Transcript of a Press conferenceWith Nicolas Eyzaguirre, Director; David Robinson, Deputy Director; Miguel Savastano, Gilbert Terrier, and Rodrigo Valdes, Senior Advisors, in the Western Hemisphere Department; and Andreas Adriano, Media Relations Officer, in the External Relations Department
Saturday, April 24, 2010
|Webcast of the press briefing|
MR. EYZAGUIRRE: Thank you very much. It is a pleasure to have you all here today. I will make some brief remarks about the global developments and the regional trends and just to sort of whet your appetite of what is going to be a more comprehensive coverage when the Regional Economic Outlook is posted on the website. The REO will be officially launched on May 4 in Uruguay, and this event will be followed by presentations in El Salvador and other countries.
The global context—I am sure you have heard the Managing Director’s and Messrs. Viñals and Blanchard's points in their press conferences and, although, the world economy is regaining health, there are still some fragilities in terms of the growth in some advanced economies. That contrasts sharply with a robust expansion in many emerging economies.
On top of the weakness of growth in advanced economies, still growth is very much predicated on extraordinary public policy support, and concerns about fiscal sustainability are clouding the horizon.
In the United States in particular which, as you know, is within this Western Hemisphere Department of the Fund, the drag from the global crisis will persist for some time, unfortunately. Unhealed financial systems and weak household balance sheets, coupled with still-high unemployment, continue to hold back private sector demand.
But the current global setting has favored enormously the financial conditions and the export prices of many emerging economies. Therefore, we expect that emerging economies will be very dynamic in the foreseeable future.
In Latin America and the Caribbean, as in the world, the recovery is a multispeed recovery, because we have different structural features in different parts of the continent. But overall, last year the regional economy contracted by 1.8 percent and this year we are forecasting that real GDP will expand by about 4 percent with, I would say, some upward risks.
Before going further, just let me tell you that there is no room for complacency. In the region—I am talking about a group of the larger Latin American economies—unemployment went up 2 percentage points. However, in the United States, for instance, it went up 4.5 percentage points. So the social costs in the Latin American region have been much more muted than in advanced economies which is, of course, something very valuable.
In the regional picture, countries with strong policy frameworks that are very well-connected to financial markets and are also net commodity exporters will be the ones growing most. On the other extreme, I would say that some smaller economies that are heavily dependent on tourism and remittances and are highly indebted are still facing some difficulties.
We see several policy challenges for the region in the near term. However, these challenges are very different across countries because, as I was explaining, the situation is very different in the different sub-regions within the Latin American and Caribbean region.
I would say that, in the cyclically more advanced economies, the immediate task is to begin to withdraw the policy stimulus and turn to a more neutral stance to avoid excessive growth and potential problems coming down the road. For other commodity exporting countries without that much access to international capital markets, supply-side policies to enhance their ability to grow and the normalization of relations with financial markets—an endeavor where the IMF could help—should probably be at the top of the agenda.
In some other countries—I am talking about Central America—with fairly good macroeconomic frameworks but which happen to be commodity importing countries that are at the same time suffering from a slowdown in remittances, growth will be positive but lower than in commodity exporting countries. These countries should perhaps save some potential countercyclical stimulus if downside risk scenarios were to materialize.
A main focus of our Regional Economic Outlook is precisely the need to implement an appropriate set of policies depending on what your structure and your juncture is. Special attention is devoted to reflecting on what is the appropriate set of policies to the countries that are going to be facing strong tailwinds from the global setting—and I am talking about those with more access to capital markets and that are commodity exporting countries.
The difficulty is that this favorable situation is likely to be sustained. It is not just an overnight kind of situation. It is likely to be sustained but it will not be permanent. So, it creates potentially significant risks—the ones that emanate whenever you consider very favorable situations that are sustained as permanent ones when they are not.
We look in depth at the challenges associated with these favorable external financial and export conditions by analyzing similar episodes in the past. Regrettably, these episodes did not end up very well. Almost all the crises that you can trace back since, I would say, the seventies, did have a period of very easy external financial conditions before the crisis. Experience shows that cheap and abundant external financing raises the risk of a boom-bust cycle.
What is our message in terms of the policies needed to take advantage of the good environment without falling into the risks? I would say first that the exchange rate was used by a number of countries when there was turmoil in the financial markets as the first line of defense to avoid a liquidity squeeze. However, we are now in the reverse situation, with too much liquidity and letting the exchange rate move in the other direction—that is, appreciating—should be part of the policy menu.
