Chairman of the Board and
Chief Executive Officer
Gulf National Bank
Texas City, Texas
T. C. Frost
Chairman of the Board
Frost National Bank
San Antonio, Texas
Robert G. Gr.eer
Chairman of the Board
Tanglewood Bank, N.A.
Houston, Texas
GaryE. Wood
President
Texas Research League
Austin, Texas
Peyton Yates
President
Yates Drilling Co.
Artesia, New Mexico
Federal Aduisory Council Member
Ronald G. Steinhart
Chairman of the Board and
Chief Executive Officer
Team Bank
Dallas, Texas
Lnarrman Pro I em:
Diana S. Natalicio
President
The Universiry of Texas at El Paso
El Paso, Texas
Verorilca K. Callaghan
Vice President and Principal
KASCO Ventures, Inc.
El Paso, Texas
Ben H. Haines,Jr.
President and Chief Operating Officer
First National Bank of Dona Ana County
Las Cruces, New Mexico
Alvln T.Johnson
Senior Vice President
Management Assistance Corp. of America
El Paso, Texas
Wayne Meffltt
Chairman of the Board and President
Texas National Bank of Midland
Midland, Texas
Jenard M. Gross
President
Gross Builders, Inc.
Houston, Texas
lValter E. Johnson
President/Chief Executive Officer
Southwest Bank of Texas
Houstofl, Texas
Clive Runnells
President and Director
Mid-Coast Cable Television, Inc.
El Campo, Texas
President and Director
Runnells Cattle Co.
Bay City, Texas
San Antonio
Chairman:
Roger R. flemmlnghaus
Chairman of the Board, President, and
Chief Executive Officer
Diamond Shamrock, Inc.
San Antonio, Texas
Chairman Pro Tem:
Erich Wendl
President
Maverick Markets, Inc.
Corpus Christi, Texas
Humb€rto F. Sambrano
President
SamCorp General Contractors
El Paso, Texas
GregoryW. Crane
Chairman of the Board, President, and
Chief Executive Officer
Broadway National Bank
San Antonio, Texas
Houston
JavTer Garza
Executive Vice President
The Laredo National Bank
Laredo, Texas
Chairman:
Gilbert D. Gaedcke
Chairman of the Board and
Chief Executive Officer
Gaedcke Equipment Co.
Houston, Texas
Chairman Pro Tem:
Judy l,ey Allen
Partner and Administrator
Allen Investments
Houston, Texas
JeffAustln,Jr.
President
First National Bank of Jacksonville
Jacksonville, Texas
Milton Caffoll
President
Instrument Products, Inc.
Houston, Texas
I-awrence E.Jenkins
Vice President (retired)
Lockheed Missiles & Space Co.
Austin, Texas
Jane Flato Smlth
Investments and Ranching
San Antonio, Texas
Sam R. Sparks
President
Sam R. Sparks, Inc.
Progreso, Texas
ElfectiueDecemberJI. 1991
ADV|S0RY
GoUltGtrS
Financial Institutions
Small Business and Agriculture
Barbara Clore
Chairman, Texas Credit Union League
President, Associated Industries
Credit Union
Deer Park, Texas
Joe Alcantar
President
Alman Electric, Inc.
Mesquite, Texas
ArnoJ. Eastedy,Jf.
President and Chief Executive Officer
Barksdale Federal Credit Union
Barksdale Air Force Base, Lotrisiana
P. M. Elvir
Managing Director
Operations and Cash Management
Bank One, Texas, N.A.
Dallas, Texas
Paul T. Gray
Senior Vice President
NCNB Texas National Bank
Dallas, Texas
Jarnes L. Hawklns,Jf.
