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She is also the chair of the Latin American Committee on Macroeconomic and Financial Issues (CLAAF) and Adjunct Professor at the School of International and Public Affairs at Columbia University, New York. From March 1998 to October 2000, she served as managing director and chief economist for Latin America at Deutsche Bank. Before joining Deutsche Bank, Rojas-Suarez was the principal advisor in the Office of Chief Economist at the Inter-American Development Bank. Between 1984 and 1994 she held various positions at the International Monetary Fund, most recently as deputy chief of the Capital Markets and Financial Studies Division of the Research Department. She has been a visiting fellow at the Institute for International Economics, a visiting advisor at the Bank for International Settlements and at the Central Bank of Spain. She has also served as a professor at Anahuac University in Mexico and advisor for PEMEX, Mexico’s National Petroleum Company. Rojas-Suarez has also testified before a Joint Committee of the U.S. Senate on the issue of dollarization in Latin America.
She has published widely in the areas of macroeconomic policy, international economics and financial markets in a large number of academic and other journals including Journal of International Economics, Journal of International Money and Finance, Journal of Development Economics, Journal of Contemporary Economic Policy, International Monetary Fund Staff Papers. She has also published or being cited in prestigious newspapers such as the Financial Times, the Wall Street Journal and the Washington Post. She is also regularly interviewed by CNN en Español.
Michael P. Dooley & Donald J. Mathieson & Liliana Rojas-Suarez, 1997. "Capital Mobility and Exchange Market Intervention in Developing Countries" NBER Working Papers 6247, National Bureau of Economic Research, Inc.
Rojas-Suarez, L & Weisbrod, S-R, 1997. "Financial Markets and the Behavior of Private Savings in Latin America" Working Papers 340, Inter-American Development Bank, Research Department.
McNelis, P.D. & Rojas-Suarez, L., 1996. "Exchange rate depreciation, Dollarization and Uncertainty: A Comparison of Bolivia and Peru" Working Papers 325, Inter-American Development Bank, Research Department.
Rojas-Suarez, L. & Weisbrod, S.R., 1996. "Banking crises in Latin America: Experience and Issues" Working Papers 321, Inter-American Development Bank, Research Department.
Rojas-Suarez, L. & Weisbrod, S.R., 1996. "Building Stability in Latin American Financial Markets" Working Papers 320, Inter-American Development Bank, Research Department.
Rojas-Suarez, L. & Weisbrod, S.R., 1996. "Managing Banking Crises in Latin America: The Di's and Don'ts of Successful Bank Restructuring Programs" Working Papers 319, Inter-American Development Bank, Research Department.
Rojas-Suarez, L. & Weisbrod, S., 1994. "Achieving Stability in Latin American Financial Markets in the Presence of Volatile Capital Flows" Working Papers 304, Inter-American Development Bank, Research Department.
This paper explores the impact of international financial integration on credit markets in Latin America. The overall effect is positive, but the foreign banks do tend to amplify the impact of foreign shocks on credit and interest rates. Important policy recommendations include ring-fencing mechanisms, early-warning systems, and the incorporation for agreements between domestic and foreign supervisors.
This paper presents lessons derived from the 2008–09 financial crisis for Latin America and developing countries in other regions that might seek economic growth in the context of greater integration to the international capital markets.
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In a May 2008 speech at a forum organized by the Central Bank of Colombia, senior fellow Liliana Rojas-Suarez analyzes the effect of the global financial crisis on Latin America before an audience of high-level government officials. Drawing on points made in her forthcoming book, Growing Pains in Latin America, she argues that key actions taken before the crisis to switch to flexible exchange rates and avoid major disruptions in their domestic the banking systems have saved Latin America from what could have been even worse repercussions.
Additional reforms are still needed, however—especially those that would enable the implementation of countercyclical fiscal policy to counteract the effects of adverse external shocks.
Rojas-Suarez makes a similar case in a recent interview with CNN en Español in which she compares the actions during the crisis of U.S. Fed chairman Ben Bernanke to those of central bankers in Latin America.
Growing Pains in Latin America: An Economic Growth Framework as Applied to Brazil, Colombia, Costa Rica, Mexico, and Peru will be launched in the fall. A Spanish-language edition, Los desafìos del crecimiento en la América Latina: un nuevo enfoque will be released in partnership with the Fondo de cultura económica
CGD senior fellow Liliana Rojas-Suarez, principal author and editor of Growing Pains in Latin America, discusses the book with CGD publications coordinator John Osterman. The book comprises chapters by prominent experts on Latin America and lays out a framework for sustainable, equitable growth in the region. A Spanish version will be published by El Trimestre Económico de México later this year.