As always, fiscal discipline will be very important not to contribute further to the potential over-expansion of the economy. But, this time around, we are also thinking that, given the strength of the push factors coming from abroad, we will need a more diversified toolkit. This will involve exchange rate flexibility, fiscal discipline, and also, very significantly, macro prudential policies.
In some cases, exchange rate flexibility, good fiscal discipline, and a prudent set of macro prudential policies, maybe not be enough to avoid an over-expansion or a potential bubble. Thus, we do not bar or disapprove the potential contribution of carefully designed taxes on capital inflows that may have a role in complementing the policy toolkit—although we should always bear in mind that these kinds of more orthodox responses do have their limitations.
So, with those opening remarks, the floor is yours.
MR. ADRIANO: Thank you, Nicolas.
I just want to say two things--that the opening remarks will be distributed to you at the end of the press conference and, please wait for the microphone and identify yourself before your question.
QUESTION: This is a question for Mr. Robinson, since I know he is the expert on Mexico. My question is going to be a little bit the same that I did a couple of days ago. Basically, it is that I wonder if you can explain what is the reason that the Fund says that the slow growth in Mexico was due to the slow growth in the U.S. Next year, the growth in the U.S. is going to be lower than this year, but the growth in Mexico is going to be a little bit higher. Also, growth for this year was revised, I think, one point up from January by the Fund. So, could you explain something that seems to be contradictory?
MR. ROBINSON: Sure. Just for those who don't know our forecast on Mexico, let me just say that, yes, we have revised the forecast for Mexico up, and we are now projecting growth, I think, of around 41/4 percent in 2010 and 4.5 percent in 2011. Now, how is growth in Mexico related to growth in the U.S.? Well, it is certainly true that there has been a very close relationship in the past and, obviously, what happens in the U.S. matters very much for what happens in Mexico.
That being said, it is not the only thing that matters for growth in Mexico. I think we also have to take into account the fact that Mexico was hit by other shocks last year, including the H1N1 virus, and Mexico is coming out of this crisis with what we see as a very large output gap. That means that the level of its output is quite a lot lower than the level it could potentially produce and, over time, we expect that gap to be closed.
So, our forecasts for this year and next year try to take into account the combination of these facts. One is what is happening in the United States, but another one is what is happening in terms of the relatively large output gap in Mexico and the fact that it will close; and, when we put these things together, we get a path of output projections which is along the lines that you see.
MR. EYZAGUIRRE: If I may add, the correlation between what happens in Mexico and the United States is very high in the short term but, as time passes, both countries may have additional sources of growth that are not that correlated. And, in the case of Mexico, there is a larger output gap than in the United States. Thus, going toward 2011, the possibility of boosting domestic demand and using more the domestic market as a source of growth is something that is possible. That explains why, even if we predict that the growth rate in the U.S. is going to decrease somewhat in 2011, in Mexico it is not to decline.
QUESTION: I just wanted to home in on the statement regarding the small countries that are dependent on tourism and remittances, like Antigua and Barbuda, Jamaica, and so on. Could you comment a bit more about the outlook for those countries and also what kinds of recommendations are being made to turn it around?
MR. EYZAGUIRRE: Okay. I'll ask Gilbert and Rodrigo to take that question.
MR. TERRIER: What we have seen so far is that countries have been affected by the slowdown in economic activity in the U.S., Canada, and Europe, and this impact varies a lot from country to country. Some markets are more dependent on the U.S. or Canada, and others more on Europe. So there is a contrasted picture but, by and large, most countries have been negatively affected.
Some of the most recent data that we see do show some improvement. So, we are seeing a lagged effect of the crisis on the Caribbean, but also with some recent data which we find encouraging. We have to see how if this is confirmed in the period ahead.
MR. VALDES: I just want to add that the Caribbean countries, the smaller countries in the Hemisphere, are still suffering from the shock that they have had from tourism, basically. With unemployment and the labor markets in general not recovering very fast going forward, our assessment is that the recovery in these countries will be very slow, too—for example, in a few countries, we will have still negative growth, although by very little.
What to do there? Well, these countries, some of them in particular, have very high debt levels and, therefore, the space for policies is very constrained. What we tell them is that the focus of the effort has to be for the most vulnerable, and probably some projects have to be postponed for some time.
