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Latam helps “rebalance” world economy by appreciating its currencies

Saturday, October 9th 2010 - 02:05 UTC
Full article 6 comments
IMF chief economist for the region, Nicolás Eyzaguirre IMF chief economist for the region, Nicolás Eyzaguirre

Latin America did its homework and allowed its currencies to appreciate sufficiently in order to contribute to the balance of global growth, International Monetary Fund (IMF) chief economist for the region, Nicolás Eyzaguirre, announced.

Using other measures to narrow the excessive revaluation of the currencies should only be an extraordinary decision, Eyzaguirre added after being questioned over the alleged controls of external flows of countries such as Brazil.

“Latin America has done its job in terms of helping to rebalance the international economy,” Eyzaguirre said during a press conference within the framework of the IMF/World Bank biannual meeting.

”Mexico and Brazil have allowed for a significant degree of appreciation (of their respective currencies). This is in their best interest, but it's also completely coherent with world cooperation,“ he added.

Brazil has seen its Real appreciate more than 35% since 2009, and after toughening certain controls in foreign capital inflows in order to stop speculation, its Finance Minister, Guido Mantega, commented, on September 27, on the ”currencies war“ taking place around the world.

This great flow of financial capital to Latin America, which could be estimated at 91 billion US dollars this year, quadrupling last year's number, ”is a cause for concern,“ but only in the short term, Eyzaguirre assured.

In the long run, the region can absorb this shock if it keeps up the current macro-economic path, and also thanks to the rise of its internal markets, which can also import more, Eyzaguirre said.

The Director-General of the Fund, Dominique Strauss-Kahn, has warned that using currencies as ”war weapons“ cannot be beneficial for anyone in a context of fragile recovery.

If the appreciation exceeds a level considered bearable for a country, ”you must use all your available tools, beginning with an adequate mix of polices“ Eyzaguirre explained.

”We don't have any problems with a certain level of intervention, although introducing good macro-economic measures in order to prevent excesses“ he added.

Latin America is to grow 5.7% in 2010, according to the Fun, a figure strongly revised in the last four months.

”The issue right now is how to avoid an excess of good things,“ the region's chief economist warned. ”The demand must be tempered; to continue with the current expansion would imply an overheating”.-

Categories: Economy, Latin America.

Top Comments

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  • Billy Hayes

    Mercopress is asking for revaluation in argentina, they are missing mendez.

    Oct 09th, 2010 - 03:56 am 0
  • Forgetit87

    I thought the Argentine BC president comment on the IMF - that it was on purpose trying to export unemployment from the developed to the developing world - was typical Argentine government official bravado against the IMF. Apparently it was not.

    Oct 09th, 2010 - 02:51 pm 0
  • Forgetit86

    And of course Mercopress will praise currency evaluation of emerging economies - who are desperate to keep their currencies down. After all, Mercopress clearly writes in favour of the economic interests of financial capital and the political interests of developed countries - a syntom of which is the obsessive attempts to denigrate left-wing govts in LatAm.

    IMF hostility to capital controls is well known. And infamous, too. In the Asian crisis of the 90s, the nation that did the best against the crisis was Malaysia. And Malaysia was able to afford a recovery before its neighbors precisely because it ignored IMF advises and adopted capital controls.

    Oct 09th, 2010 - 02:58 pm 0
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