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School of Business Professors Lead Latin America Monetary Policy Discussion at World Strategic Forum

April 17, 2015
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Sandro Andrade (left), associate professor of finance, moderated the panel session on Latin American monetary policy.

While strong fiscal policies and free trade agreements are positive factors for Latin America's economies, lower commodity prices, corruption scandals and lack of transparency are major concerns for international investors, according to four experts from the public and private sectors. The experts, including the governors of two Latin America world banks, shared their insight April 13 during the World Strategic Forum, for which the School of Business was a sponsor.

Anuj Mehrotra, the School’s vice dean of faculty affairs and graduate business programs opened the discussion on "Fine-Tuning Monetary Policy in the Americas,” while Sandro Andrade, associate professor of finance at the School, moderated the panel session.

"For many years, the University of Miami has enjoyed a special relationship with Latin America, which has become an increasingly important contributor to the global economy," said Mehrotra. "We are striving to develop the region's business leaders and foster economic growth in an evolving global climate."

Andrade noted that Latin America's major economies have enjoyed strong growth in recent years, but now face some significant headwinds, including a declining demand for commodities due to a slowdown in China's economy.

"This is a very complex international environment," said Nicholas P. Sargen, chief economist and senior investment advisor, Western & Southern Financial Group, and one of the panelists. "Last year, oil prices plummeted, the dollar was up, interest rates in Europe fell and everyone wonders when the Federal Reserve will raise U.S. rates." In Latin America, those trends have a negative impact on oil exporters such as Venezuela, but benefit oil importers, Sargen added.

Panelist Frank L. Holder, chairman, Latin America, FTI Consulting, said corruption is a "terrible problem" in Latin America, citing Brazil's Petrobras-related financial scandal. "A lot of infrastructure projects that Brazil desperately needs have come to a screeching halt, because foreign investors have turned off the flow of funds," he said. "On the positive side, politicians and business executives are being arrested, and there will be fewer shadows for corrupt officials to hide in the future."

Carlos G. Fernández Valdovinos, governor, Central Bank of Paraguay, emphasized the diversity within Latin America, and noted that the economies of Argentina and Brazil are slowing, while other countries continue to grow. "From the perspective of central monetary policies, one size does not fit all," he said. "Around the world, some central banks are lowering rates to stimulate their economies, while others are considering different actions."

Julio Velarde, governor, Central Bank of Peru, said sound monetary policies have kept rates low and inflation under control in his country. "We have also reduced the holdings of foreign investors who had too great an appetite for emerging market currencies," he said. "The stronger U.S. dollar is a concern for us, but overall, I don't see any dramatic changes in the coming year."

Reflecting on U.S. monetary policy options, Sargen said the stronger dollar may delay how quickly the Federal Reserve raises interest rates. "I know there is a lot of concern in Latin American," he said. "But I think those nations can relax about the Fed. It's not going to go crazy."

The conference is organized annually by the International Economic Forum of the Americas.

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