After examining the different outcomes in Asia and Latin America, Jeffrey Sachs concluded that" the more important differences seem to center on exchange rate management and on the trade regime."'This view echoes more general arguments, put forward by Bela Balassa and Anne Krueger, that outward orientation fosters growth. 2 The crux of this explanation is that outward-oriented policies, reflected in a level of the real exchange rate that encouraged exports, fostered the development of the tradable sector in Asia, whereas inward orientation and an overvalued real exchange rate encouraged growth of the nontradable sector in Latin America (and Africa as well). There are a number of reasons why the difference in orientation can affect growth, both in the short and the long run. Outward orientation makes it possible to use external capital for development without encountering serious problems in servicing the corresponding debt. Inward orientation of production is one reason why Latin American and African economies have experienced debt crises that have inhibited their growth in the 1980s. Outward orientation also generally results in more rapid growth of exports, and there may be externalities

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