2001 Conference Announcement - Domestic Finance and Global Capital in Latin America

– final 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 liberalization is among the most pressing goals for policymakers in Latin America today as policies aim at expanding, diversifying, and modernizing financial services foster participation in the global economy. However, liberalization also presents new dilemmas. Lowering barriers to entry and attracting foreign capital have led to rapid growth in capital markets but have also resulted in market uncertainty and volatility. Moreover, existing weaknesses in some financial systems have resulted in costly bank bailouts. As the Western Hemisphere becomes increasingly integrated, financial liberalization in Latin America has important implications for U.S. financial markets and the international trade outlook.

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.

November 1, 2001
1:00 Registration
2:00 Introduction to Conference Themes:
Michael Chriszt, Director of Latin American Research, Federal Reserve Bank of Atlanta
2:30 Session I: Theoretical Issues
John C. Robertson, Federal Reserve Bank of Atlanta
  Capital Flows to Latin America: New Issues and Old Concerns
Eduardo Fernández-Arias, Inter-American Development Bank

This session examines prospects for continued capital flows to Latin America and emphasizes factors that support continuity of flows and others that support different patterns from past experiences. This discussion encompasses 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.

  Financial Liberalization in Latin America: Policy Continuity and Change
Myriam Quispe-Agnoli, Federal Reserve Bank of Atlanta
Elizabeth McQuerry, Federal Reserve Bank of Atlanta

This research attempts to establish a baseline for evaluating the process of financial liberalization across countries and time through the construction of a Financial Liberalization Index. The Index, which is estimated using the Kalman filter, measures the degree of financial openness in five Latin American economies by incorporating indicators characterizing the financial system. The study also correlates macroeconomic and institutional variables with the opening in each country, and compares these variables across countries. The implications of these findings for further reform will also be discussed.

Susan Minushkin, Centro de Investigación y Docencia Económica, Mexico
Santiago Montenegro, Asociación Nacional de Instituciones Financieras, Colombia
7:00 Reception and Dinner
Presentation by Keynote Speaker:

Ricardo López Murphy, Fundación de Investigaciones Económicas Latinoamericanas and former Minister of the Economy, Argentina
November 2, 2001
8:00 a.m. Continental Breakfast
9:00 Session II: Banking Sector Issues
William Estes, Federal Reserve Bank of Atlanta
  Policy Lessons and Prospects for the Banking Sector in Latin America
Miguel Kiguel, Banco Hipotecario, Argentina
  Bridging the Gap: A Discussion of Links between International and Domestic Financial Architectures
José María Fanelli, Centro de Estudios de Estado y Sociedad, Argentina
Rohinton Medhora, International Development Research Center, Canada

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 frictionless. This session explores some areas of weak or improperly functioning institutions in the current setup, and their implications for banking sectors in Latin America. This discussion also examines areas of concern for all Latin America.

  Credit Allocation after Banking Crises: The Data and Prospects for the Future
Rogério Studart, Comisión Económica para América Latina y el Caribe (CEPAL), Chile

This paper examines factors behind weak or non-existent credit allocation in Latin banking sectors today and discusses 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 session will also discuss concerns in the region as a whole, including policy recommendations where applicable.

Martin Naranjo, Universidad del Pacifico, Peru
12:00 noon Luncheon
1:00 Session III: Financial Market Questions
Stephen Kay, Research Department, Federal Reserve Bank of Atlanta
  Recovering from Crises: Good Policy or Good Luck?
William C. Gruben, Federal Reserve Bank of Dallas
John H. Welch, Barclays Capital

Since the mid-1990s, 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. 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 effective policy. Indonesia and Russia are obvious candidates. This discussion addresses the postcrisis policy steps taken by various nations and outlines their results. Their implications for growth sustainability and applicability of such steps to future crises also receive attention. Most striking is the extent to which recoveries can proceed even though the supposed causes of the crises have not been fully addressed. The Diamond and Dyvbig-based models—in which multiple equilibria exist and a shift from one to another does not require a fundamental change—may have some explanatory power here. Finally, the duration of the bounce back is examined.

  The Future of Domestic Capital Markets
Eduardo Walker, Universidad Católica de Chile
Fernando Lefort, Universidad Católica de Chile

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?

Arturo Porzecanski, ABN AMRO
Martin Redrado, Fundación Capital, Argentina
3:00 Coffee Break
3:30 Session IV: Policy Roundtable on Monetary and Regulatory Policy in an Era of Global Markets
Robert A. Eisenbeis, Federal Reserve Bank of Atlanta
Ilan Goldfajn, Banco Central do Brasil
Liliana Rojas-Suarez, Institute for International Economics
Nouriel Roubini, New York University
Leonardo Villar Gómez, Banco de la República, Colombia

Panelists will make opening statements focusing on the session themes and previously distributed questions. Specifically, what issues are monetary and regulatory policymakers likely to face in the future and how could they best be handled?

5:15 Social Hour and Conference Close