The presidents of Brazil, Ecuador and Peru attended the opening ceremony of the 43rd Annual Meeting of the IDB's Board of Governors, which is being held in the northeastern Brazilian city of Fortaleza, March 11-13. From left to right, Ecuador President Gustavo Noboa, Brazil President Fernando Henrique Cardoso, Peru President Alejandro Toledo, IDB President Enrique V. Iglesias, IDB Exective Vice President K. Burke Dillon and IDB Vice President for Planning and Administration Paulo Paiva..(Foto by W, Heinz)

The Board of Governors of the Inter-American Development Bank inaugurated its 43rd Annual Meeting today in a climate of concern over the crisis affecting Argentina and over the need to reduce public pessimism over the results of the past decade’s economic reforms.

Attending the inaugural session were the presidents of Brazil, Ecuador, and Peru; IDB governors and senior governmental officials; and many other key policy makers. The session was held in at the headquarters of SEBRAE, a Brazilian agency that assists small and medium-sized businesses.

The IDB’s Annual Meeting is the major event that examines economic and social development issues in Latin America and the Caribbean. In addition to the formal sessions, participants attend seminars on a wide range of development topics, among them, the process of economic reform, tourism, water resources, AIDS, integration, and macroeconomics. A total 4,860 participants registered for the meeting, including nearly 400 journalists.

In his last speech as chairman of the IDB’s Board of Governors, Chilean Finance Minister Nicolás Eyzaguirre noted that when he was elected to his post a year ago, people were voicing “cautious optimism” about the region’s prospects and economists were predicting 3.5 per cent growth. Now, he said, after a decade of “profound reform,” the region has plunged into a period of uncertainty and loss of faith.
Part of the road to recovery depends on actions taken in the industrialized countries, said Eyzaguirre. Current barriers to Latin American exports hurts the region’s economies while creating an environment of uncertainty that stifles foreign investment.

The IDB governors unanimously elected Brazilian Minister of Planning Martus Antônio Rodrigues Tavares chairman of the Board of Governors until the next IDB Annual Meeting, which will be held a year from now in Milan, Italy.

In his address, Tavares called the IDB’s role “strategic and essential” in the unfolding debate over changes in the international financial architecture, and particularly in opening world financial markets to the region’s countries. “We must make a joint effort to reestablish and increase these [capital] flows,” he said.
“Recent events have shown that it is imperative that we achieve a change in the international financial architecture to reduce the variability in financial flows and give them more predictability,” he said.
Peruvian President Alejando Toledo, in his address, stressed the need to both improve living standards for the region’s poor and to resist the temptation on the part of the leaders to revert to populism and retreat from sound macroeconomic policies.

“Economics is a social science at the service of people; people must not serve economics,” he said.
He also called on leaders to protect their peoples from the negative effects of globalization and competitiveness. “Globalism is not an option,” he said. “Competitiveness is not an option. But neither is sustainable unless we give them a human face.”

Ecuadorian President Gustavo Noboa called for greater equity in international trade and support for development. “As long as there is poverty in the south,” he said, “there will be no peace in the north.”

In the area of education, he called for use of the “most advanced technology” in classrooms of the region.

Without such technology, he said, the poor will become “digital illiterates,” and the gap between the educationally advantaged and disadvantaged will very difficult to overcome.

Brazilian President Fernando Henrique Cardoso called on world leaders to refocus their attention on efforts to reduce poverty. At the present time, he said, the “international agenda is almost solely dominated by issues of security.”

He spoke of the need to bring ethics into economic policy discussions. The success or failure of economic policies, he said, will ultimately be determined by answering the question: “Has the quality of life improved?”

Cardoso also had strong words for the need to level the international playing field in the area of trade, saying that countries that demand that their neighbors open markets cannot then pursue policies to close their own.
Finally, he reiterated Brazil’s solidarity with Argentina in that country’s efforts to win the support of the international community to help resolve its current crisis. He thanked IDB President Iglesias and the Bank for its work in this regard.

IDB PRESIDENT IGLESIAS PROPOSES ACTIONS TO REKINDLE GROWTH

In his address before the Annual Meeting inaugural session, IDB President Enrique V. Iglesias today recommended that Latin American and Caribbean countries undertake a series of actions to revitalize economic growth, mitigate the social costs of stagnation and reduce the region’s exposure to external financial turmoil.

