Panel: Financial system is Latin America's biggest asset in facing crisis

Prudent regulations implemented following 25 financial crises over the last 30 years have made Latin America's financial system one of the region's biggest assets in facing the current economic slump, a panel of experts told an audience in Medellín, Colombia. While the current global crisis is more severe than ones that were more regional - such as in the 1980s - Latin America is today better prepared to face turmoil in large part thanks to the accumulated reserves stemming from higher commodity prices, Andean Development Corporation ( CAF) chairman Enrique Garcìa said. However, the region is being impacted by the decline in prices for raw materials, lower exports and the drop in remittances sent from Europe and the US, UN Economic Commission for Latin America and the Caribbean ( Eclac) executive secretary Alicia Bárcena said. Eclac is predicting the region's economy will shrink by 0.3% this year. Today, the region's biggest danger lies not in the risk of default by a sovereign but in the private sector's exposure to the crisis and its strong refinancing needs, Bárcena said. Given the scenario, Latin America's financial sector is one of the region's main strengths in tackling the crisis, said another panelist, Colombia's finance minister Oscar Iván Zuluaga. According to Argentina's central bank president Martín Redrado, the region's financial sector made pertinent structural changes over the last couple of years such as creating mechanisms to prevent foreign and local currency mismatches, lowering banks' exposure to the private sector as well as tightening capital requirements and making the necessary provisions to withstand an expected increase in past-due loans given the economic downturn. The experts spoke at a breakfast sponsored by Spain's BBVA (NYSE: BBV), CAF and LatinFinance magazine held during the IDB's 50th annual meeting in Medellín this week.