announcing a fiscal package of 7 percent of gdp to bail out financial institutions, without creating doubts as to the sustainability of their public accounts. at the same time, emerging countries are more likely to experience joint crises. a drop in deposits may lead to fx pressures with an impact on the external position and may affect fiscal accounts ( due to the impact on sustainability of the potential fiscal cost of a financial system bailout or domestic currency depreciation in the face of a currency mismatch ). these limitations together with second round effects make a strong case for more coordinated efforts with a greater voice from the emerging world. otherwise, countries might be tempted to further address the shocks in an uncoordinated way probably by taking measures to isolate themselves. the backfire could be seen either on financial integration ( by controlling capital outflows ), or on trade policy ( rising barriers on imports ). we have to avoid that the positive aspects of integration are overcome by the flaws of the system. it is also worth noting that self - insurance via international reserve accumulation or fiscal funds seems not to be enough when confronted to the magnitude of the de - leveraging process taking place at a global level. we are seeing many welcome developments, particularly the surge in bilateral currency swaps agreements such as the recent one between the hungary national bank and the swiss national bank as well as the one between the people ’ s bank of china and the monetary authority of hong kong to facilitate a smoother trade. this adds to those seen during last year between central banks in developed economies and with emerging ones : the fed with mexico, brazil, korea, and singapore ; the bank of japan with india and the scandinavian central banks with iceland. all of these bilateral agreements just prove the need for international cooperation in a context of an absence of a multilateral organization in a position to perform as a kind of “ central bank of the central banks ”. this is the next step we need to go for. while challenges for policy makers around the globe are significant, now we seem to understand that policy recipes vary from one country to the other in this complex scenario. this progress is, obviously, welcomed. especially for us, emerging markets ’ policy makers, as we have to catch up with the standards of living of our population and, most importantly, build institutions and credibility at the same time. in fact, it is more a synchronic than a sequential two - fold challenge : advancing towards the development of our economies and building institutions simultaneously. and

) monetary prudence ; 3 ) external sustainability with exchange - rate flexibility and countercyclical policies ; and 4 ) better regulated and deeper financial systems. the current account surplus and a primary fiscal surplus has reduced indebtedness in virtually all countries in the region. latin america has been showing a current account surplus for three years in a row, which reached about 1. 3 % of gdp in 2005. fiscal solvency has become a public good highly and undoubtedly valued by our society. most importantly, fiscal discipline is not an asset for the left or right. it is just common sense. there is also increased price stability along with a greater social demand for restrained inflation. central banks in the region have been able to meet these demands by pursuing prudent monetary policies. this scenario together with higher private capital inflows has helped to develop countercyclical policies by means of foreign reserves accumulation. while, the decision regarding the level of foreign reserves that a country should hold is generally associated with the need for a certain amount of liquidity to meet external liabilities, i would like to stress the role that foreign reserve accumulation plays as an insurance and deterrence mechanism for emerging countries. i believe it is the responsibility of every country to develop its own set of countercyclical policies that would help weather limited access to financial markets without causing a significant impact on domestic variables. building a precautionary cushion of foreign reserves is particularly important for emerging markets in these benign times. also, there has recently been a shift in the focus of international financial rules. the old paradigm is in crisis, but no replacement has yet been found. the problems in distinguishing between financial turbulences that arise from temporary or permanent causes may lead to contagion effects ; an uncertain transition from bail - out to bail - in ; problems arising from moral hazard, are as present today as they have been in the past. therefore, in the absence of an international lender of last resort and with an incomplete international financial architecture, the accumulation of international reserves for prudential reasons has to be contemplated. in fact, today i believe that, there is no good substitute for sound liquidity policies developed domestically to deal with exposure to the potential risks i described earlier. and this is not a policy exclusive to argentina. following the macroeconomic and financial instability of the second half of the 1990s, the main emerging countries, especially those that have endured financial crises, have favored the accumulation of reserves as a mechanism to reduce the vulnerability