QUESTION: We know that you have been meeting with our Minister of Economy, Amado Boudou of Argentina. So I was wondering if you can tell us a little bit if there is any progress on the possibility of an Article IV. Yesterday or the day before, IMF First Deputy Managing Director John Lipsky told us that there were still some technical issues. I would like to know if this is concerning the statistics and if the IMF could provide any technical assistance in that regard.
MR. EYZAGUIRRE: Yes, we have been talking with Minister Boudou—it is always a pleasure to talk to him—and it is always good to be able to talk to the top economic authority and to see how things are going down there.
In fact, we have been talking about the possibility of a TA (Technical Assistance) mission, predominantly because INDEC has the intention to widen the coverage of the CPI from Buenos Aires to the national level. So, we have been talking about that for some time, and there has been quite encouraging progress on that point. Did you also ask about the Article IV?
QUESTION: Yes, whether there was any progress, because Mr. Lipsky told us that there was this technical problem.
MR. EYZAGUIRRE: Right. Well, you know, as many of the Ministers of the G20 have underscored—and that is also true for Fund surveillance—this crisis has dramatically showed that we live in just one world, and that the level of interdependence has been raised to unimaginable levels. Actually, if you look at the output levels in the last quarter of 2008, we have never seen in history such a correlation in the fall-down of every, or almost every country—in China also, the growth rates decelerated very sharply, even though they did not go into negative territory.
So that shows you in a nutshell that we all depend on each other. Therefore, in the G20 but also in the Fund, as I have repeated many times in these press conferences, the dialogue between countries is very important for every country. For countries to fine-tune what they have to do in their own domain, they need to have full knowledge of what the others are doing and what their prospective developments.
That is why most members favor an open dialogue of member countries with the Fund, especially for G20 countries, because the G20 countries are the ones that have a more systemic role. Thus, not having full information about policies and developments in a country that belongs to the group of systemic ones impairs to some extent the ability of the others to design their policies in the best possible way.
So it would be very good for Argentina and for the world community to reestablish the Article IV consultations. Minister Boudou was open to that. He said, I understand, that there is no rush for that, but he has not denied that avenue as a possible one.
QUESTION: Regarding this interdependence that you were talking about, I wonder if you could tell us what you think the potential impact of the debt crisis in Greece could be and also the perceived increased risk of other countries as shown in the bond spreads.
MR. EYZAGUIRRE: That is a tough question, because there are a number of linkages or potential linkages. The more direct ones are that whenever the spreads in a given country rise, which has been the case in Greece, you could potentially confront an increase in spreads of other countries. That is happening, as you know perfectly well, in some other countries of Southern Europe, predominantly Portugal, Italy, and Spain.
That has not been observed in the Latin America. There was some reaction at the beginning, but spreads have come down to very low levels. So, up to now, there is a decoupling of market access of Latin American countries from what is going on in the south of Europe. Of course, if the situation were to get further complicated, and sovereign spreads in other countries of Europe were to rise, that would be another scenario. But we believe that, first, the level of trade between our countries and that part of the world is not very significant and, second, that the financial inter-linkages are quite limited as well.
As you know, the presence of Spanish banks in Latin America is very important. I should say that the holdings of sovereign bonds of Greece, for instance, or some other countries in Southern Europe in Latin American banks are negligible, so you don't have that kind of contagion in the first place. But you could think what if sovereign spreads in the south of Europe were to go up, that would put strains on banks that have a large presence in Latin America.
You can never say "never"—but Spanish banks in Latin America are very well-managed. Generally, they have their own capital base in Latin America, they finance themselves with domestic deposits in Latin America, and are very profitable. So, the possibility of Spanish banks having some funding problems is not very likely because they are very solid, and that means that some credit constraint to Latin America is really a bit out of what we can see for the time being.
QUESTION: Thank you. I am Sylvia Pisani with La Nación also in Argentina. Please, you talked about the timing for a visit in terms of the Article IV. I would like to know if it is necessary to have a visit like that before any agreement between Argentina and the Paris Club, or if it is not necessary. What is the position of the IMF on that? Also, do you have any comment or does the IMF have any position about paying the debt with the reserves of the central bank?
MR. EYZAGUIRRE: Regarding the first question, you should ask that question to the Paris Club, not to us. It is up to them to put whatever conditions they see fit. It is not our conditions. It is the Paris Club conditions. The second question was—
QUESTION: About paying the debt with the reserves of the central bank.
