the subprime crisis ( july - october 2007 ), the second was the abrupt misalignment of monetary demand ( april - june 2008 ), and the third episode is associated with the severe worsening of the international crisis ( as from mid september 2008 ). in order to overcome them, we adopted a series of measures in sequence. we first restored the demand for money and normalized the foreign exchange market and later ensured the adequate supply of liquidity in order to guarantee systemic financial stability. this enables argentina to face one of the worst financial crises in decades. this situation is ratified when the degree of coverage of the financial system ’ s consolidated assets is analyzed. the current levels of international reserves are very high in historical terms and cover 62 % of private sector m3 compared to less than 40 % coverage before the 2001 crisis. the current levels are also 10 percentage points higher than these indicators at the end of 2004. this also happens when the coverage ratio is compared to the central bank liabilities. this strength makes it easier to act in a context of a weaker demand for money. therefore, the normalization of the domestic money market is underway and private sector deposits and loans are recovering their long - term growing trend in a framework of solid bank liquidity conditions. the combination of prudential and countercyclical policies that the central bank has developed on the monetary and financial level, added to the fiscal and external surplus, will therefore allow for the impacts of the international disruptions on domestic macroeconomic performance to be cushioned. although the reversal of the capital movements seen in argentina since the second half of last year is significantly larger than what happened during the “ tequila effect ”, the impact on real variables has been so far limited. aggregate activity has maintained a rising trend, although not as steep as at the beginning of the current expansive cycle. on the other hand, together with the moderation of growth of the level of activity and the recent correction of international commodity prices, in a stable exchange rate regime less pressure on domestic prices is foreseen. notwithstanding, the limitations faced by emerging economies to deal with extreme externals shocks makes a strong case for global mechanism of liquidity provision in an timely way. other way, countries might be tempted to try to address the shocks in an uncoordinated way probably by taking measures to close the economy thus hampering the progress made for the last decades on globalization. the backfire could be seen either on financial integration ( by controlling capital out

. also, a very stable and broad deposits base is the key financing source of the domestic financial system. the banking sector went from being a source of instability in the past to become a source of strength to the real economy as it has been buffering the impact of the international crises on economic activity. in latin america potential sources of contagion are limited to a reduction in lending by subsidiaries of international banks and the impact of higher risk aversion and slower growth on capital flows ( portfolio, fdi and remittances ). a related issue of concern is the ability of less sophisticated investors exposed to emerging markets to properly understand that those capital outflows from global institutions were just the reflex of margin calls or the answer to capital adequacy in developed countries ( instead of outflows as a result of fundamentals deterioration in the emerging world ). this flight to supposed “ safer heavens ” could be very costly as it could trigger a run against the domestic banking system or the local currency, given the natural tendency towards financial instability in emerging economies. medium - term challenges remain the same : reducing existing inequality in access to financial services in both geographical and socio - economic terms while keeping an adequate balance of risks and deepening the markets, especially, in local currency. 3 ) more flexible foreign exchange regimes. they provide additional degrees of freedom to deal with highly volatile financial flows and increased risk aversion. the recent episode proved that there is no “ one - size fits all ” exchange rate arrangement. in my country, the managed floating exchange rate has proved to be the most adequate foreign exchange regime at this time in our economic history. a country with decades of macroeconomic volatility and dollarization which during the past 25 years has spent more than a third of its time outside its dynamic stability path ( a range within two standard deviations of the long term trend ) is a good reason to believe that we are not yet ready to let the exchange rate floating like it does in neighboring countries. 4 ) better liability management with a reduction of net foreign debt and currency mismatches. the public debt to gdp ratio in the region decreased almost 30 percentage points over the last five years. this reflects, in part, better liability management, which also shows up in the enormous reduction in the exposure to foreign currency debt, providing solid grounds for developing a domestic yield curve in local currency. 5 ) external strength due to mainly trade dynamism ( diversifying destinations and products ). just as