The International Monetary Fund said it supports measures that would ease the impact of capital flows into Latin America that have caused some of the region’s currencies to climb at the fastest pace in the world.
The IMF wants to help Latin America design fiscal and monetary policies, including so-called macro-prudential policies that would protect banks and boost direct investment, the lender’s Western Hemisphere director said today, without naming specific tools.
Countries across Latin America have intervened in currency markets and changed reserve requirements to stem inflows fueled by robust economic growth and higher benchmark interest rates than in the developed world.
The inflows can inflate currency values and create temporary volatility in financial markets, the IMF director, Alejandro Werner, said in an interview posted on the Washington-based lender’s website.
“The role of the fund in these countries is to assist them in the design of the optimal monetary-fiscal policy mix, one that strikes a balance between accommodating the capital inflows and avoiding financial excesses or new vulnerabilities,” Werner said.
“Macro-prudential policies can be very useful to strike this balance.”
The interview comes after the IMF last year reversed its decades-old opposition to capital controls in a report that said targeted and temporary measures could be effective in preventing asset bubbles and currency rallies.
Werner joined the IMF in January this year after directing corporate and investment banking at BBVA Bancomer.
Brazil Barriers
Brazil is the largest economy in the region and in recent years has been the most aggressive in erecting such barriers by raising taxes on foreigner purchases of bonds and levies on offshore loans.
Chile’s government is analyzing whether to follow suit by implementing policies to control its peso, Finance Minister Felipe Larrain said last month.
Uruguay’s peso in the past six months has appreciated faster against the U.S. dollar than any other global currency, with Paraguay’s guarani trailing two places behind, according to data compiled by Bloomberg.
The gains come as Latin American economies are expected to expand 3.5 percent this year, exceeding the global average by more than one percentage point, according to analysts polled by Bloomberg.
bloomberg.com
The IMF wants to help Latin America design fiscal and monetary policies, including so-called macro-prudential policies that would protect banks and boost direct investment, the lender’s Western Hemisphere director said today, without naming specific tools.
Countries across Latin America have intervened in currency markets and changed reserve requirements to stem inflows fueled by robust economic growth and higher benchmark interest rates than in the developed world.
The inflows can inflate currency values and create temporary volatility in financial markets, the IMF director, Alejandro Werner, said in an interview posted on the Washington-based lender’s website.
“The role of the fund in these countries is to assist them in the design of the optimal monetary-fiscal policy mix, one that strikes a balance between accommodating the capital inflows and avoiding financial excesses or new vulnerabilities,” Werner said.
“Macro-prudential policies can be very useful to strike this balance.”
The interview comes after the IMF last year reversed its decades-old opposition to capital controls in a report that said targeted and temporary measures could be effective in preventing asset bubbles and currency rallies.
Werner joined the IMF in January this year after directing corporate and investment banking at BBVA Bancomer.
Brazil Barriers
Brazil is the largest economy in the region and in recent years has been the most aggressive in erecting such barriers by raising taxes on foreigner purchases of bonds and levies on offshore loans.
Chile’s government is analyzing whether to follow suit by implementing policies to control its peso, Finance Minister Felipe Larrain said last month.
Uruguay’s peso in the past six months has appreciated faster against the U.S. dollar than any other global currency, with Paraguay’s guarani trailing two places behind, according to data compiled by Bloomberg.
The gains come as Latin American economies are expected to expand 3.5 percent this year, exceeding the global average by more than one percentage point, according to analysts polled by Bloomberg.
bloomberg.com
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