I am honored to welcome you to this seminar. In particular, it is my pleasure to be your host in the city of Cusco, probably one of the main historical destinations in the world. In ancient times, the Peruvian Andes were the cultural matrix of this part of the world. The brilliant cultures that flourished here centuries before the arrival of the Europeans still elicit admiration for their architectural, artistic, and agricultural achievements. In particular, the Incas used the heritage from previous civilizations to create an empire of continental dimensions, which they ruled from this very town. Although pre-monetary, the Inca civilization arguably remains one of the best organizations the world has ever seen. Under the Incas, a vast territory covering six present-day South American nations was integrated by a sophisticated infrastructure and governance network; and natural resources in the most diverse climates and regions were harnessed through ingenious technologies. Let their example of good governance enlighten our discussions.

I now turn to the matters that will occupy us during the next couple of days. The depth and extent of the ongoing global turmoil is unprecedented. At this point, however, governments, think tanks, and multilateral agencies generally agree that the end of the global recession is within sight. This improved outlook is associated with an (also) unprecedented policy response. Fiscal stimulus and monetary easing has been sizable, notably within the G-20, and we know from our models that international coordination should magnify the effect of policies undertaken at the national level.

At the same time, the duration and speed of the global economic recovery remain quite uncertain. Unemployment may simply be bottoming out, and a clear pickup in the level of global economic activity will certainly not happen before normal financial conditions are restored —a goal that still seems distant. Despite substantial efforts in developed economies, credit flows and securitization markets —the engines of the boom years— remain stubbornly sluggish. Mainly, much more needs to be done to cleanse bank balance sheets of troubled assets.

In this difficult context, the aim of this seminar is to discuss the policy implications of the current global crisis for the international monetary and financial system going forward. This involves of course discussing ways to improve, deepen, and expand supportive and corrective policies, but also tackling more sensitive and challenging matters concerning the preservation of world financial stability in the long run. During the next two days, among other issues, we will ask questions such as whether the policy efforts displayed so far, especially in the context of the G-20 process, have been effective, and when would be the right time for an exit from stimulus policies. However, even more fundamentally, I encourage our guests to venture into uncharted territory, reach out beyond the current crisis environment, and give us their views about what they think will be the future landscape of global finance. A main priority will be to discuss the role of the established international monetary system in the inception of the crisis and, according to our assessment, try to establish whether there are viable options for a “new monetary order”.

In this context, considering the increasing share of emerging economies in world GDP, trade, and capital markets in recent years, will we see them take on an enhanced role in the global recovery and in the preservation of financial stability thereafter? Will this be reflected in a greater governance share of these economics within the main multilateral agencies? Will these agencies gain greater independence from, and traction on, the stakeholders? Crucially, will international cooperation in regulation and supervision of systemically important financial institutions finally materialize?

I personally look forward to the results of this exercise. What we know for sure, and take as a premise for this seminar, is that, in addition to short-term policy responses aimed at resolving the crisis, fundamental long-term changes in macroeconomic policy, financial supervision, and perhaps the international monetary order itself, will be needed to prevent a cyclical relapse into global financial disaster. Like I said before, the stake of emerging economies in the post-crisis world will be of particular interest to us. Finally, as has been stressed in several forums, international collaboration in the design and implementation of economic and financial policies will be essential. I am sure that the contributions that will emerge from our discussions will be original, daring, and creative, as fits the exceptionally difficult circumstances ahead of us.



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