December 1, 2001
There is an old saying that people should save their pennies for a rainy day. Dark clouds have moved across the skies since the September 11th terrorist attacks. This sort of unpredictable event is precisely why countries that depend on commodity exports have taken steps to protect themselves by creating reserve accounts that accumulate extra revenues when times are good.
Javier Murcio, director of Latin American research at Credit Suisse First Boston in New York, says such stabilization funds are "supposed to isolate the country from the potential negative impact of falling commodity prices. [These] funds allow countries more stability in spending and preparing [budgets]."
Several countries in Latin America have created reserve accounts to sock away excess revenues from commodity exports. These stabilization funds will soon face their first tests as oil prices continue to sink.