from around 30 percent to the current annual 2. 9 percent, after patiently building credibility and institutions. the transition was characterized by a flexible regime in the use of instruments, including foreign exchange market intervention first through the central bank and nowadays through operations with the government - owned exporting companies and the treasury, which allowed the economy to adjust to both domestic and external shocks. in argentina, the monetary policy transmission channels are only just being rebuilt, since credit to the private sector accounts for 10 percent of the domestic product, still far below the latin american average. moreover, consumer credit reacts weakly to interest rate fluctuations. this means that 90 percent of the economy operates in cash ; therefore, the hasty adoption of certain instruments would not only be useless but also hamper their future use. we cannot “ take short cuts ” ; rather, we must patiently rebuild the power of monetary policy tools. furthermore, in certain macroeconomic scenarios with still persistent features of fiscal dominance and external determinants, monetary policy should be conceived under a general equilibrium approach, where fiscal solvency, the monetary balance and external sustainability are mutually determined. in consequence, when devising the transitional monetary regime, the classical dilemma of rules versus discretion cannot be solved with an extreme option. far from “ buying ” credibility, a “ rigid ” monetary policy rule might become unsustainable if the people anticipate inconsistencies with the rest of the macroeconomic policies. on the opposite extreme, “ unrestricted discretion ” would also lead nowhere and could contribute to a frustrating process. our approach to financial and monetary policy rests upon this theoretical framework and is built on four pillars – ( i ) a gradual and consistent monetary policy that ensures money market equilibrium ; ( ii ) a countercyclical prudential reserve accumulation approach ; ( iii ) a system that is independent from public sector financial needs ; and ( iv ) a policy framework that boosts corporate and household credit. the current regime of control over the money supply and the demand for money combines the necessary doses of monetary prudence and flexibility. simple rules on the growth of money supply provide the adequate tool for the people to make monetary policymakers accountable. thus, the credibility lost in the crisis is gradually rebuilt without sacrificing the necessary discretion to address the contingencies inherent to an economy that is in transition towards its long - term equilibrium. to preserve the money market equilibrium, we apply a deep monetary absorption strategy coupled with reserve accumulation for prudential purposes. such a strategy

##balances. second : oil prices, short - term risks relate more to the geopolitical arena than to the fundamentals of exploration and exploitation of resources. on the demand side, the renewed interest on financial instruments such as the exchange - traded funds and their widespread development, open access for individual investors to spot and future markets, this new phenomenon generates new pressures that may be out of line with changes in the underlying fundamentals. third : asset inflation - mainly in the real estate market - and, in particular, how this issue has impacted on consumption and wealth effects in industrial countries. although in some economies such as england and australia housing prices began to decline, there is still noticeable uncertainty about the accelerated asset inflation and its consequences on the real economy. fourth : the adjustment of “ global imbalances ”. in particular which region will absorb the greater costs is a critical factor to asses potential spillover effects. my view is that the correction will imply both a rebalancing of world demand together with price adjustments. obviously, the key question is whether we will have a soft landing or a hard one. while in the past we have not seen many soft adjustments for this kind of imbalances, the pace of technological progress and structural changes in productivity together with labor flexibility, make it harder to extrapolate the past into the future. in any case, the behavior of commodity prices, interest rates differentials and the demand for assets denominated in dollars will be the relevant angles to level the field during the next years. any scenario requires our economies to adopt countercyclical macroeconomic policies. why? because we are more vulnerable to external factors. the agenda includes foreign reserve accumulation, fiscal discipline and strong financial systems, capable of buffering the possible impacts of global financial turbulence on domestic variables. this is no time for complacency. this is time to build strong countercyclical policies. save in the good times to spend it in the downturn. 3. latin america it is true that today our region is better prepared than in the past. the external and fiscal accounts of latin american economies have improved significantly over the last years. in this framework, our countries have made progress towards more flexible exchange - rate regimes, continued to accumulate foreign reserves, made net payments to multilateral financial institutions, increased domestic savings and developed domestic capital markets. therefore, the macroeconomic fundamentals from a risk management perspective are much stronger due to : 1 ) fiscal solvency ; 2