Transcript
DEBT RELIEF
At its Annual Meeting in Belo Horizonte, Brazil, the IDB presented a study that says Latin America must find new methods of consolidating positive tendencies to avoid the recurrence of financial crises.
The IDB’s president said Latin American’s recent economical imbalances should not be forgotten, referring to the fact that accumulation of international reserves and emergency lines of credit were not enough to prevent the “sudden stops” of capital inflow.
MORENO: “The challenge for the region’s countries – that the IDB expects to assist – is to develop new alternatives now, in good times, which will be useful when we have to cross troubled waters.”
The study says that country insurance facilities could be created to meet the challenges of liquidity.
But economist Guillermo Mondino believes that in smaller markets, the approval of large loans could displace other investors, causing destabilization.
MONDINO: “I don’t think it’s such a good idea in these markets that all of the sudden, from one year to the next, these countries receive such a large emission of funds, whether from the government or from institutions like the IDB. The process should be gradual.”
The director of Harvard University’s Center for International Development Ricardo Hausmann, said it’s important to support debt markets by emitting bonds in local currency.
HAUSMANN: “The IDB has a lot to do both in local markets and in international ones, by administering loans in local currency thereby helping the ‘dedollarization’ of the Latin American debt.”
Guillermo Calvo, the IDB’s Chief economist, added that in order for the region’s countries to develop, governmental protection should be more focused.
CALVO: “We have a problem in Latin America that the legislation sometimes, doesn’t protect enough the creditor. So it’s becomes difficult to develop certain instruments.”
The region’s economic challenges are significant – and although Latin America is going through a uniquely favorable period, an efficient response requires the development of new methods to handle the risks emerging economies face.
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