Latin America should embrace currency depreciation

Latin American countries should not fear currency depreciation as their economies adjust to an environment of lower global liquidity and slower growth in many emerging markets, policymakers said. Many developing countries have been punished by investors amid expectations that the US Federal Reserve will soon start to ease back on the easy money it has been pumping into the global financial system since the crisis, money which helped fuel bumper capital flows into lesser-known markets.
But at meetings in Washington, the World Bank and the International Monetary Fund urged member countries to embrace the buffer offered by flexible exchange rates and not try too hard to resist a trend to weaker currencies. Latin America, which suffered from currency crises as recently as the 1990s, was better able to withstand exchange rate fluctuations than in the past, thanks to healthy international reserves, less dollar-denominated debt and independent central banks with a strong focus on inflation, officials said. "It's a very big change compared to 15 years ago," Hasan Tuluy, World Bank Regional Vice President for Latin America, said in an interview with Reuters.