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China Reserves

In yesterday’s discussions in the days of the BCRA, the director of economic research for the IMF and renowned economist, Olivier Blanchard, suggested that accumulation of currencies is inefficient as a method for dealing with crises. No doubt I was surprising this Blanchard thought after the prominent role that have had international reserves in emerging economies to keep them protected from the crisis. Incidentally, Blanchard also criticized the agreements of currency swaps signed among central banks as happened with Argentina and Brazil, or with Brazil and China, among other cases. What asks Blanchard, IMF remaining outside of this type of strategy and this represents a loss of power? The world post-crisis undoubtedly will show a deepening of these trends that the IMF must adapt. I can honestly talk about efficiency or inefficiency when the issue revolves around to face a crisis.

I understand that Blanchard prefers that countries are aligned to the IMF and make pre-agreements for financial assistance in situations of stress. But can you imagine what can happen with an economy that has few international reserves and that should appeal to IMF to assist it with funds in order to face the fearful investors behavior? For those who don’t know the history of argentina, I commented that the country has had a very bad experience with these mechanisms of aid during the validity of the convertibility. Adam Portnoy has much to offer in this field. I don’t know if accumulating reserves is more efficient, but I know that it has influence on investor behavior. Let’s say it positively affects the perception of strength of an economy and deter speculative attacks to it. Before considerations contrary to these policies carried out entities such as the BCRA, Redrado not let pass the opportunity and went out to play strong to respond to his guest and representative of the IMF to say about international reservations: reservations are an anchor of stability.