Read the book: Growing Pains in Latin America
Read the brief
Watch the video in English and Spanish
Q: Tell us about the history of this book. Where did the idea for it come from? What problems were you hoping to solve?
A: This book was inspired by a troublesome observation in Latin America: in spite of a significant number of reforms and policies undertaken during the 1990s and early 2000s, the region’s economic growth was disappointing in the years before the current international crisis. It wasn’t that the region was not growing, but that the growth was insufficient to reduce Latin America’s income-per-capita gap relative to other regions. And a lot of people were deeply discontented with the results of market-based policies and were, therefore, unwilling to support additional reforms.
So the book addresses urgent questions: What can Latin American countries do to accelerate growth on a sustainable basis? How can countries break the state of inaction, paralysis, and impasse that prevents the implementation of further pro-growth policies and reforms?
To answer them, Simon Johnson and I led a task force that developed a simple analytical framework specifically designed for Latin America. Growing Pains describes the framework and applies it to Brazil, Colombia, Costa Rica, Mexico, and Peru.
Q: There have been other frameworks for growth before. What makes this one different?
A: This framework takes into account the unique features of Latin America: it is the most financially open (the one with the least controls to the movement of international capital flows), the most democratic and the world region with the greatest economic and social inequality.
That does not mean that the framework does not build on previous analysis. Our framework, like many others, seeks to identify the main foundations that encourage the accumulation of physical and human capital as well as improvements in technology—the three factors that lead to economic growth. The framework identified five “growth foundations” for Latin America: (1) secure property rights; (2) sufficiently equal opportunities for large segments of the society; (3) sufficient economic and political competition; (4) macroeconomic stability; and (5) broad sharing among the population of the benefits from growth. These five foundations must all be firm to ensure the sustainability of a market-based model in Latin America.
Q: Why Brazil, Colombia, Costa Rica, Mexico, and Peru for the case studies? Are these exceptional cases, or can conclusions be applied to all of Latin America?
A: Every country in the region has particular features in its reform-growth history that I would have loved to explore. But since we had to make choices, we went for an in-depth analysis of a few cases rather than for wider but shallower coverage of the region. In selecting the case studies we had two considerations in mind: representation and diversity. Representation in the sense that we wanted to include big (Brazil and Mexico) and small (Costa Rica) countries as well as countries from the different sub-regions: Andean (Colombia and Peru), Southern-cone (Brazil), and Central America (Costa Rica). Diversity in the sense that we wanted to include big reformers (such as Peru), slow reformers (Brazil) and countries that had more difficulties implementing some type of reforms, especially institutional reforms (such as Mexico and Costa Rica). This strategy ensures that lessons from case studies can be applied to many other countries in the region.
Q: Your recommendations are pretty optimistic. What are your reasons for optimism? Has the financial crisis changed things?
A: They’re optimistic because we focused from the beginning on making doable recommendations. An important commonality in the process of implementing reforms that emerges from all the country studies is the emphasis on incremental reforms. Even in the cases where a major revamping is recommended, the proposals are not for “big bang” reforms but for pilot projects designed to build constituencies that will support and endorse further change and reform. Also, the proposed reforms would be implemented through agreement and negotiation rather than by decree, an approach that is fully consistent with the reality of Latin America today as the most financially open, most democratic, but also most unequal region in the developing world.
And, yes, the financial crisis has changed my perception—it has actually increased my optimism about the region. Previous reforms, especially those in the macro and financial regulation areas, have actually helped Latin America weather the crisis quite well, especially given the incredibly adverse circumstances coming from industrial countries. For the first time in decades, Latin America has not succumbed to a path of deep financial crises and prolonged recessions following an adverse external financial shock. While some countries are suffering the impact much more than others (Mexico in particular), it is quite amazing that a country like Brazil has recently even been upgraded to the category of “investment grade,” an achievement rarely seen in periods of deep trouble like the one we are experiencing these days.
Q: What do you hope the impact of this book will be?
