Under this logic it is better to postpone or to take out of the agenda those issues threatening this process' unfolding. Definitely, the government knows what its is doing, say some well intentioned.

How may one ask so much of an improvised program, as the IMF's managing director says. To say the truth, these arguments are perfectly justifiable if the government's precedents are reviewed. Certainly, the governments does not seem to be a quick learner. It took two consecutive years, building up the most spectacular chain of errors in this country's economic policy, for the government to rectify such policy. Some ministers have needed a long and tortuous history of rectification to understand the things they now assume under mere common sense. The handling of the financial crisis, the extravagant auction of dollars in 1994, the commitment against inflation, the exchange control, the initial failure of privatizations, the December 1995 devaluation, are just some of the numerous blunders of an administration that appears to have a very slow learning record.

One must not be mean, however, in recognizing that things have changed and that some cabinet members have set a pace for the program that would have been hard to predict based on a simple extrapolation of events. One listens to the minister of Planning, in a crusade where he does not have many partners, strongly and convincingly defending what has been done and there is no other alternative than to give credit to those who, within government have do all that is possible to do what the president and a material group of ministers would have made almost impossible. If only with this fact, Teodoro [the Planning minister] deserves sufficient credit -not to be undermined by rhetoric exercises. Surely, one could say that this is evidence of voluntarism, some sort of an endeavor to appear renewed, but then this does not lessen the merits. Perhaps an effort of this nature, if it had better company, would surely have a better end. But then, it is unfortunately the only thing we have and we must bet on it.

An unjustified enthusiasm
It is known that since the program's inception it has been criticized by us. This criticism, one must say, has been made without the least intention of enjoying the showing of errors, it has been rather under the sincere will to foster reflection on uses that, in our opinion, should be rectified immediately.

Unfortunately, there are two events seemingly leading the current economic policy makers to despise this criticism and to cultivate an optimism that, in our opinion, is not well justified. These events are, on one part, the oil market's undoubtedly more favorable conditions and, on the other, the exchange market's apparent stability. What one reads on these events reflects, in my opinion, a most wrong way of evaluating the adjustment program's results. Some even have gone as far as to say that, facing the oil panorama, it is impossible for the program to reach a good harbor. Well then, the external sector's conditions are not the best place to identify the Venezuelan economy's problems. In 1996, the country could well reach a brutally high surplus in current account, perhaps 10% of domestic product. These results, from an accounting point of view, are produced by the combination of higher income from oil exports, better volumes and prices, and by a significant drop of imports. In terms of domestic balance, this spectacular surplus in the current account has its counterpart in an important reduction of the public sector's consolidated deficit, basically as a consequence of the devaluation acting a resource redistributing tool between private and public sector and of an excess in savings over private investment that, technically, may not be interpreted as a positive result. The reason is quite simple: these results in external accounts are produced thanks to the fact that the economy is under a prolonged recession, with a lowest level of private investment. An adjustment sustained on this base is not something to be optimist about. As it has been experienced one more than one occasions, as soon as the economy begins to recover a minimum operational level, problems appear with greater strength. The adjustment fails to modify the starting conditions, in terms of relative price structure, and, as time goes by, a new adjustment is required, but stronger than the former.

The greater oil income expected for 1996 and 1997 are not going to be, either, the required ones if things are to be changed. If we take PDVSA's strategic figures as good, the oil exports' levels of 1996 will just be a 9% higher, in real terms, that the 1989 verified level. A much lower level than the one that was reached under the 1990 Hussein effect. It is true that some 1,500 million dollars are not a despicable figure and that we could stand much worse. But these figures, and not even a greater shock, are not going to change things. This economy's structural corrosion is so deep that much more is to be done in order to exit from where we are. The fundamental problem is that this economy does not stand any longer inflation levels of 30% to 40% nor a short breath growth pattern exposed to the oil market's ups and downs. A reduction in the inflation rate to those levels and a 4% growth rate, some results surely pleasant to the current program's designers, are quite mediocre if we consider the country's problems. Those who dream of a new oil miracle, should think of income much higher than what has been projected and perhaps should look back in terms of this economy's scarce ability to manage efficiently these booms or mini-booms.