Senior Vice President
First National Bank in Alamogordo
Alamogordo, New Mexico
Carter B. Kelly
Executive Vice President
The First National Bank of Amarillo
Amarillo, Texas
J. w'. Pieper
Senior Vice President
First City, Texas-San Antonio
San Antonio, Texas
Kenneth A. Trapp
Executive Vice President
Frost National Bank
San Antonio, Texas
Larry Z.Truax
President and Chief Executive Officer
Home Federal Savings Bank of New Mexico
Deming, New Mexico
Patrick E. Boyt
Managing Partner
P. E. Bolt Farms
Devers, Texas
John S. Cargile
President
Producers Livestock Auction
San Angelo, Texas
Ron Davenport
Owner
Davenport Cattle Co.
Friona, Texas
Robert D. Dooley
Partner
KPMG, Peat Marwick
Dallas, Texas
T. Mlke Fleld
Agriculture and Real Estate
Lubbock, Texas
Annette Bailey Hamilton
Chairman of the Board
Annette 2 Cosmetiques, Inc.
Dallas, Texas
John Michael Solar
Principal Attorney
J. Michael Solar & Associates
Houston, Texas
Lois Farfel Stark
President
Stark Productions, Inc,
Houston, Texas
Charles R. Tharp
Panner/Manager
Tharp Farms
Las Cruces, New Mexico
L. C. Unfred
Farmer
New Home, Texas
Jeffreyw. Vilson
President
C a t t l eB a r o n R e s t a u r a n tI,n ( .
Roswell, New Mexico
ElfectiueDecember31, 1991
OFFIGERS
Federal Reserue Bank of Dallas
Helen E. Holcomb
Vice President
John R. Phillips
Assistant Vice President
Robert D. McTeer,Jr.
President and
Chief Executive Officer
Joel L. Koonce,Jr.
Vice President
Larry C. Ripley
Assistant Vice President
TonyJ. Salvagglo
First Vice President and
Chief Operating Officer
Robert F. Langlinais
Vice President and
General Auditor
MaryM, Rosas
Assistant Vice President
George C. Cochran, III
Senior Vice President
Rebecca V. Meinzer
Vice President
Jay K. Mast
Senior Vice President
Gerald P. O'Driscoll,
Vice President and
Economic Advisor
Harvey Rosenblum
Senior Vice President and
Director of Research
James L. Stull
Senior Vice President
Millard E. Sweatt
Senior Vice President,
General Counsel, and Secretary
Lyne H. Carter
Vice President
Jack A. Clymer
Vice President
V. Michael Cox
Vice President and
Associate Director of Research
BlllyJ. Dusek
Vice President
RobertJ. Rossato
Assistant General Auditor
Jr.
Dean A. Pankonien
Vice President,
Assistant General Counsel,
and Assistant Secretary
LarryJ. Reck
Vice President
Jesse D. Sanders
Vice President
Eugenie D. Short
Vice President
I-atry M. Snell
Vice President
W. ArthurTdbble
Vice President
Uzzlah Anderson
Assistant Vice President
Billy D. Fuller
Vice President
BasilJ. Asaro
Assistant Vice President
Joseph T. Gholson
Vice President
Stephen P. A. Brown
Assistant Vice President and
Senior Economist
Phlllp R. Spear
Assistant Vice President
Mlchael N. Ihrner
Assistant Vice President
Stephen M. Welch
Assistant Vice President
Marion E. whlte
Assistant Vice President
Robeft L. Whitman
Assistant Vice President
Bob W. Williams
Assistant Vice President
Emilie S. Worthy
Assistant Vice President
GlodaV. Brown
Community Affairs Officer
Joanna O. Kolson
Operations Officer
BobbyG. Moore
Senior Proiect Manager
El Paso
Sam C. Clay
Vice President in Charge
J. Eloise Guinn