A: I truly hope that the impact of this book will be multidimensional. Some of the book’s authors have been given key roles over the last year. One of the authors has become deputy minister of finance in Peru, and the authors of the Costa Rica chapter are now preparing the economic program of the lead presidential candidate, Laura Chinchilla. And several countries in the region have already begun initiating reforms recommended in the book. I think we’re on the way toward making the proposals reality. I hope that Growing Pains in Latin America will continue to inform the debate among policymakers, the public sector, and civil society on the need to continue the reform process in the countries studied and in the rest of the region.
Mervyn King, governor of the Bank of England, called last week for radical reform of the International Monetary Fund. In a speech in New Delhi, King said that the IMF's role as lender of last resort was much diminished in part because middle-income countries have built up large reserves. To remain relevant, he said, the IMF must give large developing countries a greater say in its governance and analyze the balance sheets of rich countries as well as developing countries. CGD senior fellow Liliana Rojas-Suarez, an international finance expert who chairs the Latin America Shadow Financial Regulatory Committee and previously worked on Wall Street and for multilateral institutions, including the IMF, shares her views on the future of the Fund.
Q: King said in New Delhi that the governance of the IMF should give greater voice to large developing countries, such as China and India. The U.S. supports increased representation on the IMF board and consolidation of European representation, with a single seat for the Eurozone countries. How important are these sorts of changes?
A: Increased representation of key emerging market countries on the IMF board is essential. The days when countries would just follow IMF advice without questioning its appropriateness are long gone. The IMF is suffering a credibility crisis partly because of the widespread perception that its response to the East Asian financial crisis led to declines in output growth beyond what was necessary for crisis resolution. Credibility can only be regained if Fund’s advice is backed by a Board with significant representation from countries that may need IMF programs.
Q: The Financial Times reports that Rodrigo Rato, the IMF's managing director (and a former finance minister of Spain), has been trying to build consensus for incremental reforms, including greater focus in the Fund's surveillance reports and a reform of voting rights. Is there a fundamental difference between King’s views on these issues and where the IMF seems to be headed?
A: The most important differences between Rato's and King's proposals regarding the need for reform of voting rights relate to timing and degree rather than substance and it’s good to see a consensus emerging on the need for such reforms. However, there are important differences on the issue of reforming IMF surveillance. While Rato would like to improve the effectiveness of surveillance using current instruments, King calls for an overhaul of the process, with a more vocal IMF publicly stating early warning signals of inadequate country policies, especially when they generate risks to the global financial system. I think King has it right.
Q: What about King’s assertion that the IMF’s role as lender of last resort is going to become less and less important? Rato argues that it has only been a few years since the people worried that the IMF was overstretched, with huge loans to countries such as Argentina, Brazil and Turkey. He warns that such needs could easily arise again. What’s your view?
A: This is a crucial issue, and on this question my views are much closer to Rato’s ideas than to King’s. The last three years have been exceptionably favorable for developing countries: global growth has been healthy, capital inflows have been abundant and prices of commodity exports have skyrocketed. Of course there has been a drop in demand for IMF lending! Nobody goes to the IMF in good times! However, this unusually favorable environment will not persist forever. If we learned anything at all from the crisis episodes of the last two decades it is that capital flow reversals can be sudden and large, so large that even substantial foreign exchange reserves may not be enough to insulate countries from a sudden stop of external finance.
Q: You worked as principal advisor to the senior economist at the Inter-American Development Bank and recently chaired a joint CGD/Latin America Shadow Financial Regulatory Committee working group that prepared a report on the future of the IDB. That report recommended greater IDB flexibility in responding to the challenges of globalization. Are there any parallels between the challenges facing these two organizations?
A: Definitely. In fact, increased flexibility is more important for the IMF than for any other multilateral organization. The IMF’s main job is to ensure the stability of the international financial system; this role goes beyond country or regional boundaries. The big issue is avoiding unsustainable global imbalances. As we know from the current account balances of China and the United States, global imbalances can involve industrial countries, developing countries or both. IMF flexibility in a globalized world means complementing country surveillance with world surveillance. Since global developments evolve continuously, so should IMF country-specific policy recommendations and financial support.
Q: King has called for the IMFs board to refrain from micromanagement. Instead of having a resident board, he suggests that the board should meet six times a year, with directors comprising senior finance ministry or central bank officials. Do you agree that the IMF management should be given greater latitude?