The exchange market's stability is the other misread issue. The accrued devaluation between November 1995 and April 1996 is the highest one ever seen in the Venezuelan economy's history, higher than the 1989 one and than that of the first quarter of 1994. Up to now, the exchange rate has been basically the sole variable upon which the adjustment rests. The effects of an devaluation of this size, we believe, were not estimated when forecasting the exchange market's behavior after the exchange control was eliminated. The history of the Venezuelan economy is that after each of these macro-devaluations, the exchange market enters into a period of relative stability. Something similar was experienced in 1983, in 1989 and in the 1994 adjustment intent. This may be understood by two basic reasons. First, the relative prices' effect acting on the foreign currency demand, specially on the demand for imports and, second, by the wealth effects akin to devaluation. The first effect is perhaps the most popular and need not be commented, the second has been seen less. Some estimates indicate that Venezuelans have roughly some 80,000 million dollars abroad, Some economists have pointed out that any consumer behavior analysis during the recent years must, of all need, take into account the devaluation's effect on this stock of wealth. A devaluation's wealth effect operates in two directions: as a transfer of resources and as a portfolio restructuring effect. The transfer of resources acting between the private and the public sector has the effect of a contraction in aggregate demand, thus contributing to external surplus. A devaluation's portfolio effect operates on the foreign currency holders, who have a portfolio structure that is affected by a devaluation. This portfolio effect has the consequence that the economic agents, as of first, tend to make their gains from devaluations and to rearrange their portfolios for the benefit of domestic goods, which tends to increase, on the short term, the foreign currency offer. These three factors, the price effect and the wealth effect in its two variables operate in a way that, after a macro-devaluation, the foreign exchange market tends to behave rather quietly, something not to be confused with a definite stabilization. This very same tranquillity in the currency exchange market, accompanied by a strong accumulation of reserves, are some events that may be observed in 1983, 1989 and 1994. This last year, if the accumulation of reserves criterion were to be used would end being the most successful of all observed adjustments. During the first two months, after the imposition of the exchange control, roughly some $ 2,000 million were accumulated; this accumulation was eroded in the same way thanks to the distribution mechanisms facilitated by the exchange control system.

The basic danger of these two appreciations on the program's evolution, the external shock's beneficial effect and the foreign exchange market's quietness, lies in the fact that they may lead -as it has occurred in many other occasions- to a wrong policy prescription. This is more so if one adds to it the fact that the government has bought, rather naively, the idea of using the exchange rate as a nominal anchor. In some ways, it is the same error, and, not casually, made by the same administration we had in 1994.

It is fair to confess that we are somehow guilty of this. For some time we have being sustaining that the use of the foreign exchange policy as a tool to promote competitiveness should be abandoned, and that one should rather concentrate on its importance in the fight against inflation. This is a message that was apparently heard and assimilated, although we believe that in many instances without understanding all of the argument's implications. Something that seemingly was not understood is that when you abandon the use of the exchange rate to seek real change objectives, to preserve the exporting sectors' competitiveness, it does not mean that these competitiveness problems generated by the exchange rate's overvalue will equally disappear and that you no longer have to worry for significant deviations of the exchange rate around its parity level. The exchange rate's transitory effects on competitiveness must be substituted by offer policies affecting competitiveness in a permanent way. And this change of tools must be made as soon as possible, As it has been proved more than one time, all these programs trying to use the exchange rate as a nominal anchor, and failing to use offer policies working as the exchange rate did before in a transitory manner, do end most recklessly when the external sector's problems begin to widen as a consequence of the overvalue. This pattern in the programs based on the exchange rate, in most cases have ended in failed stabilizations, specially when offer policies are not used that may lessen the effects of the overvalue. Those who have bought the idea of the nominal anchor, somehow without understanding its consequences, are caught in a real trap, perhaps somehow accounted for in the extravagant announcement by the Central Bank of the imposition a system of bands. On the one hand, it is said that the rate of exchange is going to slide in accordance with the inflation target, but on the other hand it is determined that the rate will not be overvalued, in such way that any difference between the inflation target and inflation will be corrected. These are the kinds of things that common sense -that so much favored by the minister of Planning- simply does not forgive. In this issue, the government seems to act rather candidly. In the midst of a mini oil boom, without the structural reforms needed to enhance the productive apparatus' competitiveness, they are going to try a program based on a nominal anchor for the exchange rate. Placing it on non technical terms, it is the kind of problems where you are caught one way or the other.

