Randall Woods – Bloomberg Businessweek, 12/10/2012
International Monetary Fund Managing Director Christine Lagarde will likely outline the lender’s reversal of its decades-old opposition to capital controls on a five-day tour of Latin American this week, even as Brazil says the new position doesn’t go far enough.
In a Dec. 3 report, the IMF said targeted and temporary controls can be effective in preventing asset bubbles and currency rallies. Policy makers in Brazil, the largest economy in the region and the most aggressive in erecting such barriers, said the fund still shows a bias against controls, places too much emphasis on the benefits of capital flows and doesn’t hold rich nations accountable for fueling sudden liquidity surges.
Still, the IMF’s shift can give cover to countries that might consider enacting such controls, said Claudio Loser, a former Western Hemisphere director at the Washington-based fund.