Transcript

Washington, D.C.
October 8, 2010

Participants:

Nicolás Eyzaguirre
Director, Western Hemisphere Department

David Robinson
Deputy Director, Western Hemisphere Department

Miguel Savastano, Gilbert Terrier and Rodrigo Valdéz
Senior Advisors, Western Hemisphere Department

Andreas Adriano
External Relations Officer, External Relations Department

(Part of this briefing was conducted in Spanish and transcribed from the English interpretation)

MR. ADRIANO: Good afternoon. My name is Andreas Adriano, and I am from the IMF Media Relations Department. Thank you for coming to this press briefing from the Western Hemisphere Department. We have interpretation in Spanish if you need, so you can ask questions in Spanish. I would like to give the floor to Mr. Nicolas Eyzaguirre, Director of the Western Hemisphere Department, for some opening remarks. Nicolas?

MR. EYZAGUIRRE: Well, good afternoon. Before taking your questions, I will make some remarks on how we see the participation of the countries of the Western Hemisphere, just a broad picture today, since we will be going more in-depth soon, with the launch of our--I hope well-known by now--Regional Economic Outlook publication. In brief, the main messages--the first one, overall, the economies of our Hemisphere have been moving in the directions that we expected. I say "directions" because the paths are quite divergent within our Region, and I would say also that the speed has been a bit different to the one that we anticipated six months ago.

In essence, we continue to see, as the second thing, a relatively cool recovery in the North, particularly in the U.S., but a much hotter recovery in the South, particularly in South America. Especially in South America, where growth recently has been the fastest, the immediate policy challenge is to make sure things don't get too hot, to watch out for excesses. I will start with the North, since the U.S. economy has implications for all of our Region. As expected, recovery in the U.S. is proceeding slowly, held back by weak balance sheets and delicacy of the U.S. financial crisis. There is no quick way out of that situation, so we expect only gradual recovery and that U.S. monetary policy should stay easy for a prolonged period. So we expect U.S. growth of about 2.6 percent this year and 2.3 in 2011. Canada's economy will do somewhat better than its neighbor, with about half-point stronger growth in both years.

Turning to Latin America and the Caribbean, we see that the relevant external environment for these economies has a mixed picture of positive and negative factors. On the negative or the down side, low growth in the advanced economies including the U.S. is a drag on growth elsewhere. This is more important for those with closer economic linkages to the U.S., particularly Mexico, countries of Central America and the Caribbean.

On the other hand, low growth, as I was telling you a moment ago, in advanced economies also means very low interest rates. This is a stimulative factor for the Latin America and Caribbean Region, especially for countries with the strongest fundamentals, the ones that appear most to foreign investors. We also see stronger growth in the emerging market countries of Asia, strong enough to keep world prices of commodities high. This affects Latin American economies in different ways, but clearly, it is another stimulative factor for the commodity exporters of South America.

We see this mixed global environment reflected in a diverse outlook for the Latin American and Caribbean economies. South America is in the lead, with Brazil and a number of other economies growing by more than 7 percent this year. In fact, for some countries, surging exports to Brazil have been another strong stimulative factor. We do expect growth to moderate next year, although I will come back to that topic in a moment.

Mexico's economy has exceeded expectations recently and will grow by about 5 percent for the year. We expect growth of about 4 percent next year--still, I would say, a relatively good performance considering the lack of dynamism coming from its Northern neighbor. In Central American economies for which external conditions are not so supportive, growth is averaging about 3 percent this year, but we expect about 3-3/4 for next year. In the Caribbean, recovery from the global recession is only just beginning for many of the smaller, most tourist-dependent economies. Most will grow by only about 2 percent next year. But the outlook is much better for the Dominican Republic, where growth will again exceed 5 percent this year, and in Haiti, where January's earthquake triggered a deep contraction, we expect to see a very strong rebound for 2011.

Coming back to South America, the issue now is to avoid having too much of a good thing. The strong recovery of domestic demand this year has been welcome, bringing economies back to their potential levels. But demand now needs to moderate. A continuation of rapid demand, expansion, could bring overheating, inflation, and widened current account deficits. The return of credit growth is also welcome, but care needs to be taken also to avoid financial excesses.