This is one of the many reasons why, in matters of structural reforms, one must act quickly and decidedly. We are not dealing here with ideological extremisms nor with academic exquisiteness. The problem is that the clock of overvaluation moves without stopping. If corrected by means of the exchange then one loses all the benefits of the anchor and of the submission to an inflation control rule. If one lets it go, then, sooner or later, the external sector's problems explode and even if the starting position was somehow comfortable as to international reserves, the situation, eventually, becomes unmanageable. In that case the most likely consequence is that the dilemma is surmounted in the traditional manner. A devaluation provisionally correcting the overvaluation problem and a peak in the inflation process. This is the kind of solution that the Venezuelan economy has experienced repeatedly.

The Monetary Front
The monetary front is one where the program advances more slowly. The program's designers seem to be dazzled by the apparent success in the foreign exchange front and simply minimize the few steps to be taken in the monetary front to produce clears signs of stability. The most evident sign that things have not changed in this front is that, if one observes the deposits' structure in June, in terms of sight, savings and term, it is basically the same as in December. In other words, a highly volatile structure, with the aggravating circumstance that the Central Bank's strategy of increasing its liabilities' maturity (from 45 to more than 150 days as an average) this has substantially raised the system's interest rate risk. Obviously, one of the system's harder to resolve problem in the programs design was how to avoid that the effects of an increased rate could have long term reach effects on the financial system, presenting a high exposition to interest risk in view of the maturity gap between its assets and liabilities.

We have seen how, notwithstanding the permanence of the same basic unbalance in the monetary market, characterized by a volatile deposit structure and an enormous interest risk not covered by financial intermediaries, these problems have not been transmitted to the foreign exchange market. The fundamental reason -already pointed out- has to do with the size of the devaluation and the implicated portfolio effects. Additionally, one should underline the financial intermediaries' situation. As of June 1996, the credit portfolio had only grown at a 10%, which means a brutal drop in real terms. The country had not seen a similar drop since June 1989, and this leads us to think that that the domestic product's drop could be much higher than expected. This has implied that the financial intermediaries have had to increase their public instruments holdings. Of course, the increase in the demand of these papers has led to a raise in their prices and to the consequent lowering of their returns. This is a most particular situation that has to do with the high percentage of holdings concentrated in commercial banks. Inasmuch as the Central Bank has had a strategy of reducing these papers' financial cost and at the same time of extending their maturity -something that seems correct-, if the same thing had been done with the structure of the liabilities, that would have led to the apparently paradoxical result of a drop in the returns with an increase in the holding of these certificates.

The long road to the IMF
It is known that negotiations with the IMF are not easy. For a long time, Colombia has refused to establish explicit agreements with the IMF, under a seemingly understandable argument . The fact of submitting to the iron-clad discipline of a foreign organization, with the risk that clearly natural delays in a program's development may be amplified under an agreement with the IMF, have moved the Colombians to refrain. The Cardozo administration in Brazil, with a firs class equipment including the best Brazilian economists, for more than three months tried, without success, to reach an agreement with the IMF. The fundamental reason is that the Fund, under the political uncertainty over the elections that gave, as a result, Cardozo's election, preferred to extend the matter in a scenario where Brazilians simply could not wait any longer. With the IMF, in many cases, it is not enough to be ready for an agreement.

The Venezuelan case is worth being reviewed, not only under the special circumstance of having as main actors a government that had done almost the impossible to avoid going to the IMF, but also under the kind of negotiation that was carried.

Prior to reaching the July 1996 agreement, Venezuela had become some sort of a black sheep for multilateral organizations. To reach an agreement with the country had turned into some kind of challenge that could be used as a launching tool for an ascending career in the organization. The main hurdle was indeed of a political nature: with a government that, a time after the other, had denied the possibility of reaching an agreement, that had adopted a whole set of measures being incompatible with the organization's fundamental philosophy, it was quite difficult that one could even begin to discuss without a deep rectification in the country's policies. These political hurdles, however, were not the only ones. The other hurdle had to do with the core of the president's economic advisers. This is why one should not lessen the merits of those who, within the government, with all the case's limitations, made it possible to enter the agreement. The team of presidential advisers was known as the "Tecoteca" group. It was formed by Julio Sosa, Ramón Espinaza, Enzo del Bufalo, Asdrúbal Batista, Luis Carlos Placios. Rafael Macquahe, Rafael de Kries, Werner Corrales, Edgard Paredes Pizani and some other.

