LatinFinance - Special Edition - August 2013 - 63

2
THE
FUTURE
OF LATIN
FINANCE

The next global shock may be coming. But Latin America is better placed
than ever to withstand it, says Mexico’s central bank governor Agustín
Carstens. By Taimur Ahmad

Agustín Carstens
Strength in numbers

hen running for the top job at the imf in 2011, mexico’s central bank governor agustín
carstens campaigned as “the emerging markets candidate”.
a former deputy managing director of the Washington-based multilateral, carstens was always the underdog to french finance minister christine lagarde, who ended up getting the job of managing director.
But as a self-styled champion of the developing world, carstens sought to hammer home the point that the
global emerging markets he proposed to represent were no longer the crisis-prone basket cases of decades
past; moreover, that any institution of global economic governance must give credence to the collective voice
of the developing world. on the campaign trail he argued passionately that the emerging markets, having
been through so many years of financial turmoil, were better equipped than ever to face the vicissitudes of
the global economy – and also to chart a way through them.

Previously at the Bank of mexico, carstens himself gained firsthand experience of dealing with financial crises, including mexico’s
debt problems in the 1980s and the peso crash in 1994. emerging
markets, he said, had learned the hard way – and they have come out
the better for it.
nothing bears this out like the 2008 global financial crisis itself,
carstens says, where the emerging markets – and latin america in
particular – bounced back with unprecedented vigor.
Storm clouds are again gathering over the region, as growth slows
and financial volatility rises. But in an interview with LatinFinance,
carstens explains why he thinks the emerging markets of latin
america are in strong position to withstand the next global shock.
LF: Latin america proved especially resilient during the
2008/2009 global financial crisis. What accounted for that
strength relative to past episodes?
aC: latin america was a crisis-prone region and that pretty much
lasted until the early 1990s. this weakness that latin america
showed for a couple of decades was a manifestation of poor macroeconomic management and even poor institutional development, in
the way policy was designed and implemented.
latin america reacted to much better policy management after
the 1990s and this reflects two things: one, the general recognition,
not only among technicians but also among politicians and society in
general, that to have disorderly macroeconomic policymaking was
not good for the country and was bad for society in general.

that allowed some steps to be undertaken and structural reforms
to be implemented. among them: to have a far more professional
fiscal process; to have, in some cases, strict rules on fiscal policy; to
have enhanced regulations, reform of financial markets; and, in for
most countries, some sooner than others, to adopt the autonomy of
the central bank.
So as a reaction to the economic problems that permeated all the
way through society, there was support, political support, to establish arrangements to facilitate good policy-making.
many latin american countries during the first years of this
century have benefitted a lot from the openness of china. china has
participated more in international markets and has become a very
important player in some commodities.
Given that latin america is commodity-rich that has benefitted
the region a lot.
latin america experienced a very important terms-of-trade shock
over the last decade. obviously it has benefitted some countries
more than others. mexico in general was one with fewer benefits of
this. But for the region as a whole, this was a very positive development.
You mention the more sophisticated macro-policy response.
But to what extent were measures by G7 central banks, including
Fed swap lines for systemically important economies, responsible for that apparent resilience?

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