CALGARY: Latin American nations should allow their currencies to strengthen, to help cool their overheating economies, the International Monetary Fund chief said.
"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.
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