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CLAAF Does Not Rule Out a Financial Bubble in Peru (CLAAF MEDIA COVERAGE)

November 17, 2010
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During the 13th and 16th of November, the Latin American Shadow Financial Regulatory Committee (CLAAF) chaired by CGD senior fellow Liliana Rojas-Suarez, held their second meeting of the year in Lima hosted by the Central Bank of Peru. As a result of the meeting, CLAAF released their 23rd statement discussing the economic problems Latin America faces as a result of the currency wars and offers detailed policy recommendations.

As president of CLAAF, Liliana was featured in several major Peruvian newspapers regarding the CLAAF statement. Here is a summary of the articles in English as well as links to the articles in Spanish.

CLAAF no descarta burbuja financiera en el Perú:

Expreso

November 17, 2010

http://www.expreso.com.pe/edicion/index.php?option=com_content&task=view&id=121225&Itemid=34

CLAAF does not rule out a financial bubble in Peru

Liliana discussed that although CLAAF does not rule out a financial bubble in Peru, she thinks it is alarmist to assert that a financial bubble has definitely formed. Liliana is confident that the Central Bank and the bank supervisory authority have taken appropriate policy decisions to prevent the creation of such a bubble. She also commented on the financial stability of the United States and Europe, and their continued responses to the financial crisis.

CLAAF no descarta burbuja financiera en Perú:

Diario 16 – page 11

November 17, 2010

www.diario16.com.pe/pdf/bajando.php?archivo=17-11-2010.pdf

CLAAF does not rule out a financial bubble in Peru

Liliana discusses the possibility of a financial bubble in Peru. She concludes that even though the policy decisions taken by the Central Bank have been appropriate to avoid creation of a bubble, if it were to occur it could have a negative impact on the mortgage market, the consumption credit market and Peru’s Stock Market.

El dólar alcanza su cotización pico de tres meses contra el sol
:

El Comercio

November 17, 2010

http://elcomercio.pe/economia/670283/noticia-dolar-alcanza-su-cotizacion-pico-tres-meses-contra-sol_1

The Dollar reaches its highest value in three months against the Sol

The dollar’s value reached its highest point in three months, affected by the news of the Chinese inflation and the debt in some European countries. Liliana discussed Chinese monetary policy and how the value of the Yuan and the Dollar impact Latin America.

Dólar trepa a S/. 2.81 y BCR sigue en pie de guerra ante volatilidad

Gestion

November 17, 2010

http://gestion.pe/impresa/noticia/dolar-trepa-281-bcr-sigue-pie-guerra-ante-volatilidad/2010-11-17/25205

Dollar rises to S/. 2.81 and Central Bank is still battling volatility

Liliana discusses CLAAF’s opposition to systematic sterilized interventions in foreign exchange markets. This type of interventions usually leads to interest rate increases which could attract further capital inflows.

Entrevista a Liliana Rojas-Suarez sobre La Guerra de Divisas

La Hora N

November 16, 2010

http://www.jaimedealthaus.com/videos/entrevista-a-liliana-rojas-suarez-2.html

Interview with Liliana Rojas-Suarez on the Currency War

CGD senior fellow Liliana Rojas-Suarez was interviewed on the 23rd Statement of CLAAF on the currency war and its effects in Latin America.

Liliana Rojas-Suarez, senior fellow at the Center for Global Development and president of CLAAF, was interviewed by “La Hora N” regarding the so-called “currency wars” and their effect on Latin America. Liliana explained that the two main contributing factors of the currency wars are expansionary monetary policy in the United States and China’s reluctance to let the yuan appreciate sufficiently. In terms of reviving economic growth, Rojas-Suarez argued that the US should conduct expansionary fiscal policy. However, she believes that Congress is not acting boldly enough in this regard, which, she pointed out, is reminiscent of Japan’s “lost” decade during the 1990s. Referring to Latin America, Rojas-Suarez thinks the region is in the position of having to react to the policies of both China and the US. Central banks in the region are worried that their economies may reheat because of inflationary pressures on certain assets. Additionally, the extreme appreciation of any major currency could affect competitiveness in the region /of the region. Commenting on Peru in particular, Liliana advises that several policy instruments should be used to counter this trend. First, foreign exchange policy should be conducted in order to let the currency appreciate somehow. Second, banking supervisors should make use of the counter-cyclical policies at their disposal (i.e. dynamic provisions). Third, continue the use of reserve requirements as a macroprudential tool. Finally, given current trends in economic activity, the aim of fiscal policy should be to generate a surplus. An important component in this last recommendation is to allocate tax revenues towards public investment.