It is possible to cite several examples which show that the preoccupation with short-term management and medium-term restructuring may have damaging consequences in the long term. Trade liberalization, which leads to the exit of domestic firms on a significant scale, ultimately affects the capacity of an economy to respond to changes in relative prices. The reason is simple. Exit is easy but reentry is difficult. Similarly, financial liberalization, which leads to a persistent, if not mounting, overvaluation of the exchange rate, may force domestic firms to close down.29 By the time the overvaluation is undone, hysteresis effects could be strong. This means that re-entry becomes difficult, for domestic firms must create new capacities to capture the opportunities created by the changed set of relative prices. But that is not all. The workers who are unemployed as a consequence of closures may lose their skills with the passage of time and become less productive when employment opportunities appear after a lag. It is also possible that their old skills, even if retained, are less relevant after a time.