Further action from Latin American central banks to alleviate liquidity problems in the region's main financial systems cannot be ruled out, Eduardo Levy-Yeyati, head of Latin America research at Barclays Capital, told BNamericas.
Over the last few weeks, several of the region's central banks have come out to ensure their respective banking systems' liquidity. In the cases of Brazil and Chile, the measures were needed to reverse a US-dollar liquidity crunch that was worse than in other countries.
The measures were predictable and logical and have been gradually scaled up to ensure both dollar and local currency liquidity, and their effect is already being reflected in lower interbank rates, Levy-Yeyati said.
"We don't discount the fact further measures may be needed but believe central banks are in emergency mode and ready to act," he said.
Central bankers from Argentina, Brazil, Colombia, Chile, Mexico and Peru met Sunday in the Chilean capital Santiago to analyze the global crisis and agreed on cooperation to shield the region against its effects.
Unlike in the 90s or most of Eastern Europe today, Latin America has a positive foreign asset position as a whole as the moderate short dollar position in the private sector is outweighed by the long dollar position of central banks or treasuries.
"The reversal of outflows creates an internal transfer problem: how to transfer dollars to the public sector - for example, through foreign exchange intervention - but it is unlikely to cause a macroeconomic imbalance," Levy-Yeyati said.
Latin American banking sectors are relatively liquid and solid, largely funded by deposits and unlikely to be severely affected by the global credit crunch, he added.
However, the worldwide deleveraging process may influence Latin American banks and the region's growth in three indirect ways: a dollar crunch as cash-strapped foreign lenders pull out; a local currency crunch as local banks build up liquidity buffers; and a decline in lending if liquidity hoarding is sustained over time, Barclays Capital said in a recent report.
Barclays Capital is the investment banking arm of the UK's Barclays (NYSE: BCS).
No comments:
Post a Comment