A: Absolutely. Independence is especially important for surveillance and policy prescriptions directed to industrial countries. How often has an appropriate recommendation by IMF staff not been made public because of political constraints imposed by the Board? There is an obvious and useful analogy for thinking about this. The IMF appropriately tells countries to make their central banks free from political interference. The IMF is essentially the world’s central bank. Like national central banks, its job is to provide liquidity to control crisis episodes and avoid contagion. Seen this way, it is only natural to protect the IMF from political interference by a Board that largely represents the interests of a minority of its membership.
Q: Some people argue that such reforms are desirable but politically impossible.
A: I disagree! I think that reform is inevitable. This is not because I’m an optimist. It’s just a matter of time before the major players in the world economy realize that they cannot afford to be without an adequate surveillance mechanism for global financial stability.
Center for Global Development
WASHINGTON (July 2, 2019) -- The Latin American Committee on Macroeconomic and Financial Issues (CLAAF by its Spanish acronym) met in Washington today to discuss ‘Mexico’s financial risks: Solving Pemex for a Solvent Mexico.’ The CLAAF explored some of the major macroeconomic issues facing President Andrés Manuel López Obrador (AMLO), the new leader of Mexico, such as declining per-capita income growth, fiscal and monetary issues, and the country’s finance and trade integration with the US and larger international system, and made a series of related reform recommendations in a policy statement.
The CLAAF is a group of prominent economists and academics who have served as government ministers, central bank governors, and/or senior officials at multilateral institutions like the Inter-American Development Bank, International Monetary Fund and the World Bank. Twice a year, the group convenes to analyze major national or regional macroeconomic issues and then release a series of policy recommendations to change course and advance greater economic and financial stabilization.
Cognizant of and analyzing some of the major domestic and international pressures on the AMLO administration (such as NAFTA legacy and the manufacturing sector, the new USMCA, US Federal Reserve activity, rule of law and corruption issues, and more) the CLAAF centers in on Pemex, the state-owned oil company, “by far the single most important fiscal problem faced by the AMLO administration. Lack of investments in exploration and extraction have led to a steady reduction in oil production, while the company has issued a large stock of debt in international markets. Investors have become increasingly weary of holding Pemex bonds,” the group states.
To avoid a sovereign rating downgrade or an additional deterioration of Pemex, either of which could severely curtail capital inflows to Mexico, and improve the country’s economic outlook, the CLAAF believes that:
the paramount task for the government is to address the critical situation at Pemex:
a corporate restructuring of Pemex is required, and should be complemented by a number of additional actions, including attracting new private funding for investments in exploration and extraction;
a comprehensive corporate restructuring plan can also help avert Pemex’s debt crisis. Currently, Pemex is on a collision course that may lead to a debt restructuring; and
while rationalization of current expenditures is needed, the success of the government’s plan of using primary surpluses to finance public expenditure projects requires well-developed and substantive feasibility studies.
“The first priority for the Mexican government should be the prompt resolution of Pemex’s deep financial problems,” said Liliana Rojas-Suarez, president of the CLAAF and director of the Latin American Initiative at the Center for Global Development. “If this issue is not addressed in time, a downgrade of Mexico´s sovereign debt is likely. This, combined with the current external challenges arising mainly from US policies, could further curtail Mexico’s economic growth prospects and performance.”
CLAAF members participating in the June-July 2019 session:
Laura Alfaro, Warren Albert Professor, Harvard Business School, Former Minister of National Planning and Economic Policy, Costa Rica
Augusto De La Torre, Former Chief Economist for Latin America and the Caribbean, The World Bank. Former Governor, Central Bank of Ecuador.
Guillermo Calvo, Professor, University of Columbia; former Chief Economist, Inter-American Development Bank
Roque Fernandez, Economics Professor, UCEMA University; former Minister of Finance, Argentina
Pablo Guidotti, Professor of the Government School, University of Torcuato di Tella; former Vice minister of Economy, Argentina
Paulo Leme, Executive in Residence Professor of Finance, Miami Business School, University of Miami.
Enrique Mendoza, Presidential Professor of Economics, University of Pennsylvania. Director, Penn Institute for Economic Research.
Guillermo Perry, Non-Resident Fellow, Center for Global Development. Former Chief Economist of the Latin America and Caribbean Region, World Bank
Carmen Reinhart, Minos A. Zombanakis Professor of the International Financial System at the Harvard Kennedy School.
Liliana Rojas-Suarez, president, CLAAF; Senior Fellow and Director of the Latin American Initiative, Center for Global Development; former Chief Economist for Latin America, Deutsche Bank
Full Statement Here
Video of Findings and Discussion Here