To wrap up, these challenges for our countries will not be simple or routine, since the global environment will be especially conducive to stimulating excesses of demand and credit. The timely removal of early macro policy stimulus will be essential. Early fiscal policy normalization will be especially useful, since it will all allow monetary policy to play a forward role, thereby avoiding attracting stronger capital inflows. Allowing exchange rate flexibility can also help avoid attracting more inflows. Careful financial policies are critical, too. In our upcoming Regional Economic Outlook publication, we look carefully at the use of macro-prudential regulatory policies to complement but never to substitute for traditional policies in the current context of easy external financing conditions. Thanks, and the floor is open for your questions.

QUESTION: Can you confirm to us whether you are going to meet Argentine Minister Amado Boudou? On another question, the emerging countries have requested more power and more measures for the advanced countries to reduce these flows or the currency war to contribute to ensuring that the imbalances are decreased. But there also needs to be more responsibility in the economic environment, and I don't know to what extent or what Latin America should do about this.

MR. EYZAGUIRRE: On your first question, we will be meeting with Minister Boudou and, as always, I'm sure it will be a very pleasant, very positive meeting. We haven't had any news about the Article IV consultation. It is an issue that we have not addressed. But in our talks with the Argentine authorities, including the representatives in the Southern Cone chair, is constant and fluid, and our discussion on economic development is as well. So, the relationship is ongoing, although there has been no consultation on an Article IV completion. Now, as we have explained, this is an obligation of the countries through the Articles of Agreement --it is an issue of membership--and these Articles of Agreement basically establish how countries have to meet this obligation.

As to your second question, yes, it is true, this is a multilateral body; however, it is not a supranational body, and we often forget that. The Fund only does what its members ask it to do. So, to have more voice and vote in the Fund’s Board, which is the collective body that represents the countries of the world here and gives guidance to the Fund, also implies taking on greater responsibilities in terms of helping to generate and develop the Fund's policies and any counsel or advice that the Fund may give different countries of the world on how to improve the situation addressing each and every one of our economies.

As to the current situation, obviously, one could always do more--that was implicit in my opening statement--but in general, what I would say is that Latin America has dealt well with the major systemic challenge which has been defined by the institution as two major rebalancing acts. In other words, we have replaced the stimulus from public demand which was put in place as an emergency measure to overcome the downturn after the Lehman crisis with more private-sector-oriented demand. And as I said in my opening statement, that is what is happening in most of the Latin America countries with very vibrant private sector demand. Perhaps what is missing now, since private demand has recovered, what we now need is to have the public sector demand become a bit more moderate; but that whole rebalancing act has now taken place.

The second rebalancing that the IMF has requested is that demand, not within countries of the world, but amongst all countries of the world, move from the countries that have solid external accounts to increase the internal demand, since those that have much more compromised internal situations cannot do it. So, in this regard, I would say that Latin America is perhaps a good example of cooperation in view of the fact that countries have seen a significant appreciation of their currencies in real terms, and exports from Latin America to the rest of the world have grown in a vibrant manner in 2010, and that has helped to rebalance the global trade scenario.

In sum, there is no doubt that greater power also requires greater obligation, but I think the present situation has demonstrated that Latin America has responded well to these challenges proposed by the IMF and by the world, and moved from deficit countries to surplus countries, and I think Latin America has met that expectation.

QUESTION: Mr. Eyzaguirre, in referring to what you said yesterday in your presentation at the Inter-American Development Bank when you used the analogy of what is going on in the South American countries in terms of the inflow of capital, you said that a lot of water is falling on a very small hole. My question therefore is: Is there any kind of projection on what could be the effect in our countries if these capital flows continue at the pace that they are flowing in these past few months, which has forced countries such as Brazil to impose additional measures in order to slow it down a bit, hold it back, and avoid other consequences such as inflation and high appreciation of its currency?

And secondly, in terms of Mexico, could you elaborate a bit more on what you said--you said that there was a review of the growth, an upward review of Mexico's growth for this year. However, the data within the country are not as encouraging. In August, the Government announced that Mexico is once again at the same job level that it had before the crisis, and during the crisis, something like 700,000 jobs were lost. And at the moment, not many jobs are being created in Mexico. So my question is to what extent is this inability of the Mexican Government to create the jobs that are needed affect our growth possibilities over the short term.

