Latin America urges US to act fast to stem crisis
WASHINGTON: Latin American finance ministers urged the U.S. to act quickly to combat the swirling financial crisis that could reverse broad economic gains made across the region in recent years.
Meeting with counterparts at an annual World Bank and IMF meeting this weekend in Washington, ministers asked wealthy nations to coordinate "orderly" efforts to restore market confidence and "save the world economy from a deep recession" that could slash jobs, income and growth, Colombian Finance Minister Oscar Ivan Zuluaga said.
Still, Latin America does not expect local banks to fail, as tighter lending restrictions and increased reserves have increased solvency, Zuluaga said. Many countries have also boosted foreign currency reserves and paid down foreign debts in recent years, positioning them to combat the spreading crisis with emergency credits and currency sales.
Brazilian Finance Minister Guido Mantega suggested the IMF should "establish a new set of measures to strengthen and protect" the world financial system, shifting focus away from the U.S. and European models it has long championed.
"The world is watching incredulously as the crisis reveals serious systemic weaknesses and policy limitations in what used to be considered model countries, countries that were presented as the reference point for good governability, as examples to be emulated," he said. "We need a new financial structure, with more controls and less favoritism."
Brazil has for years pushed for an IMF restructuring that would increase its sway in the institution's decisions.
Mantega chaired a Saturday meeting of leaders from the G20, a group of the world's biggest economies, including the European Union, Brazil, Mexico and Argentina. The group will meet again in Sao Paulo on Nov. 8 and 9 to further address the economic crisis.
According to Peruvian Economy Minister Luis Valdivieso, Latin America is vulnerable to the financial crisis on two fronts: the global credit crunch is drying up loans, and slowing global growth is slashing demand for the region's exports.
Peru, he insisted, has none of the cash supply or banking problems seen in the developed world, but might use some of its US$35 billion in currency reserves to keep credit flowing and meet its IMF growth forecast — which at 9.2 percent, is the highest in the region. Peru's central bank is also "willing to take opportune measures if necessary" while the government might boost debt levels if the crisis worsens, Valdivieso said.
The Inter-American Development Bank has meanwhile created several new credit programs to boost local lending if the crisis worsens, bank president Luis Alberto Moreno said.
Finance ministers from Argentina, Chile, Colombia, Mexico, Peru and Uruguay met Saturday with U.S. Treasury Secretary Henry Paulson, who heard their concerns and detailed measures that the U.S. and G7 countries are employing to combat the crisis.
Paulson has said the current turmoil must first be resolved before policy makers can consider overhauling the world financial system.