Iglesias acknowledged that the region’s growth rate would probably be zero this year and said a modest recovery could take place in 2003. Given that outlook, he proposed measures to cushion the social consequences of the region’s lackluster economic performance and to increase its competitiveness, promote domestic savings and create appropriate conditions for investments.

“An improvement in the international economic cycle will certainly be a key factor in the resumption of growth in our countries, but it cannot be the only factor,” he told delegates from the IDB’s 46 member countries. “It is necessary to accelerate actions in certain areas of the present economic policies.”

Among steps required to energize Latin American and Caribbean economies, Iglesias listed the development of regional and local capital markets and the strengthening of the legal frameworks and regulatory agencies that govern them. These measures would improve the region’s business climate and foster savings and investments.

Iglesias also underscored the importance of preserving the macroeconomic stability achieved over the past decades. “Keeping inflation under control, especially through responsible fiscal policies and orthodox monetary policies, is fundamental to this end,” he added.

As the lack of economic growth will raise poverty and unemployment levels, the IDB’s president proposed that countries consider the possibility of providing incentives for small- and medium-size enterprises and reinforcing their social safety networks.

While any decrease in Latin America and the Caribbean’s vulnerability to changes in the international business cycles will ultimately depend on a recovery of strong, sustained growth, Iglesias identified increasing domestic savings and diversifying exports as priority goals to protect the region from the effects of external volatility.

In that context, he suggested that Latin American and Caribbean countries step up their efforts to promote regional integration and to increase their participation in dynamic markets such as services and tourism in order to reduce their dependence on commodities exports.

Iglesias devoted much of his presentation to analyzing the deep sense of insatisfaction evident in vast sectors of civil society over the economic reforms launched over the past two decades and the process of globalization.

Two out of three Latin Americans, he noted, harbor pessimistic views of their region’s prospects.
In order to be effective, Iglesias concluded, reforms require a cautious accumulation of political and social consensus, as well as a dose of humility on part of those responsible for carrying out these efforts. “By modesty I mean to say that we should not pretend to know as much as we sometimes have believed we knew,” he said. “There are no easy formulas for growth or to escape poverty. But there are lessons derived from successes and failures that must be adopted on a case-by-case basis, with leadership and perseverance.”

IDB REPORT: LATIN AMERICA AND CARIBBEAN FACE HISTORIC CHALLENGE

Latin America and the Caribbean are facing an historic challenge as they adopt policies and make adjustments to overcome adverse economic circumstances brought on by a series of world shocks, according to the IDB’s 2001 Annual Report.

The IDB responded rapidly to the crisis by approving $7.9 billion in loans and guarantees to the region during 2001, the third highest level in the Bank’s history and the highest for its regular lending program, the report said.

“The lending program reflected the region’s broad-based development agenda of poverty reduction and social equity, reform and modernization of the state, and investments in infrastructure and productivity,” the Annual Report said.

The worldwide economic slowdown, exacerbated by the terrorist attacks in the United States on Sept. 11, “brought increased demand by countries for fast-disbursing sector loans to support stabilization and modernization,” the report said. “The Bank responded by providing $3.1 billion in financing for policy-based sector loans for reform, modernization of the state and protection of social spending during times of economic stress.”

According to the report, Latin America’s by-and-large healthy economic performance during the much of the 1990s suffered setbacks resulting from the Asia financial crisis of 1997 and the Russian crisis of 1998. The slowdown in the United States, Europe and Japan beginning in mid-2000 also marked the beginning of an economic deceleration in Latin America and the Caribbean.

“As a result of protracted stagnation and the difficult outlook for 2002, the countries of Latin America and the Caribbean are entering one of their most critical stages in decades,” the report said.

For the eighth year in a row the IDB was the largest source of multilateral credit for development of the region. Fifty-four percent of the total loan volume and 59 percent of the number of projects supported investments in poverty reduction and social equity – an emphasis that reflected guidelines of the Board of Governors. The Bank approved 14 programs totaling $1.7 billion to protect the social safety net and to promote human capital investment. Nine loans totaling $711 million supported basic, secondary and technical education in five countries.

The Bank used new flexible lending instruments for 29 operations totaling $963 million. These included innovation loans; multiphase projects; sector facilities in trade, health and education; and the Project Preparation and Execution Facility.

Other activities

The IDB Annual Meeting is the site for ceremonies to sign loans previously approved by the Bank’s Board of Executive Directors. View press releases on the Bank’s Annual Meeting homepage.