MR. EYZAGUIRRE: Well, on your first question on the great inflow of capital toward Latin America and specifically toward South America, as to whether that is a reason for concern or not, my answer would be yes, but it is a concern for the future, not for the present reality, in view of the fact that we haven't yet seen any imbalances of a considerable or of any concern occur. As I said a short while ago to your colleague, Latin America has done its job in helping rebalance the world economy by increasing its participation in the global arena, generating great demand for imports, but that has not meant that imports have grown above the level of exports, so much so that countries would begin to fall into a vulnerable area, because they would end up with deficit external accounts. We haven't yet reached that point; in other words, we are still on the right course, as any sailor would say, and the ship is not in danger of getting off-course.

However, to follow that same analogy, since the tide or the current is still quite strong, we do have to show some concern. If the winds are too strong, we have to pull down the sails a bit. And we have said very clearly that in 2009, and particularly in 2010, it would be perfectly understandable that both fiscal and monetary policies would be expansive so as to help the economy come out of the recession caused by the financial crisis that occurred right after Lehman Brothers; and then, beginning in 2012, that a stimulus is no longer necessary, and at that point, it could become a bit dangerous, because to keep the sails up when there is a big tailwind, and the rest of the economies are really pushing our economies, it may end up pushing us too far, too quickly.

So some of the dangers could be and should be dampened originally or initially through domestic policies. When there is an excess of external factors that make an economy grow very quickly, the first thing that needs to be done is to limit the internal factors that can be pushing in the same direction, and that is why, first and foremost, it is very important to make sure that those economies that are going at a fast pace start withdrawing the monetary fiscal stimulus.

Now, having said that, the question is can the countries in our region, by themselves and after withdrawing the stimulus, be able to ensure that the rate of growth of their economies is set at a sustainable level, or if those forces that are pushing them from outside, mainly the capital inflows, are still so big, of such a dimension, that we run the risk of overheating the economy even though the internal domestic policy has been normalized.

And the answer to that question, I would summarize in the words: It is possible. It is possible that we may need additional factors to mitigate the speed of our economies in addition to normalizing fiscal and monetary policy. That is why, as I said at the very outset when describing the regional economic outlook, we have called for macro-prudential measures. This is a series of additional instruments which to a certain extent have a slightly similarity to capital controls, but just like similarity, they are not capital controls--they are macro-prudential measures--and that could be necessary--that might be necessary--and we might want to consider it taking into account the reality of each country.

Now, in terms of Mexico, what I said is quite compatible with what you have asked. Mexico is going to grow at 5 percent this year. It is a good rate. But it is true that it dropped 6 percent last year, more than 6 percent, so it hasn't yet recovered the level of output that it had in 2008, nor has it recovered the level of jobs that it had at that time. We are hoping that in 2011, Mexico will grow at the rate of 4 percent which, added to this year's 5 percent, will put Mexico's output at higher than it had in 2008 and hopefully higher numbers of employment.

I must say that Mexico's rebound has been a satisfactory one if you compare it to the rebound being seen in most of the industrial countries. As you know, Mexico is very closely tied to the U.S. If you look at what is happening in the 2010-2011 growth compared to the slowdown in 2009, you will find many economies in the world that in 2010-2011 don't even reach, aren't able to compensate for, the slowdown in 2009; whereas in Mexico, 2010-2011 will exceed the drop in 2009, and it is due to--in spite of its strong trade relations with the Northern Hemisphere countries. So, in view of that, Mexico is doing the right thing.

QUESTION: Yesterday, the President of the Central Bank of Argentina said that Argentina will be providing some numbers to the G20; they will meet the ROSC (Report on Observance of Standards and Codes). However, Argentina has not yet shown any willingness to comply with Article 4, nor has it communicated that it will comply with FSAP (Financial Sector Assessment Program). So, how do you see this? Argentina is willing to provide the information to the G20. What would happen if the information on the ROSC, which is fairly similar in technical terms to the kind of information provided through an FSAP--would t hat be sufficient if Argentina is willing to comply with an FSAP but not the Article 4?

MR. EYZAGUIRRE: Well, let's separate out the mandates--let's tease out the mandates from the different institutions. The G20, as important as it is, is a group of countries that sets its own rules. The IMF, in view of the importance that these countries have on the world economy, has been cooperating on a continuous basis with the G20, providing them with technical assistance, so they are serving as their technical secretariat. However, the rules set by the G20 in terms of what its different member countries must submit, are the rules that apply only to the G20, and the IMF has nothing to say about that because it is not our job to express opinions on how other institutions govern themselves.

