Moody's Investors Service, one of the biggest global credit rating agencies, yesterday warned that Latin America could fall victim to the international financial crisis.
The warning came as Mr George Soros, the financier, urged the Group of Seven leading industrial countries to intervene to prevent the flight of capital caused by the crisis in Russia spreading to Latin America.
In the meantime, Mr Victor Gerashchenko, the new head of Russia's central bank, called for reimposing state controls over exporters' hard currency earnings, reverting back to Soviet methods of regulating foreign exchange market.
The Russian central bank is also planning to rescue favoured domestic banks by giving them new credits, calculated on the par value of restructured short-term treasury bills (GKOs).
Mr Gerashchenko's comments, which followed a meeting with President Boris Yeltsin in the Kremlin, are the strongest indication to date of how far Russia's new government could go in reverting to Soviet-style methods of regulating the economy and resorting to the printing press.
The British Chancellor of the Exchequer, Mr Gordon Brown, said yesterday that broad agreement had been reached among financial leaders on the kind of action that might be necessary to contain the global economic turmoil and restore confidence.
However, German central bankers ruled out interest cuts in response to the Asian and Russian financial upheaval.
Mr Vincent Truglia, head of sovereign ratings at Moody's, said the market crisis was likely to persist for some time. "The longer this persists the more likely there will be another default (after Russia). If that happens, we could see emerging markets shut off from international credit for a very long time."
Mr Brown said G7 central bank governors and finance ministers stood ready to help Japan reflate its economy and push through financial restructuring.
He declined to say precisely what that help might be. But it seems that a co-ordinated reduction of interest rates would be considered if the financial markets crisis deepened, perhaps as a result of devaluation by Brazil or further stock market losses.
Mr Brown also said the G7 was considering the question of whether capital market controls could be desirable, but he was not to be drawn on the conclusions.
Mr Soros warned that the current crisis of confidence in international financial markets could lead to "a breakdown in international free trade".
Unless the G7 industrial countries intervene, Mr Soros predicted that the flight of capital caused by the crisis in Russia would spread to Latin America and lead to isolationist policies in the US.
Meanwhile, senior Russian officials, led by Prime Minister, Mr Yevgeny Primakov, met IMF and World Bank officials in Moscow to discuss the possible disbursement of the next $4.3 billion (£2.9 billion) tranche of the fund's support loan. Afterwards the western officials said they agreed with the "strategic goals" of the government.