Although this was not a homogeneous group, one with important differences among its members, all of them, more or less, shared three basic ideas: 1) Stabilization required a solid redistribution component, the Venezuelan economy's problems were more within the sphere of distribution than that of production; 2) Venezuela's inflation problem had an important inertial component, not answering to orthodox adjustment prescriptions -i.e. fiscal and monetary adjustment; and 3) the oil expansions and the implicated resources, made that the program did not require an external support, This group had a fundamental influence during the first stabilization intents tried by the current administration. However, the scarce internal coherence, the disorder when time came for execution, and the evident initial failures made this group to slowly lose incidence in the formulation of economic policies, even when it kept turning around the government. In fact, the three basic ideas binding the group keep holding some degree of entity in high government spheres. Among them, the main one was perhaps the idea that the government did not have to appeal to the IMF.

The fact of saying that the country did not have to go to the Fund, was failing to understand the problems affecting the Venezuelan economy at the closing of 1995. The strong unbalance between the public sector's assets and liabilities and the need to embrace a program guided towards growth, requiring strong assistance with external resources, are two reason that, by themselves. should have cleared all possible doubts as to the need to sign an agreement as quickly as possible. This idea, however, kept prevailing even in the midst of the negotiation process. Basically, this was expressed in two ways: first, it was thought that the country required only a supervision agreement, external resources were not what was sought when going to the Fund. One was dealing simply with an agreement, better if without the usual formality, that could warrant access to international markets that had been closed since 1994. The prevailing conception was that the negotiation did not have to make an important variable of financing. In the second place, the second dimension was that the other conception was evidenced by the fact that the negotiation with the IMF was fundamentally a political one; the technical details of the negotiation had little importance, it did not matter if the IMF imposed these or those growth targets for domestic credit, there was no concern for the agreement's technical support.

This conception, in a good measure, implied that if a process of negotiation with the IMF was to be opened, as the process went on all the entire negotiation would be underestimated. This was evidenced by the negotiating team's very same shape. The first negotiation team was formed by David Morán, Roosevelt Velázquez, Armando Leon and Ramón Espinaza who acted as PDVSA's supporting man.

The first phase of the process was merely the discussion of some scenarios drawn by the IMF with regard to the involved adjustments' magnitude. To say the truth, it was not a negotiation; local negotiators rather limited themselves to provide the information being required for the exercises. Someone went to say, as the negotiation became rather demanding in technical terms, that the sole difference between the local negotiators and the IMF's was that the latter read Dorbush in English while the former in Spanish. There were more differences, really. These became evident when the first figures and the kind of program requested by the IMF were seen.

The negotiation with the IMF, although it has a high political component, involves a series of technical aspects that definitely make the difference between a good and a bad negotiation. This is most special with to the kind of program serving as a ground for an agreement for the IMF.

For some time, the Fund's programs, and the methodology attached to them, have been sharply criticized. The criticism aims mostly at the great simplicity traditionally been used by the Fund to approach the stabilization and adjustment problems. In fact, there have been important differences around these issues with some multilateral organizations, mostly with the IMF.

Several analysts (see Bacha -1985- and Edwards -1989) have been observing since the middle eighties that the absence of an aggregate offer block, the contempt for growth problems make simple accounting exercises of the model traditionally used by the IMF. The problem, certainly, would not be as important if these were mere academic exercises, the fundamental issue is that these exercises lead to policy decisions such as how to restrict domestic credit in this or that magnitude, or how to reduce the deficit in this or that way. It is a matter that has huge and important consequences in the way how economic variables adjust to these changes in economic policy.

These accounting exercises' tradition is old enough and well known. Starting from simple suppositions as to the money demand's from and stability, the so called monetary programming is a mere exercise in manipulating the aggregate demand with almost the same vices of the most candid Keneysian models. In spite of this great inconsistencies, it is hard to believe that a model totally failing to incorporate offer or expectation modeling problems, may have gone so far influencing the making of policies.

Today it is a matter of consensus between professional economists that the worst stabilization program any country may have is precisely the Funds recipe, based on its famous monetary programming exercises. A program failing to recognize that the problems of offer have a fundamental responsibility in the stabilization efforts, and that the changes of rules have a great impact in the shaping of expectations, and it ends by producing an excessive cost in terms of production and employment, which is definitely the only way how things may be adjusted in accounting terms.

Of course, to be fair, the IMF as an institution has become aware of the problem, hence the importance of the so called structural reforms. This has not been enough, however. The teams of consultants, perhaps under intellectual comfort, and occasionally because of mere incompetence, keep doing their monetary programming exercises as a basis for the shaping of policies.

