"A range of policies could be used to prevent overheating and dampen the credit cycle, including upward exchange rate flexibility, a more appropriate mix of monetary and fiscal policies, and adequate financial regulations," IMF managing director Dominique Strauss-Kahn told finance ministers at the Inter-American Development Bank annual meeting in this Canadian plains city.

"In some cases, capital controls might also be useful. But they shouldnot substitute for fundamental policy adjustments," said Strauss-Kahn, who earlier in the month paid visits to Brazil, Panama and Uruguay.

Brazil, the region's industrial and natural-resources economic power house, is among countries that have sought to use regulatory measures to curb speculative capital flows in its markets.

"Latin America faces two principal economic challenges: to increase the sustainable rate of economic growth and to reduce the volatility of growth," the IMF chief added.