of our policy regime, which allows for timely adjustments in the real exchange rate and interest rates, letting the economy grow near its potential, smooth the capital account ’ s adjustments and maintain the credibility of the inflation target. this marks a difference with our economic history. bis central bankers ’ speeches over the years, the central bank has given proof of its commitment with price stability and the inflation target. it has operated with consistency in order to build credibility and trust, which gives us the necessary flexibility for monetary policy and the real exchange rate to work as buffers of the business cycle whenever advisable. in the past, when our economy ’ s fundamentals were not as strong, and the exchange rate regime was rigid and poorly suited to confront external shocks, when faced by a drop in the terms of trade or stringent financial conditions, in order to stop a currency depreciation the bank had to sell international reserves and raise the interest rate to reduce capital outflows. monetary policy, far from cushioning the external cycles, made them worse, generating economic costs and financial risks. more often than not, these experiences ended badly. overall, as usual, the present scenario has varied risks, most of them coming from emerging economies, because of both their importance in commodity prices and the behavior of world financial markets. despite the strong fundamentals of the chilean economy, we are not immune. we are a small, open economy, so external developments can and do affect us. now, allow me to describe in detail the macroeconomic scenario we believe to be the most likely one in the coming quarters, and associated risks. macroeconomic scenario our baseline scenario assumes that in 2014 the emerging markets will grow below their averages of recent years. china is a case in point, whose growth forecast has been steadily revised downward during the past several months and is now even below the officially defined target of 7. 5 percent per year ( figure 4 ). other latin american economies, including brazil, mexico and peru, have also revised downward their respective projections. this owes to a number of factors. on one hand, the weaker fiscal and monetary impulse in brazil, poor growth in mexico and a slowdown in investment and exports in peru. on the other hand, argentina and venezuela are making substantial corrections to their growth outlooks for the year, of the order of 3 percentage points down ( figure 5 ). all this contrasts with the developed world, where growth forecasts for the year have been revised upward, although with different nu

rodrigo vergara : the central bank of chile and the external crisis presentation by mr rodrigo vergara, governor of the central bank of chile, at a special session held by the honorable senate to “ analyze and evaluate the economic policy measures that have become indispensable to confront the severe symptoms of international recession and with the purpose of becoming familiar with the contingency plan announced by the supreme government ”, santiago de chile, 31 january 2012. * * * mr. president of the senate, senator guido girardi, honorable senators. thank you for your invitation to discuss the international economic situation and the measures that can be adopted in our country to address an external crisis. these instances are important for communicating the vision of the central bank of chile ( cbc ) on these issues. in the past several years, the advanced economies have gone through a severe crisis. the causes and consequences of the great recession of 2008 – 2009 have not yet been resolved and we are again enduring periods of external stress that put to the test the strength of our economy and its fundamentals. this forces us to carefully evaluate the current environment, its implications on the performance of our economy, and the measures we can implement if deemed necessary. during the past year, the biggest tensions have originated in the frail fiscal and financial conditions of some economies in the eurozone. this situation has persisted for a long time and no definitive solution is foreseen in the near term. progress has been made in several areas, but the problems ’ complexities and the political difficulties to deal with them are huge. this, coupled with the delicate position of consumers and firms, has translated in deteriorating economic expectations in the region, anticipating a recession during this year. the situation in the united states, while less severe than that in europe, is also complex, especially because of the slow recovery and little room for fiscal and monetary policies to stimulate the economy. the emerging world, chile included, will undergo a period of slower growth than in the past few years. market consensus forecasts, last week ’ s imf projections, and also those in our december 2011 ’ s monetary policy report point in the same direction ( table 1 ). most recently, the information coming from the u. s. shows a somewhat better performance than was forecast some weeks back, but does not modify medium - term problems and risks affecting its economy. in fact, last week the federal reserve extended from mid - 2013 to end - 2014 the period during which it would hold