MR. EYZAGUIRRE: Well, each country decides on its own sovereignty how it is going to deal with debt management, so we don't have an opinion on that.
QUESTION: The forecast for Venezuela's picture is very bad, according to your report, despite the commercial exchange with China, not limited only to the oil supply, according to the Venezuelan Government. So, I would like to know what the recommendations for Venezuela to improve its situation are. The other side of the question is what is the willingness of Venezuela to accomplish this recommendation, considering that some time ago Venezuela announced that it was going to leave the Bank. Do you have any update on that? Thank you.
MR. EYZAGUIRRE: To leave the World Bank?
QUESTION: The World Bank; the international financial system.
MR. EYZAGUIRRE: Oh—the Fund.
QUESTION: The Fund, yes.
MR. EYZAGUIRRE: Well, the situation of Venezuela is quite different from the situation in other countries. Venezuela has a current account surplus and, after the depreciation of the currency, it has a fiscal surplus as well. So, from the point of view of the traditional constraints to demand, the fiscal situation, the external current account situation, that does not seem to be the case for Venezuela.
So, probably our lukewarm projections on output going forward are more predicated on the basis of the expansion of potential output. Investment has been quite subdued. There are a number of problems in some sectors that are impairing productive capacity, so the main issues to be tackled are related to precisely that—how to improve the productive capacity—rather than the more traditional macro balance kinds of discussions. Do you want to say something about this?
MR. TERRIER: Just to add that obviously, last year and this, output has been negatively affected by drought and its impact on electricity production. Our negative GDP projection for this year also reflects some negative developments in the oil sector, and we project a very small GDP increase in 2011.
QUESTION: Excuse me. What about the second part of my question regarding the relationship between Venezuela and the International Monetary Fund or the World Bank, considering that Venezuela announced some time ago that it was going to leave the international financial system?
MR. EYZAGUIRRE: Well, message is the same as the one that I was conveying before in my general remarks about the interdependence of the different countries in today's world economy. Countries need to know a lot about what other countries are doing, and each of them needs to know what each specific country is doing to coordinate policies appropriately.
So, it is good for Venezuela and for the rest of the world that Venezuelan policies are fully factored into the policies of the other countries, and the other countries' policies are fully factored into Venezuelan policies, independent of what their particular decisions on what to do are. That is what these fora, like the World Bank, and especially the International Monetary Fund, are all about—the interchange of experience and the ability to take your policy decisions with full information.
Now, of course, if countries do have financing problems and come to us to ask for financing, we will tailor some policy recommendations to some policy rules that we encourage. But from the surveillance point of view, we may have an opinion but the more important thing is to have on board full knowledge about what countries are doing.
QUESTION: But just to be clear, is Venezuela providing this information to you?
MR. EYZAGUIRRE: As I was saying, Venezuela does not have regular Article IV consultations, so we don't have full information about their policies.
QUESTION: When you talk about taxes on capital inflows how these taxes come in for a country like Mexico?
MR. EYZAGUIRRE: We do not have a universal recipe. In my introductory remarks, I was saying how the situation of countries in the Region differs. Some are commodity exporters; some are commodity importers; some are very indebted; some are not indebted at all; some are closely linked to the U.S. economy; some are not very closely linked to the U.S. economy. So, it is not possible and not even convenient, to have a one-size-fits-all kind of recipe.
With respect to the countries that are highly rated by the international financial markets, we need to recognize that we are at a time when there is abundant global liquidity and tremendous search for yield. Some of these countries, as I was saying, have good prospects for growth and sustainable macroeconomic policies. Therefore, it is no surprise that they attract quite abundant capital flows.
What we say is that, if that is the case, they should start by using the exchange rate as a mitigating factor and they should try to avoid by all means pro-cyclical fiscal policies. With respect to Mexico, they have floated the exchange rate and they are not conducting pro-cyclical fiscal policies. This is all in favor of Mexico.
Then, we have the whole area of prudential policies, and that is very much in the making. The idea would be basically to avoid that the availability of cheap and abundant external financing gets into the domestic economy in the form of a credit boom.
