Liliana Rojas-Suarez

Latin America’s response to the global financial crisis has been remarkably strong. Effective use of fiscal, monetary and exchange rate policies allowed Latin America to fare better than other parts of the world and better than the region itself during previous global economic crises. But macroeconomic disequilibria in high-income countries—especially rising fiscal deficits and sovereign debt in the United States and parts of Europe—run the risk of becoming unsustainable. The Latin America Shadow Financial Regulatory Committee will meet in December 2009 to discuss the following related issues, and then share its conclusions in a public presentation. • What are the main economic imbalances in industrial countries threatening the stability of Latin American countries? • Are we, as some analysts argue, witnessing the formation of another bubble, this time involving the value of assets of emerging markets, especially those in Latin America? • Does Latin America have adequate tools to face fresh disruptions in international capital markets? Or did it exhaust its arsenal of policy options in dealing with the recent crisis? • Should countries follow the example of Brazil and try to dampen the effects of volatile capital inflows through capital controls? Can controls work in the current environment?

Join us as we launch CGD’s newest book, Growing Pains in Latin America: An Economic Growth Framework as Applied to Brazil, Colombia, Costa Rica, Mexico, and Peru. The book’s principal author and editor, CGD senior fellow Liliana Rojas-Suarez, will address the central issues posed in this book: Beyond the current global crisis, what can Latin American countries do to accelerate economic growth on a sustainable basis? How can policymakers address the fact that the benefits of market-oriented reforms have yet to reach important segments of the population? Alejandro Foxley, one of the architects of Chile’s highly successful reforms in the 1990s, and a former minister of finance and foreign affairs, will discuss the book’s key recommendations.

Growing Pains in Latin America is based upon the work of a Task Force comprising the region’s top scholars and economic policy practitioners. They examined past reforms to determine what worked and what failed to increase growth and reduce inequality, then devised a policy framework based on the region’s unique characteristics: Latin America is the most democratic and financially open region of the developing world, but also the most inequitable. In the case studies, other experts apply the framework to five countries to offer innovative yet practical policy proposals.

Spillovers from a global crisis that began in advanced economies pose a severe test to Latin America and the Caribbean region. The good news is that during this decade, countries of the hemisphere have made themselves more resilient—though not immune—by strengthening policy frameworks and reducing homegrown vulnerabilities in public finances and financial systems. On May 21, the Latin America Initiative at Brookings will host Nicolás Eyzaguirre, director of the IMF’s Western Hemisphere Department, and Steve Phillips, also of the IMF, as they present this year’s Regional Economic Outlook: Western Hemisphere report. Improved fundamentals, the report shows, mean that countries are now more able to respond to the external crisis with active policies to boost output and employment and protect the most vulnerable groups. This will help contain the damage from the global crisis and speed the region’s recovery. Following their remarks, a panel composed of Mauricio Cárdenas, senior fellow and director of the Latin America Initiative; Liliana Rojas-Suarez, senior fellow at the Center for Global Development; and Carlos Vegh, professor of economics at the University of Maryland, will evaluate the report’s findings. After the program, panelists will take audience questions.

The New Ideas in Development After the Financial Crisis Conference, sponsored by CGD and the Bernard L. Schwartz Forum on Constructive Capitalism, will examine the implications of the global financial crisis on existing development strategies. Panels of distinguished academics and policy practitioners will explore how different regions of the developing world are interpreting this crisis and how they are likely to respond on a national and international level.

Among emerging markets, Latin America is the most financially open region in the world: there are few restrictions on international capital flows and in most countries foreign banks dominate the banking system. While countries have benefitted from capital inflows, especially foreign direct investment to finance growth-enhancing projects, the region's financial systems are also very vulnerable to unexpected large reversals of capital flows. In the context of the current deep financial crisis affecting industrial countries and a number of developing countries, dealing with the following issues are central for the stability of Latin American financial markets: • What are the best policy options for Latin American countries to maintain stability gains achieved in their local financial systems? • Is there a role for capital controls under current circumstances? • How might the new industrial country proposals for increasing regulation and government intervention in financial markets affect the stability of financial systems in the region? • What is the role of the IMF to support financial stability in Latin America?

Broad-based and inclusive financial systems can significantly aid financial development, reduce poverty, and expand economic opportunity in developing countries. Poor households and individuals often have difficulty obtaining financial services for a multitude of reasons, including transaction costs, perceived risk, inadequate legal and financial infrastructure, and information barriers. Yet many financial institutions have begun making profitable inroads into these underserved markets through the continuing expansion of financial access and microfinance. Building Inclusive Financial Systems offers an indispensable guide for governments and the private sector to increase access effectively and responsibly. Panelists will share their experience and views on new directions in work in the area of financial access, building upon and extending themes in the book.