To say the truth, having a program based on these accounting exercises does not imply signing an agreement, although it is quite likely mostly if you do your work ending by adopting a typical IMF program. This is why the entire negotiation process is so important.

Finally, the IMF took charge of the matter and went on automatic pilot. Facing the risk that somebody may switch the engines on or may fire a missile, the competent IMF officers decided to impose a simple flight chart, the Fund's classical aggregated demand adjustment program, with the attachment of an accrued reserves goal warranting the recovery of the disbursed funds. Summing up, the Fund acted as a bad lender. It does not matter if the borrower finally solves his problems, the important thing is that he pays. No need for complex economic policy exercises, the required trust was missing as to pilots being able to fly kites in a clear sky, but not sophisticated airships requiring a high level of maneuvering. To a certain extent, it is the worst kind of program any country may have, simply because it is not a program for stabilization, that is to say for a drastic reduction of the inflation rate; it repeats the same kind of adjustment experienced by the Venezuelan economy since 1983. Adjustments of aggregate demand operating only under a recessed economy, sooner or later escalating to a higher inflation level. These are countries condemned to suffer inflation of 50% and 60% forced to make recurrent adjustments. Inasmuch as the economic agents find out that the locking key ends always by producing inflationary surprises by the devaluation mechanism, these adjustments turn into failed stabilizations, ever more anticipated surprises tending to increase the costs of new adjustments,

At the end, at least for the time being, all the players in the game get some benefit, Government is able to announce that it finally reached an agreement with the unpleasant but necessary creature -when wishing to have access to external financing-, the IMF. The Venezuelan government officers vouching for the recipe could become the new marshals of a failed adjustment, with an assured job with some international organization. The IMF officers are able to announce that they reached an agreement with Latin America's black sheep. This may be the credential needed in the quest to a higher echelon placement in the organization. At the end, if the adjustment fails, it will always be easy to blame it on the Venezuelan officers. If this occurs, which is probable under the kind of program on which the agreement is based, we all go back to square one. The Fund will always be the unpleasant creature and Venezuela the black sheep. The country will be the only one not getting any benefit, as it did not get either from former adjustments. This kind of adjustment will not reduce inflation to a single digit levels, it will keep the company under a long recession and will show accounting results based on less public services, lower salaries for public employees, more misery on the streets. In just a few word, more of the same. For a stabilization program that is not directed to growth, that fails to take account of the fundamental unbalance between the Venezuelan State's assets and liabilities, is bound to fail, A failed stabilizations, something now seeming likely when asking how the 1997 accounts will close. Who ever makes these questions will find no other answer than more devaluation and more inflation. The sad thing is that no one is concerned with looking forward, the Fund's officers and those of the government seem to be wanting to live the 1996 illusion.

At this stage of the game, some readers may ask: Is it not just enough to have signed with the IMF? How may you be so negative towards government, if you were the ones who recommended going to the IMF? These are valid questions indeed. We have defended the idea of going to the IMF, but not looking for an unpleasant watchman, but to have access to vital external resources for a successful stabilization program aimed at growth. But then we have always said that there is a great difference as to the kind of agreement being reached. These differences go from a very bad agreement, such as the IMF recipe, to an agreement being convenient to the country where the Fund accepts the fundamental role dealing with the offer policies in a successful stabilization, Between these two extremes, an aggregate demand accounting adjustment and a program aimed at growth, there is, of course a wide negotiation margin. An agreement with the Fund does not mean a successful adjustment and the organization's record is an evidence of it. If the government officers make a bad negotiation, if they remain silent during the meetings, if they accept the reprimands and do not argue in return, then the Fund imposes its recipe and switches the automatic pilot on. This, unfortunately, is the current case. A very bad negotiation resulting in a very bad program.

We fully understand president Caldera's concern. Even if he is not a specialist, he foresees the hazards to the country of a signing of an agreement with the Fund under these premises. We sympathize with his concerns when his Planning minister accounted on the kind of exercises that his pupils were playing at the Fund's offices. For someone who definitely is not an expert in the matter, but who has an educated intuition, it must be terrorizing to hear how the deficit's simple accounting manipulation is going to produce this chain of miracles promised by the kid at the Planning ministry. To be honest, Dr. Caldera, we fully understand you, the same doubts you have are shared by many economists, beginning with those who work in the Fund's research department.

