The Governor 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, it is important to me to explore bilateral assistance mechanisms through central banks and currency swaps, or the use of Special Drawing Rights, or the extension of Special Drawing Rights, that was granted this year to those nations that do not require them”.
Pesce considered that it is essential “to be able to use these resources through multilateral and bilateral channels to those countries that require assistance and that are not necessarily poor countries, but middle income countries that are under financial stress.”
The Governor 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 Governor’s full presentation click here.
