A New Liquidity Fund for Latin America


In the context of ongoing volatility in international capital markets, including from the expected increase in interest rates by the Fed,  Senior Fellow Liliana Rojas-Suarez highlighted  Latin America’s vulnerabilities to external financial shocks and presented a proposal to mitigate the effects of these shocks. This proposal has been advanced by the Latin American Shadow Financial Regulatory Committee (CLAAF, for its Spanish acronym) that she presides.

The essence of the proposal is the creation of a regional Latin American Liquidity Fund (LALF) where member countries pool a proportion of their reserves. The main objective of the Fund is the provision of liquidity to central banks of these member countries at times of systemic liquidity crises.

In describing the most important features of the proposed Fund, Liliana stressed its independence, transparency and relevance. For achieving the first two features Liliana underscored the need of establishing an office or Council in charge of granting pre-qualification status (for accessing the Fund’s resources) to member countries. This office should be completely autonomous and free of political interference. To meet the second feature, the participation of large countries such as Brazil and Mexico is deemed as essential.

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