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Among emerging markets, Latin America is the most financially open region in the world: there are few restrictions on international capital flows and in most countries foreign banks dominate the banking system. While countries have benefitted from capital inflows, especially foreign direct investment to finance growth-enhancing projects, the region's financial systems are also very vulnerable to unexpected large reversals of capital flows. In the context of the current deep financial crisis affecting industrial countries and a number of developing countries, dealing with the following issues is central for the stability of Latin American financial markets:
• What are the best policy options for Latin American countries to maintain stability gains achieved in their local financial systems?
• Is there a role for capital controls under current circumstances?
• How might the new industrial country proposals for increasing regulation and government intervention in financial markets affect the stability of financial systems in the region?
• What is the role of the IMF to support financial stability in Latin America?
Participants from the The Latin American Shadow Financial Regulatory Committee (LASFRC) included: Liliana Rojas-Suarez, President, LASFRC; Senior Fellow, Center for Global Development Guillermo Calvo, Former Chief Economist, Inter-American Development Bank Alberto Carrasquilla, Former Minister of Finance, Colombia Pedro Carvalho de Mello, Former Commissioner of Comissão de Valores Mobiliários, Brazil Roque Fernandez, Former Minister of Finance, Argentina Pablo Guidotti, Former Vice-Minister of Finance, Argentina Ernesto Talvi, Former Chief Economist, Central Bank of Uruguay