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Apr 10, 2005

Latin American leaders emphasize role of the state in economic development of Latin America

IDB Board of Governors opens Annual Meeting in Okinawa

OKINAWA, Japan ?  The 46th Annual Meeting of the Board of Governors of the Inter-American Development Bank was inaugurated today, with three Latin American presidents calling for a more effective role of the state in promoting sustainable and equitable development for their countries and the region.

The crown prince of Japan, his Imperial Highness Naruhito, and Presidents Carlos Mesa of Bolivia, Álvaro Uribe of Colombia and Ricardo Maduro of Honduras participated in the opening session of the IDB´s highest policy-making body, which deliberates in Okinawa April 10-12.

For the first time the Republic of Korea attended an IDB Annual Meeting as voting member, having formally joined the Bank in March of this year.

In his welcoming remarks to the governors, Prince Naruhito observed that in the past two centuries hundreds of thousands of Japanese emigrated to Latin America, forging ties on both rims of the Pacific Ocean. Hundreds of thousands of their descendents have since returned as immigrants to their ancestral nation, making ties even stronger.

The Annual Meeting of the Board of Governors of the IDB is the main international forum for the discussion of Latin American and Caribbean issues.  The event convenes thousands of participants, including official delegations from the Bank’s 47 member countries, leaders from the private sector and nongovernmental organizations, academics, representatives of international organizations and journalists.

In the inaugural ceremony several speakers focused on the role of the state and how to make it more effective in democracies with market economies.

President Mesa said Latin America should learn from its experiences of the recent past, when many countries moved from extreme state intervention to excessive liberalism. “We have to recover the role of the state without losing the essential role of the private sector,” he added.

Mesa and President Uribe stressed the need to make the public sector more efficient and effective to support economic growth and development.

In the case of Colombia, Uribe said, his administration had tried to build a state that is “sustainable and transparent” and “not an impediment” for private initiative. He said his government has begun to reduce and rationalize public spending and improve tax collections. As an example he cited the elimination of privileged pensions for 151 state enterprises.

President Maduro said a more efficient state will be better able to direct social spending to benefit groups that need it the most. Better targeting of social programs has made a dent in poverty in Honduras, he said, but rising petroleum prices are threatening to erase the benefits that have been brought to the country by foreign assistance and debt reduction through the Heavily Indebted Poor Countries Initiative (HIPC).

In his address to the governors IDB President Enrique V. Iglesias observed that in the past four decades East Asian countries have multiplied their per capital income tenfold compared with the tripling of per capita income in Latin America. During that same period East Asian countries reduced poverty by half while Latin America continues with the same poverty levels of 40 years ago.

For Iglesias, Asia’s success cannot be explained entirely by its traditional values of perseverance and saving, or by factors such as the adoption of new technologies, the effective investment in education and the expansion of trade and foreign investment.

In his view East Asian countries followed long-range development strategies and intelligent actions by the state to help the private sector adapt and compete, generating solid public-private alliances. In Latin America and the Caribbean, Iglesias said, an alliance of this type “will allow better identification and development of consensus regarding the limitations of international competition” and will encounter ways to deal with these constraints.

In their inaugural session the Board of Governors elected Japan’s Finance Minister Sadakazu Tanigaki chairman, replacing Peru’s Finance Minister Pedro Pablo Kuczynski.

In his address Kuczynski noted significant recent achievements of the IDB, welcoming the $502 million replenishment of the Multilateral Investment Fund (MIF) and the incorporation of the Republic of Korea as a new member. In addition, he praised the Bank’s development of a new, more flexible and dynamic lending framework and “the change from a cultural of [loan] approvals to a culture of results.”

At the same time he stressed the importance of the IDB’s support for the private sector and welcomed the creation of the position of coordinator to make the Bank’s activities in support of the private sector more effective and to harmonize the operations of the Bank’s Private Sector Department, MIF and the Inter-American Investment Corporation.

To continue contributing to progress in the region, Kuczynski said, the IDB should reinforce its  counter-cyclical role to provide borrowing countries access to financing when they most need it.

The priorities, he added, should be programs to improve competitiveness, consolidate macroeconomic stability and make public spending more efficient. At the same time the Bank should continue to support infrastructure projects and social programs to reduce poverty.

In his first speech as chairman, Tanigaki said that although Latin America and the Caribbean had achieved progress in recent years in the expansion of education and gender equality, much remains to be done to reduce poverty to the targets set by the Millennium Development Goals of the United Nations.

“To achieve the poverty reduction target, I believe it is essential to strengthen the social safety net and develop SMEs to generate employment, while at the same time improving living conditions for the poor,” he said.

A member of the IDB for nearly three decades, Japan will continue with its commitment to Latin America and the Caribbean, Tanigaki added. The IDB administers the Japan Special Fund, the largest source of bilateral resources for technical cooperation, and the Japan Program, which promotes closer ties and the exchange of experiences among Asian and Latin American countries. Recently the Japanese government announced that it will support the launching of an IDB action plan for the prevention of natural disasters in Latin America and the Caribbean.

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