Conferences & Events

– preliminary program –

a conference by the Latin America Research Group
Research Department
Federal Reserve Bank of Atlanta

November 1 and 2, 2001

Hotel Inter-Continental
Miami, Florida

Financial sector liberalization is among the most pressing priorities for policymakers in Latin America today. Policies aimed at expanding, diversifying, and modernizing financial services foster greater participation in the global economy. However, financial sector liberalization also presents new dilemmas. Lowering barriers to entry and attracting foreign investment capital has led to rapid growth in capital markets but has also resulted in greater market uncertainty and volatility. Moreover, existing weaknesses in some financial systems in the region have resulted in costly bank bailouts. Rapid growth and volatility in global capital markets have also helped increase market uncertainty about financial systems in Latin America. As the Western Hemisphere becomes increasingly integrated, financial sector liberalization in Latin America has important implications for U.S. financial markets and the international trade outlook.

Participants will explore a range of policy issues related to the impact of financial sector liberalization on capital flows, the banking sector, and financial markets. The conference will conclude with a roundtable on monetary and regulatory policy featuring four distinguished panelists. All discussions will focus on reforms to date and current and expected policy options.

Due to space constraints, attendance at this conference is by invitation only. If you would like more information, please contact Elizabeth McQuerry at elizabeth.mcquerry@atl.frb.org.

This paper will examine prospects for continued capital flows to Latin America and will emphasize those factors which support continuity of flows and others which support different patterns from past experiences. This discussion would encompass some analytics on the economic determinants of flows, both size and composition, and the analysis of the changes in circumstances concerning market and policymakers’ assessments as well as the international financial architecture.

What variables explain the scope and pace of financial liberalization in Latin America? Using econometric techniques and a multicountry data set, this research will examine the role of economic and political/institutional variables in determining the type of financial sector opening in individual countries. Research will also attempt to discern a common set of determinants in financial opening for the Latin America region. The implications of these findings for further reform efforts will also be discussed.

A solid supervisory framework and strict application of regulations are necessary preconditions for banking sector safety and soundness at all levels. However, while domestic institutions exist as a subset of international financial regulations and ideally are complementary, their functioning is not without friction. This paper will explore some areas of weak or improperly functioning institutions in the current setup, and their implications for banking sectors in Latin America. This paper will examine areas of concern for all Latin America and may include a country case study to illustrate the issues.

This paper examines the factors behind weak or nonexistent credit allocation in Latin banking sectors today. I will discuss whether these trends are likely to continue and what the likely impact would be. What has been the impact of the growing presence of foreign banks on this situation? The paper will also discuss concerns in the region as a whole, including policy recommendations where applicable, and could include a country case study to illustrate dynamics.

Since the mid-1990s, beginning with Mexico’s 1994–95 Tequila Crisis, the world’s emerging market economies have gone through waves of exchange rate crises. Since their crises some of the nations—particularly Brazil, Mexico, and Korea—have accomplished miraculous turnarounds as a result of strong policy steps. Some other crisis nations seem only to have had recoveries—to the extent that they have had them at all—as a result more of good luck than of effective policy. Indonesia and Russia are obvious candidates.

This discussion addresses the postcrisis policy steps that various nations have taken and outlines the result of these steps. The implications of these steps for growth sustainability and the applicability of such steps to other nations’ future crises also receive attention. Most striking is the extent to which recoveries can proceed even though policymakers have not fully addressed the supposed causes of the crises. This phenomenon might suggest that the Diamond and Dyvbig–based models—in which multiple equilibria exist and a shift from one to another does not require a fundamental or structural change—may have some explanatory power beyond fundamentals-based models. Or it could mean that initial conditions that are the result of cumulative policies preceding the crisis also determine how fast recovery comes. Finally, we look at the duration of the bounce back. More durable recoveries seem related to real and financial policies on the one hand and good luck on the other.

Domestic stock markets are merging into global exchanges, and new electronic forms of trading may make smaller emerging stock markets less relevant. Yet viable domestic capital markets are considered preconditions for sustainable private sector development and building pension systems throughout the region. What are the implications of this trend for emerging market countries? How relevant are emerging market equity markets and will their declining relevance have an impact on economic development?

Panelists will be invited to give opening statements focusing on the session themes and a short series of previously distributed questions. Specifically, what issues are monetary and regulatory policymakers likely to face in the future and how could they best be handled? Ideas from previous panels—capital flow issues, banking sector developments, and financial market experiences—will be included in the discussion. The moderator will conduct and participate in a discussion with panelists. There will be a generous time allotment for audience participation and discussion.