The problem, dear Dr. Caldera is that guilt does not lie with the Fund; see, for instance, how the Argentines, Yugoslavs, Mexicans have negotiated without swallowing the recipe, with programs strongly oriented towards growth. The basic problem is that you have been deceived since the times when you met with your advisers at Tecoteca. So much talking of adjustment alternatives, so much criticizing of the 1989 adjustment that you have ended by signing, perhaps without even fully understanding them, the same recipes that you used to criticize. It has been a long road indeed. From the planning courses at Cendes [Center for the Study of Development] to the IMF's programming exercises.

There are many similarities and differences between the 1989 and the 1996 adjustment. One of the huge differences is seen when you compare the economic policy management teams. The 1989 adjustment had a team with a high degree of coherence and technical ability. The presence, as a leading actor, of Miguel Rodríguez, perhaps one of the country's most able economists, gave some success aureole to the program. This was so much so that the multilateral organizations paid with their praise. The 1996 team is some kind of a reaction to the former and yet, for reasons that we are not going to review here, a similar optimism is present. Among the similarities, one must say that these programs bear resemblance, they are both based on a strong contraction of aggregate demand and some monetary primitivism. Which program is most likely to succeed? If the question were made twenty years from now, there is no doubt that the answer would be the 1989 adjustment. But then, things are not as simple and a good team is not enough. We believe that both programs' outcome will be similar, in spite of the differences between the managing teems, because of the similarities in the programs' design.

In order to be fair with our 1989 colleagues, history will have a more pleasant remembrance of the 1989 adjustment. Subsequent generations of economists owe a lot to Miguel Rodríguez. The 1989 program gave a pattern quite different from the usual one in economic policy management. Miguel Rodríguez is also one of those economists who act with transparency and, accordingly, deserve respect and admiration. Although it is hard to believe that the 1989 program failed for different reasons than those of an extremely adverse political environment, a dividing line must be drawn. The adverse environment did effectively play a preponderant role, but higher than the team's competence, there were also some economic policy conceptions that aided to the program's failure. These conceptions, unfortunately, are shared by the team currently managing economic policy.

One of these conceptions is that related to the currency exchange policy then promoted by Miguel Rodríguez and that he still defends, Not so long ago, referring to Petkoff's and his company's program, he observed that the program lacked a development policy and that such policy should be based on two fundamental tools. The foreign exchange and the trade policy. This notion of the offer component in a stabilization program rests on the idea that the foreign exchange policy must pursue real objectives, the maintenance of a rate of exchange preserving the competitiveness of exports.

In our opinion, as we have said it in other occasions, this conception of the exchange policy in 1989 implied disregard for the perverse effects of 30% to 40% inflation rates. While trying to collect success in the side of short reaching growth, based on a strong fiscal impulse, the program did not contemplate a reduction in the rate of inflation below the initial conditions. To a good measure, the failure of 1989 was the product of this conception of the foreign exchange policy. The reason is quite simple: while these real objectives are been sought -and they are quite hard to reach inasmuch as there are all kinds of factors affecting a variable such as the real rate of exchange which are beyond the scope of an exchange policy- it often implies the loss of a nominal effective anchor holding the advance of inflation. This is specially true in the case of the Venezuelan economy, where as to the two existing nominal anchors, the rate of exchange and the monetary offer, the Central Bank has scarce control of money aggregates. This disregard for the objective of a drastic reduction of the inflation rate was something that had also feedback effects on the deterioration of the political and social environment. The same thesis on the handling of the exchange policy is present today in the teams in charge of executing the economic policy; if we add this to a team that is undoubtedly less competent and to an institutional deterioration, one comes to think that the 1996 program's outcome will not be most fortunate either.

The modern conception of economic growth rests today on the articulation of an orderly offer policy program, structural exchange policies, investment in the health. educational, public security, infrastructure sectors, improvement in the markets' operation, which are all factors defining medium and long term growth. Unfortunately, the lesson of 1989 has not yet been understood. What is missing in 1996 is a program aimed at growth. The attempt to boost growth by manipulating aggregate demand by turning the rate of exchange into the variable stimulating production, is a wrong conception share by the 1989 adjustment and by that of 1996. The actors in 1996 repeat the errors of those of 1989, but they are not as competent as these. Perhaps this gives them the same chance as those of a dominoes player just knowing how to place the pieces.