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Latin America may be quite vulnerable to events in Europe. Beyond the risk that a deep crisis in Europe may result in double dip recession in advanced economies with deleterious global implications, Latin America's trade and financial channels with Europe are large and growing. On the other hand, as in the 1970s, capital flight from advanced economies (especially Europe) could mean more capital flowing into Latin America, offering at least a temporary relief from real sector shocks. The Latin-American Shadow Financial Regulatory Committee (CLAAF) met to address the following issues:
Under what international scenarios will economic and financial stability in Latin America be compromised?
Could financial systems in the region withstand a crisis in Spain's banking system?
Is the recovery in the region sustainable or just the result of temporary capital inflows?
How should the region's policymakers respond to current vulnerabilities? Is now the time to consider capital controls?
In light of the recent international experience, should the role of central banks in the region be revised, and should financial regulation be reformed?