Now, if the G20 should decide to obtain information such as the ROSC--Argentina is a member of the G20. If it decides to submit that information, well, it has its perfect sovereign right to do so. But no doubt that we would see that as it is not within our power what the G20 or a country decides. As you said, the ROSC, since it is an instrument fairly similar to the FSAP, because it is related to it, would be the proper step to take in view of what has been happening in Argentina, so we would see it as a step in the right direction. Now, in the case of the Fund, the Articles of Agreement do not require that a country have an FSAP. If the G20 decides, as it decided, that every five years, its members must undergo an FSAP, well, that is prerogative of the G20; but according to the Articles of Agreement of the Fund, an FSAP is not mandatory, but it is suggested, like many other things.

QUESTION: Do you want to explain what the FSAP and the ROSC are? What is the difference between a ROSC and an FSAP?

MR. TERRIER: The FSAP is a full assessment of the financial system that some countries conduct. I think most of the countries have already conducted an FSAP, and there are periodically some FSAP updates. The FSAP contains a number of modules. One of these modules is the ROSC. So the ROSC is an assessment of how a country complies with certain statistical financial sector reporting, or GDP reporting data. So these are highly technical products, the Rocs. The FSAP is more a broad assessment of the financial sector. And as you know, the United States has just completed one recently; that is why perhaps David wanted to add something.

MR. ADRIANO: Just to explain, "FSAP" means "Financial Sector Assessment Program."

QUESTION: I just wanted to ask you if you think the pressures to revaluate currencies and appreciate currencies from emerging countries apply to Latin America at all, and what do you think of the measures that the Brazilian central bank and the Brazilian Government have been taking to keep the price of the real stable.

MR. EYZAGUIRRE: I missed one part of your question--

QUESTION: The first part is if you think that these pressures for emerging countries to revaluate their currencies and appreciate their currencies apply to Latin American countries at all; and the second part is what do you think of the measures that Brazil has been taking to keep the price of the real stable--if they can.

MR. EYZAGUIRRE: What we believe--and the data would support our assessment--is that, roughly speaking, Latin America has made its contribution to the global rebalancing because most countries have allowed the exchange rates to appreciate substantially, and you will see that on average, real exchange rates are at a more appreciated level than even compared to where they were before Lehman. So the currency values have not just reversed the depreciation that happened right after Lehman, but have more than reversed, and that is clearly reflected in the fact, as you may see, for instance, in Brazil, that imports are surging vibrantly. Therefore, I think the Region is preaching with its example in terms of what it would look like, a sort of cooperative solution worldwide for the benefit of every and all of its members.

QUESTION: Can I follow up on that? Can you be more specific?

MR. EYZAGUIRRE: Okay. As I was saying previously, the fact of the matter is that still, the level of activity remains very much subdued in advanced economies, and therefore, monetary policy is very, very expansionary in those economies; and also, capital does not find its way easily to some other parts of the world, so we may see that notwithstanding some improving fundamentals, like higher commodity prices, higher savings, for instance, in the United States, will probably call for somewhat more appreciated equilibrium exchange rates in Latin America. There is the risk that if the bulk of the excess liquidity goes to Latin America, the currencies could go too high. That is why I was saying that we treat this carefully in our Regional Economic Outlook with a section called "Macro-Prudential Regulations." I would say that the tax on financial inflows that Brazil has initially set at 2 percent and now has raised to 4 percent would be one possible direction of these macro-prudential regulations.

QUESTION: I just wanted to follow up on the points that you made. Regarding Brazil, since you just finished on that point, so you think that the actions to use reserves, for example, to at least reduce the volatility and reduce the rapid appreciation of the exchange rate is appropriate? Also, you mentioned that Latin America is an example of what a cooperative agreement might look like--but is it a cooperative agreement? They are really just following policies in their national interest. It isn't something that they have agreed with among other Latin American countries or even among other emerging market countries. They are doing it in their own national interest. So, although it is the right policy for the international economy, it is not really a cooperative agreement.

MR. EYZAGUIRRE: Well, when what is best for your nation happens to be the best policy for everyone else, it is more easy, in a way, and probably to some extent, that is what is happening in the sense that our countries have been benefited by a surge in domestic demand, improving employment conditions, the living standards of their people, and so on and so forth, and that has been possible to some extent also through the appreciation of their exchange rates. But they could have taken a different stance. They could have, for instance, intervened much more severely and leaned against the wind with greater strength to avoid any appreciation. And this is not what you have seen. What you have seen is that, just to name the bigger ones, Mexico and Brazil have allowed a quite significant degree of appreciation. The same can be said about Colombia or Chile or many, many countries. So it is in their best interest, but it is also completely coherent with the cooperative scheme worldwide. Whether it is appropriate or not to intervene on the exchange rate markets, the mantra would be to prevent excess volatility, yes; to change the direction no.

