Pesce at the 2021 Money and Banking Conference

The President of the BCRA, Miguel Pesce said today in his closing remarks at the 2021 Money and Banking Conference that the International Monetary Fund should relax the conditions of exceptional loans such as the one granted to Argentina.

“Similar circumstances may also occur in other countries; therefore, it is necessary to adjust terms and interest rates to the amount of the assistance that may be required by the IMF’s member countries, especially developing countries,” pointed out Pesce, and he added: “In this sense, I think it is important to analyze bilateral assistance mechanisms through central banks and currency swaps, and the use of Special Drawing Rights, or the extension of Special Drawing Rights”. “More specifically, an example worth pondering are the SDRs granted this year to the nations that did not require them”. Pesce stated that it is essential “to be able to direct those resources—both multilaterally and bilaterally—towards the countries that require assistance. Those countries are not necessarily poor countries, but middle-income countries under financial stress.”

The President of the BCRA also mentioned the need to review the regulation of non-bank financial institutions. “As we stated before the pandemic, there must be some regulatory mechanisms on non-bank financial institutions to limit these pro-cyclical trends that affect the development of our foreign exchange and financial markets.” He also added: “It is also necessary to change the financial architecture of multilateral organizations, improve the regulation of non-bank financial institutions and, at the same time, generate mechanisms through multilateral organizations to compensate for the negative effects of market behavior, thus allowing for more flexibility in terms of fiscal policies for the countries in the region”.

Finally, Pesce analyzed the relationship between interest rates in the United States and the price of commodities, and its impact on Latin American economies. “The region depends on the price of commodities in the balance of payments, and the price of commodities is linked to the performance of interest rates and growth in the United States. Even though predictions can be made in a situation or a long-term strategy in which commodity prices increase due to the expected behavior of demand, or a circumstance in which the country’s growth slows down, or when the quantitative easing strategy is either abandoned or moderated (thus slowing down growth), or when the strategy of maintaining—even with these inflation figures—interest rates is abandoned, all this could not only bring about problems from the financial and liquidity point of view, but also influence the price of commodities in the short-term.” In order to have access to the President’s full presentation click here.

November 24, 2021..