Economic theory predicts that capital controls have significant negative effects: they reduce the supply of capital; raise the cost of financing; increase financial constraints for domestic firms that do not have direct access to international capital markets; reduce the discipline of markets on decision making; increase the risk or corruption; lead to costly effects of avoidance and enforcement; and reduce property rights so that approvals for long-term investors (on the part of pension funds, insurance companies, mutual funds) are normally excluded.1 The removal of such controls should improve prospects for economic growth (see for example Obstfeld, 1998).