So, our recommendation is that the authorities should try to work with their financial system in terms of guaranteeing its stability, avoiding the many risks that range from not having enough capital for potential problems down the road; managing adequately the sources of funding to minimize its volatility; managing the risks on the assets side to avoid the problems that arose in the United States with the sub-prime, with substantial and abrupt losses. And I think Mexico has been doing very well on all those fronts, but we are in a new global landscape, so maybe we should all think more about it.
If, on top of all the above, a country feels that its currency is getting strong appreciating pressures that are going well, well beyond—and I insist, well, well beyond—what could be considered as equilibrium levels, it may want to begin to think about taxes on inflows. Having said that and having myself lived through this as a former director of the central bank of my country and, then, minister of finance, the more integrated financial markets—as is the case of Chile, my own country—do have much more difficulty to design taxes that do not present loopholes, because the sources of funding are very diverse. It is therefore extremely complicated to tackle them all without leaving some loopholes that can be taken advantage of by financial flows.
QUESTION: I apologize. I came in a little late, so I apologize if you mentioned this in your opening remarks, but it deals with capital flows as well. I noticed in the regional section in the World Economic Outlook a line in there that said that, in some countries, there is an argument to be made that you could delay interest rate hikes to a point that would normally be the case given the cycle, precisely because of this capital flows concern, that if you hiked rates, presumably, you would actually attract more inflows. That struck me as being a bit of a reversal of the traditional Fund stance to be suggesting that rates could be held back in the cycle. Can you speak to that a little bit and explain in what cases it would be possible and whether I am right in suggesting it is a reversal?
MR. EYZAGUIRRE: Maybe we should provide some context to that. As I was saying, we believe that the first line of defense is the exchange rate. Why is that? Because if you begin to intervene heavily in the market, trying to avoid an appreciation of the exchange rate at an early stage, the market is going to generally believe that this is a one-sided bet, because somehow, the exchange rate is moving to a more appreciated level. So, the best way to attract huge capital inflows is to try to intervene in the exchange rate at a very early stage. So the first line of defense has to be to accept a more appreciated currency.
Then—this is not in sequence, but sort of in order of importance—you should rein in public finances. If you are having pro-cyclical fiscal policies, of course, that will lead to higher domestic interest rates than would be the case with a more neutral fiscal stance. So, we clearly do not favor containing domestic demand through hiking interest rates, because that is going to make the appreciation problem or the capital inflows problem worse.
As I was just saying, if with neutral fiscal policies and a substantial degree of appreciation capital keeps flowing in, you have to look at prudential regulations, and ascertain that banks are not taking open positions (being too long in dollars; entering into
currency mismatches; or developing maturity mismatches). Then you have to look at the sources of funding and assess whether those sources are too volatile, and you can act there.
So what we are trying to say is use those kinds of tools instead of doing outright monetary tightening, because that is not going to solve your problem. In highly integrated financial markets, when you raise domestic interest rates, what you change is the composition of credit but not the level of credit. Instead of domestic credit, you will get external credit. So it is a problem of how efficient the measure is, not whether or not you should do monetary tightening. Having said all that, if inflation is going up, monetary policy needs to be called for.
QUESTION [Interpreted from Spanish]: You mentioned that during the meeting with Minister Boudou, it was said that it was possible to have some technical assistance for the CPI. Is this a proposal from the IMF? Could you elaborate a little more when this will happen, and indicate if this is linked to the credibility crisis that the Statistical Institute INDEC is undergoing at the moment, which is reflected in the reports produced by the IMF? Also, this is linked to Article IV consultations, so does this issue also affect the taking of strategic decisions?
MR. EYZAGUIRRE: Shall I do it in Spanish, or shall I do it in English, and you get translation?
MR. ADRIANO: There is simultaneous translation, so you can answer in Spanish.
MR. EYZAGUIRRE [Interpreted from Spanish]: Well, what we have done in our publications is specify in footnotes that there are also some private estimates with regard to CPI and GDP growth that are different from the public figures. At the same time, the authorities have expressed interest in improving the quality of their statistics, so we are ready to have Technical Assistance missions. But, for the time being, we have concentrated on expanding the CPI from Buenos Aires to the rest of the country, and this is all we have discussed.
QUESTION: Mr. Nicolas, maybe you can tell us the following. As you know, Nicaragua also has a program with the Fund which is going to finish this year and is going to be reviewed, if I am not mistaken, in May next year. So, how do you see Nicaragua at the moment and, given the situation, do you believe that macroeconomic stability is maintained? But I have read that unemployment increased 2 percent last year in figures provided by the central bank. And, on the other hand, is the IMF concerned about the political crisis in our country, violence in the streets, etc..? Do you think this situation is going to affect the prospects of economic growth in Nicaragua?
