One problem that has helped lead to devaluations, as in 1994, was an overvalued currency, no?
When you have a system of free float, by definition the currency can’t be overvalued for a long period of time. But it is true that misalignments can occur, which are difficult to correct. There is not much a monetary authority can do in a regime of free float. The instruments are limited. This is a problem that the world hasn’t resolved. You have the situations of Chile, Israel, and Mexico this past year. There’s no recipe. If there were, the financial authorities would be less worried. Q: Are you worried about the trade deficit growing over the next year? A: It’s in line with our projections. In November, 1996, when we presented the budget to Congress, we had estimated a curent account deficit of 1.3% of GDP, with economic growth of 4%. This year, the economy will grow 7.3% or 7.4%, and the curent account deficit will be 1.6% of GDP. Imports will be greater because growth will be 70% higher than we had planned in the budget. Q: Overvaluation is a problem that successful economies hav
