Strengthening regional financial cooperation

Agosin, Manuel R.

2014-01-02T18:42:44Z

LC/G.2130-P

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Includes bibliography

The severe international financial crises which rocked the Latin American economies in the 1980s and 1990s suggest that the international financial system suffers from serious defects. This article looks at one of the reforms which has been mooted in recent years: strengthening regional financial cooperation. It concludes that a Latin American fund made up of a modest portion of the reserves of the countries of the region, possibly backed up with contingency credits from the international banking system, could be an effective line of defense against financial crises caused by capital flight and could help to prevent the spread of crises within the region. A fund of this nature could also have other functions, such as providing finance to cope with balance of payments problems associated with temporary slumps in the terms of trade. It would also promote harmonization of the macroeconomic policies of its members, which is an essential condition for achieving more stable bilateral exchange rates and effective regional integration. Such a regional fund would not be a substitute for the International Monetary Fund, but would be complementary to it.

COOPERACION REGIONAL; CRISIS FINANCIERA; INTEGRACION ECONOMICA; RELACION DE INTERCAMBIO; SISTEMA MONETARIO INTERNACIONAL; TIPOS DE CAMBIO; ECONOMIC INTEGRATION; FINANCIAL CRISIS; FOREIGN EXCHANGE RATES; INTERNATIONAL MONETARY SYSTEM; REGIONAL COOPERATION; TERMS OF TRADE;