I would add another thing to the mantra that is quite important: It depends where. If your currency by all conventional measures is undervalued, defending it strongly is not good for your country, and it is not good for the world equilibrium. Notwithstanding the above, if you have allowed for a considerable appreciation, and all conventional measures point more to a strong rather than a weak currency, you should use everything that you have in your tool kit, starting, as I have said repeatedly, with an adequate policy mix, but if that won't suffice, and your currency is by all conventional measures--all intuitive measures--clearly on the strong side, we have no problem with some degree of intervention, but also, as I have been repeatedly saying, with introducing well-needed macro-prudential measures to avoid excesses.

QUESTION: I just want a clarification. At the beginning, you said one of the major challenges for the Region is that the recovery not be too overheated, too hot. Now you are saying that the priority in order to avoid that would be to pull back on the fiscal stimulus over the short and medium term; is that correct?

MR. EYZAGUIRRE: As I was saying, and my colleagues, the "heat map," let's say, is a bit diverse. There is more heat to the South, and it is cooler in the North. So what we say is that wherever private demand has recovered substantially, and the economy is perfectly able to keep going, led by just private demand, fiscal policy and monetary policy should move back to neutral gear. By that, we are not saying that you are going to sit on fiscal expenditure, that it is freezing fiscal expenditure. We are saying that the rate of growth of fiscal expenditure should be neutral, no more than GDP. That is what is happening currently--or, to be more accurate, no more than potential GDP growth.

Now there is a variety of situations. If your degree of fiscal stimuli during the crisis was high, and your level of public debt is on the high side, you may want for some time to do a bit of fiscal consolidation. That, again, wouldn't mean that fiscal outlays do not grow, but in this case would grow a little bit less than GDP so that the debt-to-GDP ratio declines somewhat. In some other countries, it would be appropriate just to grow as much as GDP. That is what we are saying by cooling off a little bit the stimuli in terms of public policy. The same would go for monetary policy.

QUESTION: I wanted to ask you about the World Economic Outlook, where the section on Argentina states that the IMF has certain doubts about the inflation and growth data in the country. So, specifically, my question is are you going to ask Minister Boudou about this when you meet with him?

MR. EYZAGUIRRE: What we have been saying for some time now in our footnotes is that in Argentina, there are discrepancies between the public and private estimates, both in terms of inflation and more recently in terms of the GDP. It is a fact that these discrepancies do exist, so that is part of the dialogue that we have with them as we do with other economic issues in Argentina, because it is important to have accurate information in order to have a more exact diagnosis of what the economic prospects are for Argentina.

QUESTION: Mexico is in a battle against drug trafficking that requires more and more money every day. In addition, the lack of safety is having an impact on foreign investment. To what extent do you think this could have an impact on your growth projections and your growth forecast for Mexico?

MR. EYZAGUIRRE: Well, there is no question that the violence linked to drug trafficking in Mexico is a source of concern for the very Mexican authorities themselves. They have told us this on many occasions, and they have made a significant effort to try to keep it from increasing, because they realize it can affect the investment climate. This is why the help of the public finances, where governor Carstens and Minister Cordero have focused, is a very necessary condition, although not enough, to ensure that the war against drug trafficking can succeed. But could those measures to control the money laundering or currency have an impact on--what did you say--the measures for what--

QUESTION: The Government of Mexico has implemented a series of measures to control currency exchange within the country and have stricter control of the origin of foreign currency. Do you think this is going to have an impact on investment or exports or imports?

MR. EYZAGUIRRE: In general, after the problems with terrorism that have occurred worldwide, all countries under GAFE have signed an agreement to avoid money laundering and financing of terrorism and any money related to the marketing and sale of illegal drugs. All countries are involved in this effort, and therefore, any effort at more transparency, more information, to ensure this does not occur is more an asset than a liability. As an international community, what we need to focus on is trying to get all countries to do this, not just have some ignore it and therefore attract investment on the basis of not doing this.

QUESTION: In each country, the revaluation situation is different. However, in the case of Colombia, what is the ceiling--the fact that the Banco de la Republica has begun to buy dollars--is that the limit, or what is the real limit in the problem of revaluation, and to what extent can a country like Colombia withstand or resist what is happening?

