It is therefore imperative that policymakers in the region consider the risks of a possible turnaround of this positive cycle, and carefully monitor fiscal spending. Expenditures should be established in coherence with the permanent levels of fiscal revenues so as to ensure that, once the current boom is over, public finances are not depleted, and public spending is shielded from commodity price fluctuations. Although the region’s economies have made significant progress regarding integration to the global markets, they are still vulnerable to international financial volatilities. A yellow light was turned on by the episodes of May-June of this year, when the market correction hit hard on some currency and stock exchanges of emerging economies. The main challenge for our region at this point is to take advantage of the opportunities provided by the actual international situation by making progress in the design of policy framework and institutions so as to consolidate macroeconomic stability, and strengthen the conditions necessary to achieve high and sustainable growth rates. This is the best strategy to prevent future crises. Main opportunities are in continuing advancing in: •  Macroeconomic policies oriented toward making the economy more resilient to external shocks. This requires a credible and flexible policy framework, with prudent and consistent monetary, exchange rate, and fiscal policies. In this direction, progress in fiscal accountability, and the adoption of inflation-targeting monetary frameworks alongside more exchange rate flexibility have left the economies of the region better equipped to participate in the global economy.

In addition, governments of the region should also take a careful look at existing social policies so that they are aimed at reducing poverty and improving the access of the poorest groups of the population to quality education and health services. In his concise and well-focused document, launched before the 2005 Annual Meetings, Mr de Rato addressed the fundamental strategic question for the Fund: Given the purpose of the Fund, as set out in Article I of Articles of Agreement, what is the relevance of the Fund in today’s global economy and financial markets? In our opinion, the Fund has a privileged position to contribute to more effective management of global macroeconomic and financial risks around the world. This process involves taking several steps simultaneously: •  Identify threats to global macroeconomic and financial stability and to member countries;  •  Quantify its effects on key variables such as exchange rates, relative prices, and real outputs, etc. ;  •  Identify economic and financial vulnerabilities at global, regional and country level;  •  Manage implied risks by making better analyses and developing better understanding of institutional and market mechanisms so as to absorb, cushion, transfer, hedge, strengthen the resilience to such risks, and ultimately, minimize their potential impact;  •  Continue surveillance of risks and vulnerabilities. In our opinion, continued surveillance of macroeconomic and financial stability is a shared responsibility of the Fund, member countries, and private sector institutions of the international financial system, especially those participants of systemic relevance.