The Latin American Shadow Financial Regulatory Committee: Statement 16

Event Title: The Latin American Shadow Financial Regulatory Committee
Sponsor: Center for Global Development
Location: C. Fred Bergsten Conference Center
Date: April 12, 2007
Time: 10-11:30am
Approximate Number of Attendees: 100
Intern Attending: Elysa Severinghaus

Featured Speaker: Liliana Rojas-Suarez (Peru)
Panelists: Pedro Carvalho de Mello (Brazil), Roberto Zahler (Chile), Pablo Guidotti (Argentina), Ernesto Talvi (Uruguay), Claudio Contador (Brazil)

Six years ago, several independent economists founded The Latin American Shadow Financial Regulatory Committee. As a whole, they felt, and still feel, that there is no sense of urgency for development action in Latin America from the International Monetary Fund (IMF) or the countries that make up the region.

Many people believe that the IMF is no longer relevant in Latin America because it is not needed at the macroeconomic level and it is not wanted at the microeconomic level. However, despite improved organization at the macro level, poverty is still very high and income distribution is sharply skewed.

The committee issues a statement every few months based on their progress as an advisory body. Their statement this month focuses on the fact that the IMF is stll highly relevant in Latin America. The region remains vulnerable and if left, it would begin to flounder on an already unstable base. As the world becomes more financially integrated, it is important that countries in this region cooperate to promote common interests. In order for this to happen, there must be an external, impartial vehicle for coordination. The committee’s statement reads: “With all their imperfections, multilateral institutions are the appropriate vehicles to organize such cooperation.” Latin America should look to the IMF more often and not just use it as a last resort lender. It can serve to promote monetary and financial stability, but does not have the means to draw multiple related countries out of a “global liquidity crunch” but can work, rather, in preventitive measures.

What the developing world needs is a more focused IMF. The committee suggests that it should concentrate on its primary responsibilities: “monetary and exchange rate policy, fiscal sustainability, the level and structure of the public debt, [and] strength of the domestic banking system.” The committee hopes that the IMF will “review its practices with the goal of strengthening by ensuring…consistency [among] IMF-supported programs” with appropriately set standards for democratic governance.

Sra. Rojas-Suarez concluded her presentation of the statement with by remarking that the current lack of crises should not encourage the IMF to look for new and different roles to play in Latin America. She reinforced that they still have plenty to learn about the region and should use this period of increased stability to develop new insights and skills on their current functions instead of trying to shift to new roles.