Are Latin American and Caribbean Countries Complying with Their Fiscal Rules?

October 20, 2022  

By Oscar Valencia and Carolina Ulloa Suárez. 

Over the past two decades, a growing number of Latin American and Caribbean (LAC) countries began adopting fiscal rules to limit overspending influenced by election cycles, public pressure, and other political economy factors, helping the region strengthen its fiscal solvency and sustainability. 

However, in recent years the region has suffered several external shocks that have put such rules to the test. The most recent episode related to the COVID-19 pandemic has forced countries to invoke escape clauses to such rules to deal with the health emergency and that has led to large budget deficits and a significant increase in debt levels. 

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