But we need to recognize that domestic protection is limited and costly. For example, countries in Latin America hold huge amounts of international reserves with a significant carrying cost at current rates and no clear stabilizing effect. In fact, there is the fear that the very use of the reserves may signal weakness and prompt an attack.
Many countries in the region follow prudent policies such as stringent bank liquidity requirements, or long debt maturities, or controls on short-term capital inflows, but none has been spared from financial contagion.