MR. SAVASTANO: Well, to put this in context, Colombia is one of the countries in the Region which, in 2010, has seen a stronger appreciation of the currency, the nominal currency. But to put it in a more general context, it is also one of the countries that had depreciated more so than others during the crisis, and it is a country in which the long-term currency prospects are quite favorable. In other words, the Colombian peso over the medium term is going to appreciate. That is the view we have here and the view shared by the authorities and many analysts in Colombia.

So it is just a question of how to manage that appreciation, how to soften the landing, so to speak, as the currency strengthens. And in that context, what the Colombian Government has done and what the central bank has done is to act in a very prudent manner in order to mitigate some very abrupt changes that occurred, but they are not going to change the direction in which the currency is appreciating. Your question is how far can a country withstand this, and I think it depends on the country. Since Colombia over the long term will have more revenue because of oil export and will be handling more than it has now over the medium term, the trend of the Colombian currency in, say, three to four years, will be to appreciate. So the economic policies are consistent with that appreciation.

QUESTION: What are the variables that the IMF has considered to ensure that Venezuela will continue in recession?

MR. TERRIER: Well, the fact is that in the first quarter of this year, Venezuela had a negative rate of growth, particularly for the first quarter. In the second quarter, it did a bit better--better than had actually been expected--from the figures we now have. So we are now preparing our projections keeping in mind all the information that we now have, and in an international context where, as you know, oil is the most important variable in all economies, especially in the export area. The problem we have had with Venezuela is that we haven't had an Article IV visit for five or six years now, so it is a bit difficult for us to obtain information, to follow on that information. But we are having some talks that will allow us to obtain some information.

QUESTION: Going back to Argentina, there doesn't seem to be much progress in the past six months, at least since the debt exchange. I would like to ask you what you expect in terms of progress in the coming year with Argentina.

MR. EYZAGUIRRE: What I would say is that--and I said clearly a moment ago--domestic demand is growing fast, especially in the South, given the traction of high commodity prices, but also in some cases given the traction of the high growth of domestic demand in Brazil. That is clearly the case of Argentina, because Argentina is closely linked to Brazil in commercial terms. So, what is going on in Argentina is that output is growing fast, way faster than we previously anticipated, aided by this situation, but also that public policy, fiscal policy and monetary policy, to our understanding is still in the stimulative side.

So it would be our advice that, as in other countries, the degree of impulse of public policy should be moderated in order to make the growth more sustainable. Also, as it is, I understand, the attempt of Minister Boudou to reengage with voluntary markets, financial markets, would also help Argentina to smooth potential pressures arising from this very dynamic domestic demand. So I would say that I see that as challenges for the management of the Argentinean economy.

MR. TERRIER: Was the question more on access to financial markets?

QUESTION: Yes--or if you expect any progress within a year on this.

MR. TERRIER: I think what we have seen in recent weeks and months is that a number of provinces have been able to access the international markets. There have also been a number of pronouncements by the Ministry of Finance, saying that they are waiting to have somewhat better conditions to go into the market. But for the time being, we don't have more information. We have to see the conjunction of the policies and the markets.

QUESTION: To follow up on a question asked by my colleague, Mr. Eyzaguirre, you referred to the concern of the Mexican authorities on security and safety. My question is what is the IMF's opinion on this issue. The lack of security that is right now affecting some regions in the northern part of the country where industrial production takes place--can that affect growth or growth prospects for all of Mexico, particularly for the next year?

MR. EYZAGUIRRE: To be honest, we are not experts in determining how much violence can affect the investment climate. All we do is echoing the studies that exist on that and the concern that has been expressed to us by the Mexican authorities themselves.

MR. ROBINSON: Well, I have very little to add to the points that have already been made by Nicolas. I think we are all aware that the situation with organized crime in Mexico is a very serious issue. It is a priority for the Government. The Government is working very hard to address it. As Nicolas said, we are not the experts on precisely how that should be done, but a solution to the issue which the authorities are working on is obviously very important not only from a social perspective, it will also help strengthen, I think, along with many other things, Mexico's medium-term growth prospects.

QUESTION: It's a follow-up. In view of the international situation and the slow way in which the global economy is recovering and the possibility that no economist has discarded the possibility of a double dip, what impact could this have on debt payment--what would be the benefits, what are the problems for a country such as Argentina, where that is what it is doing?

