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Euro and the Financial Relations between Latin America and Europe

Medium- and Long-term Implications

  • Author: UN, ECLAC
  • Publication date: May 2002
  • Page count: 76
  • Language(s) in this book: English
  • Sales number: 02.II.G.27

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About the product

The internationalization of the euro is in its initial stages and it is still difficult to draw any definitive conclusions regarding its scope and its implications for Latin America. The most plausible medium- to long-term international scenario seems to be development of an asymmetrical duopoly between the euro and the dollar. In a context of scant international monetary cooperation, this scenario could lead to high volatility between the two main international currencies, which will be a powerful destabilizing factor for third countries. Together with other factors, the growth of the euro bond market will tend to increase the pressure to widen and deepen the euro financial market and make it more liquid. This should favor the development of better conditions for both European and third-country participants. For Latin America, the sustained increase in the share of euro-denominated international bond issues, chiefly by the public sector, makes it necessary to consider policies for managing the currency composition of the external debt. On the other hand, the consequences of an increasingly bipolar but asymmetrical international monetary system will have to be included in the Latin America national exchange rate policies.