Assistant Vice President
Javier R.Jimenez
Assistant Vice President
Houston
Robert Smith, m
Senior Vice President in Charge
Vemon L. Bartee
Vice President
Ren€ G. Gonzales
Assistant Vice President
Lutfrer E. Richards
Assistant Vice President
San Antonio
Thomas H. Robeftson
Vice President in Charge
Taylor H. Barbee
Assistant Vice President
JohnA. Bullock
Assistant Vice President
Richard A. Gutierrez
Assistant Vice President
ElfectiDe
January 1, 1992
Rob€rt D. Hankins
Vice President
Jerry L. Hedrlck
Vice President
RlchardJ. Burda
Assistant Vice President
TerryB. Campbell
AssistantVice President
Robert c. Feil
Assistant Vice President
Johnny L.Johnson
Assistant Vice President
C. LaVor Lym
Assistant Vice President
James R. McCullin
Assistant Vice President
STATEM
El{TOFCOI{DITI
01{
December J1, 1991
December J1, 199O
(.Tbousands)
(Thousands)
ASSETS
Gold certificate accountl
$
Special drawing rights certificate account2
Coin
Loans to depository institutions
515,000
463,000
$
585,000
463,000
42,850
44,1.37
2,500
22'9oo
Securities:
237,750
Federal agency obligations
Total securities
8,390,883
$70,692,905
$ 8,577,228
772,558
740,467
977,079
2,296,846
2,704,393
Items in process of collection
Bank premises (net)
Other assets
/ |
tt
I
7,599,508
986,328
$1.6,525,628
$14,471.,616
$73,530,478
$11,48r,297
Interdistrict settlement account
TOTAL ASSETS
226,345
10,455,745
U.S. government securities
LIABILITIES
Federal Reserve notes
Deposits:
1,645,660
r , / > o ,/ > >
1,r,430
77,400
96,637
$ 7,753,727
7,046
Depository institutions
Foreign
Other
Total deposits
Deferred credit items
$ r,775,201
745,829
722,424
Other liabilities
99,827
96,779
TOTAL LIABILITIES
$76,702,748
$14,702,1,42
CAPITAIACCOUNTS
Capital paid in
$
277,440
TOTAL CAPITAL ACCOUNTS
$
422,880
TOTAL LIABILITIES AND CAPITAL ACCOUNTS
$16,525,628
Surplus
277,440
1 Tltis Bank's sbare of gold cenificates deposited
by tbe Ll.S. Trexury uith tbe Federal Reserue Sl,stem
'?This Bank's sbare of special drauing rigbts
certificates deposited by tbe U.S. Treasury uitb tbe
Federal Reserue Bank ofNeu
York.
$
184,737
1,84,737
$ 359,474
$14,47r,616
STATEMEI{T
OFOPERATIOI{S
1991
For thelear endedDecember31
1990
(Tltousancls)
(7horeands)
CI.]RRENT INCOME
Interest on loans
q
)o)
$
32,725
Interest on government securities
729,590
744,950
Income on foreign currency
790,408
197,734
Income from priced services
49,082
49,787
663
728
Other income
Total current income
$ 970,035
$7,025,324
$
98,422
7,342
$
92,358
6.336
$
91,080
5,049
$
86,022
97,729
$ 872,906
$
4,908
$
CURRENT E)(PENSES
Current operating expenses
Less expenses reimbursed
Current net operating expenses
Cost of earnings credits
Current net expeflses
CURRENT NET INCOME
$
6,848
92,870
$ 932,454
PROFIT AND LOSS
Additions to cuffent net income:
Profit on sales of government securities (net)
$
Profit on foreign exchange transactions (net)
27,748
32,662
$ 76+,875
47
Other additions
Total additions
2,240
762,594
$
Deductions from current net income:
Loss on sales of government securities (net)
0
0
Loss on foreign exchange transactions (net)
0
0
28
2