MR. EYZAGUIRRE: Well, first of all, let me clarify that the pace of the global economy is not a slow pace. The world is expected to grow at a rate of 4.8, so almost 5 percent. If you look at that historically, that's a good rate of growth. The problem is that it is very imbalanced. We have very fast growth in emerging economies and moderate growth in the industrialized economies. And that has created a lot of liquidity that is benefiting the emerging countries, which we have pointed out and that appears in the Regional Economic Outlook that, as we have said before, is not enough, because the emerging countries are already growing fast, and it may not be good that they be additionally stimulated by fiscal monetary policy.

However, in view of the great liquidity that is in the international markets, we are saying that, yes, it is the opportunity to do some good debt management, maybe linked to the terms of the debt, and possibly pay or obtain another loan at lower rates, and in this global perspective, the management of assets and liabilities should allow for the possibility of paying off loans with reserves if there is access to new sources of financing. It all depends, of course, on the cost of the loan and the size of the reserves. There is no one recipe for all, but it is something that should be looked at.

QUESTION: Let me ask one more question on Argentina. You said that that was a good step, a step in a good direction, but I didn't hear if that's enough. How far are we from it? And I also wanted to ask about two options that were mentioned for Argentina. One was the possibility of having a reserved Article IV. Yesterday in a seminar, I heard you say--it sounded like a complaint--that Brazil had not yet made its own public. So, is there a possibility of having it reserved, or is it going to be open? Secondly, at one point, you mentioned the possibility of having the Fund help Argentina in the area of statistics. Is that an open option, or has that been discarded? I know we talked about it with you some months ago.

MR. EYZAGUIRRE: To be specific, I said it was a step in a good direction if Argentina, according to its own prerogatives, agreed with the G20 countries to do a ROSC. But I did not make any comment on what your colleague has said about a swap of reserves for debt. I said that would have to be looked at on its own in view of the cost, the size of the debt, the reserves, et cetera. So, just to make sure there is no misunderstanding. Yesterday--now, of course, it is very important to keep in mind that everything has to be put in its proper context--in another seminar yesterday, given a proposal made by two academics that the Fund should pre-classify countries to determine if they are eligible for the flexible credit line, the FCL, I said that it would be very difficult to obtain a political consensus on pre-classifying, pre-qualifying, countries because countries don't like to be evaluated by others. And I gave the example of the fact that many countries don't want the Article IV consultation to be made public or published.

It is true that Article IV could be on a confidential basis, bilateral communication between countries' authorities and the IMF, and there is no need to make it public. It is not part of the agreement of the IMF's Board that Article IV information should be made public on a mandatory basis.

QUESTION: Just referring back to the Financial Sector Assessment Program, have you also done that in Canada as part of the Western Hemisphere? Also, are you doing additional assessments now of the systemically important financial institutions in countries which have these, including in Latin America?

MR. EYZAGUIRRE: I will have to ask my colleagues. We already did the FSAP for the United States, as you know. So, what about Canada, Rodrigo?

MR. VALDES: Canada is part of the 25 countries that were agreed by the Board that had to have an evaluation at least every five years; so it will come at some point, but I am not aware that it is coming in the next two years or--I can double-check if it is scheduled for you afterward.

QUESTION: But is this part of the reform of the surveillance measures of the IMF that you are going to do a sort of additional financial assessment as they apply to the systemically important institutions?

MR. VALDES: Yes. The Board agreed a few days ago, actually to have FSAPs that are not obligatory as an extra surveillance process, but within the Article IV--the FSAP will be part of that--the list of countries is the 25 most systemic countries; those include the biggest countries but also those that have big financial systems. And the list of countries for the very short run, I don't have it with me, but I think it does include Canada.

QUESTION: Is Brazil included in that list?

MR. ADRIANO: Yes, it is. Before we wrap up, I would like to make just a little piece of advertisement. We are launching the Regional Economic Outlook of Fall 2010 in Bogotá, Colombia on October 19, and in subsequent days in Kingston, Jamaica and Santo Domingo, Dominican Republic. You will be told about it. Yes, it will be on the website. Thank you very much for coming, and thanks to Miguel Savastano, Rodrigo Valdes, Gilbert Terrier, Senior Advisors, and David Robison, Deputy Director, and Nicolás Eyzaguirre, Director of the Western Hemisphere Department.