Last Updated on Tuesday, 30 November 1999 05:00 Saturday, 30 July 2011 11:13
Finance officials from South America and Mexico will gather next month to discuss ways to protect their currencies and economies from the debt crisis in the U. S. and Europe.
The meeting of finance ministers from the Union of South American Nations, to take place Aug. 10-11 in Buenos Aires, was organized at the urging of Colombian President Juan Manuel Santos. The gathering will allow governments to coordinate action to deal with shared problems including speculative capital inflows that are fueling a rally in their currencies, Santos said at a July 28 summit of regional leaders.
Latin America is sitting on $700 billion in reserves that are losing their value because of the crisis we re going through with the impasse in the U. S. Congress over the debt ceiling, Santos said in Lima, Peru at a summit of the 12-nation bloc, known as Unasur. This is affecting us and we can t continue as mere spectators.
Policy makers in Latin America are trying to curb gains in their currencies, which hurt the competitiveness of their exports, and fight inflation after near-zero borrowing costs in advanced economies such as the U. S. and Japan spurred demand for higher-yielding assets in emerging markets.
This week, Brazil imposed a 1 percent tax on bets against the dollar in the country s derivatives market after the real reached the highest level since the country abandoned its peg to the greenback in 1999.
Since last year, policy makers in Latin America s biggest economy also tripled a tax on foreigners purchase of bonds and raised levies on foreign borrowing.
Policy makers in Colombia and Chile, while so far avoiding similar capital controls, have each stepped up daily dollar purchases in their local spot currency markets.
The region s currencies are among the best-performing in the world over the past two years, with the Brazilian real surging 22 percent, the Chilean peso gaining 19 percent and the Colombian peso up 17 percent.
The International Monetary Fund said in June that it expects Latin America and Caribbean economies to grow an average 4. 6 percent this year and 4. 1 percent next year, after nations including Peru and Brazil expanded at their fastest pace in two decades in 2010.
Argentine President Cristina Fernandez de Kirchner hailed the summit in Lima, saying regional leaders need to be more proactive about addressing common challenges.
It wasn t only a routine meeting of Unasur, Fernandez said yesterday in Brasilia, alongside her Brazilian counterpart, Dilma Rousseff. For the first time we looked collectively at the problems and how they are affecting our region, like speculative capital inflows that tend to strengthen our currencies.
Santos said Unasur leaders agreed to invite officials from Mexico to attend the meeting in Buenos Aires, given that the country is a member of the Group of 20 richest nations along with Argentina and Brazil.
Courtesy: Bloom Berg
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