Other deductions
28
Total deductions
Net additions (deductions)
$
Cost of unreimbursable Treasury serwices
$
32,634
4,ztz
$ 164,873
$
4,278
Assessment by Board of Governors:
Expenditures
Federal Reserve currency costs
NET INCOME AVAII-{BLE FOR DISTRIBUTION
$
8,034
7,937
11,21,0
8,975
$ 882,024
$1,076,797
STATEMEI{T
OFSURPTUS
1991
(Thousands)
Surplus, Jantary 7
Net income available for distribution
$ 184,737
882,024
For tbelear mded December31
t990
(Tbousands)
$ 170,565
1,,076,197
LESS:
Payments to the U.S. Treasury
Net amount transferred to (from) surplus
Surplus, December 31
77,027
77,468
Dividends paid
843,853
$
26,703
$ 217,440
1,050,998
$
74,1.72
$ 184,737
UOTUME
OFOPERATIOI{S
District Summary
Number of Pieces Handled
1991
Currency received and counted
Coin received and counted
Food stamps redeemed
Transfers of funds
1990
Dol Ia r Amou nt (Thous nds)
1991
959,597,700
727,955,791
14,065,791
392,604,472
319,779,912
L,960,574
5,007,500
6,747,065
1,0r8,631,771
474,1,53,877
68,592
1990
13,559,9L2
1r7,793
r,572,384
8,170,674,245 1.0,368,347,1.28
CHECKS HANDLED
Commercial-processed
Commercial-fine sorted
U.S. government checks
7,091,,740,644 r,129,534,456 521,793,307
427,797,335
383,290,202 704,62L,557
31,245,000
34,397,594
r08,278,400
9L,458,472
41,739,399
37,790,042
570,465,998
96,459,566
49,1.44,367
ACH ITEMS HANDLED
Commercial
U.S. government
42,578,234
435,07r,078
378,729,990
49,189,268
39,044,581
COTTECTION ITEMS HANDLED
U.S. government coupons paid
Municipal coupons and bonds
12,546
17,827
2r9,855
277,864
4,358,666
6,350,898
7a1aR
679,21.1
22,736
770,545
ISSUES,REDEMPTIONS,
EXCHANGESOF U.S.
GOVERNMENT SECURITIES
Definitive and book-entry
1,3s8,640,070 765,777,143
LOANS
Advances made
421
1,,750
t,021,049
4,59r,078
The l.-erleralReserueBank ol'Dallas is
one of 12 regknal Fecleral Re-serue
Banks in
tbe United States. Together uitb tbe l3oard of
Gouentors in Washington, D.C., these
otEanizations.fbmt the Federal Reserue
s.yst
em .ud JLttlction as tb e nat ictn's cent ral
bank. Tbe S-ystent's
bdsic putl)ose is to
prouide a flow o.f mone-ycntrl credit thctt toill
Jbster r.trclerlyeconomic groutb and a stable
dollar. In orclr.lition,Federal ReserueBanks
superuise banks ancl bank holcling
companies and prouide ceftain.financial
senices to tbe banking indttst-ry-,the.federal
gouernment ancl the public.
Since 1914, tbe l.-ederal ReserueBank o.f
Dallas has serued thefinancial
institutions
in tbe Eleuentb Distnct. Tbe Eleuenth District
encompassesapproximdteb) J6O, OOOsquare
miles and comprises tbe stdte of Texas,
nortbern ktuisiana and sot,tthernNeut
Mexicct. Tbe three brancb o.fficesof tbe
Federal Reser"ueBank ctf Dallas are in El
Paso, Houston ancl San Antonio.
Federal Reserve Bank of Dallas
400 South Akard Street
Dallas, Texas 75202
(214) 55r-6111.
A,fierJune 1992:
2200North PearlStreet
Dallas, Texas 75201
(214) 922-6000
El Paso Branch
301 EastMain Street
El Paso,Texas7990l
orr 544-4730
Houston Branch
1701SanJacintoStreet
Houston,Texas77O02
orr 659-4433
San Antonio Branch
L26 East Nueva Sffeet
San Antonio, Texas 782O4
1512) 978-1200
@FedFRASER