The document presents background on the origins of the crisis and the need for adjustment; three phases of the adjustment process (recessionary adjustment 1982-83, adjustment with partial recovery, and frustration of expansive adjustment); and the domestic policy response. It adds that adjustment which necessarily entails lowering the level of the rate of growth of domestic absorption, unnecessarily cut economic growth as well, with per capita output in 1986 for the region as a whole still being 8 percent below 1980 levels, thus making this decade a lost one for most of the countries. What is worse, given the deterioration in the region's external situation in 1986 and its heavy debt burden, the adjustment process has proven to be not only costly and inefficient, but indeed far from complete and its final outcome is uncertain. Section two raises the question why has adjustment been so costly and protracted. It emphasizes that in general, the cost of adjustment depends on the structure of the economy and its capacity to respond, on policy effectiveness and the international context in which it is effected. The weak initial position, policy shortcomings, unfavorable external environment, the pro-cyclical retreat of creditors and adverse trading conditions are some of the reasons provided. Finally, section three referring to adjustment with growth: prospects and requirements. (MIBA)