Finance ministers from South America agreed to keep working to strengthen regional institutions and funds aimed at warding off the effects of a global financial crisis, without reaching an accord on the creation of a new stability fund.
Leaders from the Unasur political bloc discussed ways to boost regional trade and create a new fund or strengthen an existing mechanism, known as the Fondo Latinoamericano de Reservas, according to a statement published after the meeting ended today in Buenos Aires.
The $4 billion FLAR pools foreign currency reserves from seven Latin American nations to help address balance of payment problems.
South American nations are “better prepared to face the current adverse international conditions” than in previous years, the statement said, adding that recommendations on specific actions will be presented at a meeting of heads of state in Paraguay in two months time.
Officials from Colombia to Argentina stressed the need to coordinate policies to protect their economies in the wake of a financial crisis set off by debt problems in Europe and the downgrade of the U.S. credit rating last week by Standard & Poor’s.
Colombia Finance Minister Juan Carlos Echeverry said he’s “very worried” that Latin American currencies will appreciate further if the U.S. Federal Reserve starts a third program of asset buying, known as QE3, to boost growth.
Peso Performance
Colombia’s peso has gained 6.8 percent this year, the third-best performance among 25 emerging market economies tracked by Bloomberg, after the Czech koruna and the Hungarian forint.
The Brazilian real has climbed 3.1 percent and Peru’s sol is up 2.3 percent over the same period.
“There’s been talk of various mechanisms for building a regional monetary system that would consist of a basket of currencies for intra-regional trade, now that the dollar is in crisis and threatens the region’s countries,” Venezuelan Foreign Minister Nicolas Maduro said.
Regional finance ministers last met Aug. 5 in Lima at the urging of Colombian President Juan Manuel Santos to discuss ways to protect their economies and the value of their record $700 billion in foreign currency reserves from a deteriorating U.S. and European economic outlook.
Brazilian Finance Minister Guido Mantega said last night that South America’s two biggest economies want to increase funding to the Bogota-based FLAR.
Ready to Help
“Brazil and Argentina are ready to add to FLAR,” Mantega said at a dinner with Argentine Economy Minister Amado Boudou last night.
“This could complement the International Monetary Fund. Since it’s already there we can strengthen it and think about creating something more comprehensive.”
No decision about creating a $10 billion to $20 billion emergency fund to assist nations that experience capital flight should the crisis deepen was reached.
Mantega said today that the focus on regional institutions will come at the expense of the Washington based Inter-American Development Bank, which he said has “lost legitimacy over time” due to the influence of the U.S. over the lender.
Among the other measures being considered today, the Unasur bloc discussed coordination of policies on international reserves, Argentine Deputy Economy Minister Roberto Feletti said in comments posted on the government’s website before the meeting ended.
Rapid Response
“We’ll try to coordinate the reserves that our central banks have so that they can count on a rapid contingency credit line to strengthen their ability to respond to speculative attacks,” Feletti said.
Reserve levels in South America’s five biggest economies climbed 29 percent over the past year, to $501 billion, as investors spurred by near-zero interest rates in the U.S., Japan and Europe looked for higher-yielding assets in emerging markets.
To stem the inflows that are putting pressure on the region’s currencies, policy makers from Brazil, Chile and Colombia have stepped up dollar purchases in the spot market.
Most of the greenbacks are reinvested in U.S. Treasuries.
“The central bank has a bigger volume of compulsory deposits from banks today, of more than 400 billion reais ($248 billion), which could be employed if necessary,” Mantega said in a video shown at an event in Sao Paulo last night.
“We have successful experience from the crisis of 2008, and all the instruments created are at the disposal of the government.”
Leaders from the Unasur political bloc discussed ways to boost regional trade and create a new fund or strengthen an existing mechanism, known as the Fondo Latinoamericano de Reservas, according to a statement published after the meeting ended today in Buenos Aires.
The $4 billion FLAR pools foreign currency reserves from seven Latin American nations to help address balance of payment problems.
South American nations are “better prepared to face the current adverse international conditions” than in previous years, the statement said, adding that recommendations on specific actions will be presented at a meeting of heads of state in Paraguay in two months time.
Officials from Colombia to Argentina stressed the need to coordinate policies to protect their economies in the wake of a financial crisis set off by debt problems in Europe and the downgrade of the U.S. credit rating last week by Standard & Poor’s.
Colombia Finance Minister Juan Carlos Echeverry said he’s “very worried” that Latin American currencies will appreciate further if the U.S. Federal Reserve starts a third program of asset buying, known as QE3, to boost growth.
Peso Performance
Colombia’s peso has gained 6.8 percent this year, the third-best performance among 25 emerging market economies tracked by Bloomberg, after the Czech koruna and the Hungarian forint.
The Brazilian real has climbed 3.1 percent and Peru’s sol is up 2.3 percent over the same period.
“There’s been talk of various mechanisms for building a regional monetary system that would consist of a basket of currencies for intra-regional trade, now that the dollar is in crisis and threatens the region’s countries,” Venezuelan Foreign Minister Nicolas Maduro said.
Regional finance ministers last met Aug. 5 in Lima at the urging of Colombian President Juan Manuel Santos to discuss ways to protect their economies and the value of their record $700 billion in foreign currency reserves from a deteriorating U.S. and European economic outlook.
Brazilian Finance Minister Guido Mantega said last night that South America’s two biggest economies want to increase funding to the Bogota-based FLAR.
Ready to Help
“Brazil and Argentina are ready to add to FLAR,” Mantega said at a dinner with Argentine Economy Minister Amado Boudou last night.
“This could complement the International Monetary Fund. Since it’s already there we can strengthen it and think about creating something more comprehensive.”
No decision about creating a $10 billion to $20 billion emergency fund to assist nations that experience capital flight should the crisis deepen was reached.
Mantega said today that the focus on regional institutions will come at the expense of the Washington based Inter-American Development Bank, which he said has “lost legitimacy over time” due to the influence of the U.S. over the lender.
Among the other measures being considered today, the Unasur bloc discussed coordination of policies on international reserves, Argentine Deputy Economy Minister Roberto Feletti said in comments posted on the government’s website before the meeting ended.
Rapid Response
“We’ll try to coordinate the reserves that our central banks have so that they can count on a rapid contingency credit line to strengthen their ability to respond to speculative attacks,” Feletti said.
Reserve levels in South America’s five biggest economies climbed 29 percent over the past year, to $501 billion, as investors spurred by near-zero interest rates in the U.S., Japan and Europe looked for higher-yielding assets in emerging markets.
To stem the inflows that are putting pressure on the region’s currencies, policy makers from Brazil, Chile and Colombia have stepped up dollar purchases in the spot market.
Most of the greenbacks are reinvested in U.S. Treasuries.
“The central bank has a bigger volume of compulsory deposits from banks today, of more than 400 billion reais ($248 billion), which could be employed if necessary,” Mantega said in a video shown at an event in Sao Paulo last night.
“We have successful experience from the crisis of 2008, and all the instruments created are at the disposal of the government.”
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