It is our view that there is a need for further improvement of the current precautionary facilities to make them more suitable in providing countries with preventive financial assistance to face capital account crises. In this context, the discussion of this morning gave the Fund’s staff useful elements to consider on the design of more effective financial instruments to limit contagion from shocks in the global financial market. But not only the Fund’s financing instruments should be explored. The Fund should have a dialogue and a permanent association with private financial markets around the world to promote and eventually participate in the creation of new financial instruments that provide liquidity support at times of stress. This is an integral part of the process of managing systemic risks to macroeconomic and financial stability, which we referred to previously. From this standpoint, the Fund could contribute to alleviating the impact of existing externalities in global financial markets by creating new knowledge relating to the design of new market instruments, valuation methodologies, benchmarks and indices, for instance. This is especially important for countries that have made lots of progress in addressing their main weaknesses both on policies and the development of their intuitional framework. After almost twenty years since the debt crisis of the eighties, a good part of the Latin-American countries have repaid their obligations with the Fund.
Vittorio Corbo: The Fund’s medium-term strategy – a view from Latin America and a dialogue with high-level officials Keynote speech by Mr Vittorio Corbo, Governor of the Central Bank of Chile, at the High-level Seminar “The Fund’s Medium-Term Strategy: Considerations for a New Liquidity Instrument for Crisis Prevention and Effective Surveillance. Dialogue with High-Level Officials”, organized by the International Monetary Fund and the Central Bank of Chile, Santiago, 11 December 2006. *  *  *  Latin America has benefited substantially from the fast growth experienced by the global economy during the last four years and from domestic policies that have contributed to enhanced macroeconomic stability. External current accounts and primary fiscal balances are in surplus, exchange rates are more flexible, and inflation is no longer a major issue as it was for several years and after surpassing the average of 400 percent per year during the 1990s. Likewise, the structure of public debt has become less vulnerable, characterized by lower shares of short-term and foreigncurrency debt in most countries as compared with the early 2000s. At the same time, there is renewed appreciation in the region that a solid commitment to maintaining macroeconomic stability is a necessary condition to achieve high and sustainable growth rates in the medium term. A distinguished feature of the region is that fiscal revenues are highly dependent on natural resources. In the current favorable context for commodity prices, primary fiscal surpluses have clearly shown positive numbers, averaging around 4 percent of GDP of the region.