MR. EYZAGUIRRE: Miguel should take that one.
MR. SAVASTANO: [Interpreted from Spanish]: As you well said, Nicaragua has a program with the IMF. All the goals have been achieved, so we can say we are on track, and as you said, there is a report that will be submitted to the Board in two weeks, on May 2. The staff, that is, we, will recommend the Board to conclude the review. We are stating that the commitments regarding economic measures are being met, that the commitments that the Nicaraguan authorities have taken on have been met—for example, with respect to the reduction in macroeconomic imbalances. This has led to a favorable situation. So, after this review there is only one more deadline for June and, by mid-year, in July or August, there will be another mission to assess the performance up until that time.
As to the second part of your question, the Fund cannot speculate on political issues. The Government's commitment was to take certain steps that we thought were necessary, and they agreed to reduce the vulnerabilities in the economy. The truth is that the Government has taken those steps, including with respect to the 2010 budget. This is a very stringent budget, which aims at adjusting expenditure to lower revenue levels. Nicaragua, as other countries in Central America, has been affected by the slowdown in growth in the U.S., and growth prospects will remain closely linked to those in the U.S. economy. So, it is very difficult for all countries and for all governments to overcome this situation, but the Nicaraguan Government, as many other governments in the area, is aware of this, and they have made downward adjustments to their expenditure levels.
QUESTION: I would like Mr. Eyzaguirre to talk a little bit more about Brazil. The IMF cited Brazil as being at the risk of overheating. I would like you to develop that a little bit. Also, the country put a tax on inflows at the end of last year, and it was heavily criticized. Now, what will be the options for Brazil—to raise taxes or put another tax on inflows, something like this? Thank you.
MR. EYZAGUIRRE: Let me start with the last part of your sentence. We were not among the ones that criticized Brazil for the tax. It happened that we were at a press conference when this tax was announced, and our first reaction was that it was perfectly legitimate to do that. So, we are not among the ones that have criticized Brazil at all, and I want to make that very clear.
Now, if you want to find one country where this particular situation of the world economy which I just described—with high liquidity and high commodity prices—applies to, it is Brazil. On top of high commodity prices, high liquidity, Brazil, as you know, has discovered oil, which it is going to put into production going forward. In that respect, the commodity shock, which is a positive shock, is particularly strong for Brazil. Domestic interest rates in Brazil are also among the highest within the highly integrated financial markets. Thus, the incentives in Brazil to take advantage of high levels of liquidity in international markets to finance higher levels of investment and consumption are particularly strong. On top of that, Brazil has very nice economic prospects for the future.
So Brazil, as probably few countries, will have to deal with the difficulties associated with success and with being considered a very promising economy going forward. That is probably why Brazil should consider all the instruments in the toolkit—all of them—starting with appreciation, followed by putting the fiscal policy in a neutral stance, continuing with prudential regulations which are very important. In that respect, you will remember that, prior to the crisis, some corporations in Brazil were heavily exposed. They were very short in dollars with highly leveraged positions, which pressured them very significantly when Lehman occurred.
So, one very important thing is that banks and the financial intermediaries that are lending to these corporations have full knowledge of the financial exposure of these corporations. That is part of what is called prudential regulations, because if you are lending to a corporation that is short in dollars and some shock arises, and the dollar skyrockets, you have a big credit risk in your assets side as a bank. Prudential policies have to incorporate all these aspects—and we have been talking about that with Brazil. Possibly, all of the above—exchange rate flexibility, fiscal policy in a neutral stance, good prudential policies—may not suffice. That is why we have been open to consider that, for a certain period of time, a tax on capital inflows may be warranted.
QUESTION: But do you think derivatives are still a risk?
MR. EYZAGUIRRE: Well, what is important is that this is all about risk management. Whoever wants to take a derivative may take a derivative. But you can be short or long in one currency or in certain maturities, given that you are taking derivatives or other instruments. So, what is paramount is that the financial system does not take a lot of risk on its own books in the derivatives market, for example, and is well aware of the vulnerabilities of its main creditors arising from their own exposures in the derivatives markets. That is what prudential regulations are all about.
MR. ADRIANO: Thank you very much, everybody.