The Formation of Central Banking in Latin America: Origins and Early Challenges

This article offers a critical survey of the history of the formation of central banks in Latin America and its reactions to the Great Depression, including a section on important antecedents. It is argued that central banks arose in Latin America from 1923 onwards as a result of particular political, economic and financial conjunctures in each nation in the hemisphere, but the text also proposes a comparative analysis to establish parallels and contrasts. The essay begins with a review of the historical background regarding the monetary policies of the early twentieth century in the region and the role of the largest banks before the formation of central banks. The essay then reviews the forces that led to the formation of central banks in the 1920s and compares them with those in place in the aftermath of the crisis. We emphasize the role of the so-called "money doctors" and that of the great depression as factors that shaped the functions of Latin American central banks during their early existence.