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It is evident that economic conditions in the region are already showing signs of improvement. Industrial production, housing construction, and consumer and business confidence levels are on the rise, relative to what happened in the first two quarters of 2009. With the exception of Mexico, the economic contraction is likely to be mild this year. In some countries, such as Colombia and Peru, positive economic growth in 2009 is still a likely possibility.

Why is Latin America overpeforming relative to the developed world? To a large extent this is the result of good policies, not good luck. What is remarkable about this crisis is the widening of the "policy space"� in Latin America, meaning that governments have been under pressure to introduce measures that mitigate the...