IDB: LATIN AMERICA RESUMES GROWTH, BUT MUST MODERNIZE ITS ECONOMIES TO COMPETE GLOBALLY AND REDUCE POVERTY

At close of Annual Meeting Iglesias calls for stronger defenses against external adjustments

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Latin America and the Caribbean are growing after a period of lackluster performance, but they must modernize their economies in order to defend themselves against external adjustments, compete successfully, and reduce poverty and unemployment, said Inter-American Development Bank President Enrique V. Iglesias today.

In the closing session of the 45 th Annual Meeting of the IDB Board of Governors, Iglesias said the good news is that “Latin America is growing again, and this opens up opportunities.” According to various forecasts, the region could grow by about 4 percent in 2004.

Iglesias added that the region should take advantage of this upturn, which stems largely from external factors, to reduce its vulnerability to abrupt adjustments in the international economy.

“This growth is a good platform for consolidating what has been achieved in the past, to correct what must be corrected, but above all to create defenses in our countries to withstand the downturns in the cycle,” he said.

In order to address these future adjustments, Latin America and the Caribbean must institute anti-cyclical policies aimed at softening the impact of external shocks. But to do so, the countries must modernize their economies, warned Iglesias. “In the world we live in, there are no alternatives to getting on the train of economic modernization.”

In addition to protecting against future economic challenges, the region must pay special attention to social policies to meet the needs of the 227 million persons--44 percent of the region’s population--who living in poverty, he said

For the IDB’s borrowing countries, the possibility of improving the living conditions of their most needy citizens lies in boosting economic growth, said Pedro Pablo Kuczynski, Peru’s finance minister and chairman of the Bank’s Board of Governors. “Only this way will we have the means to eliminate the poverty and unemployment that afflict us.”

Kuczynski said that in order to stimulate job-generating growth, international institutions such as the IDB must strengthen their support for the private sector, particularly to expand credit to small and medium-size enterprises and finance infrastructure projects that will help the region increase its ability to compete.  

The Peruvian finance minister said the meeting has given Latin American countries an opportunity to take a common stand in demanding that international financial institutions modify their rules for accounting for investments in infrastructure when setting fiscal goals.

Latin American governors this week released a declaration called the Carta de Lima stating that the current criteria inhibit rational decision-making and can result in even greater fiscal deficits and reduced ability to compete.

Kuczynski also welcomed the possibility of increasing IDB membership with more countries from Asia, a region that is quickly becoming a key partner for Latin America. “Having a close relationship with these countries can only bring benefits,” he said.

Regarding the IDB, Kuczynski said governors recognized the Bank’s ability to adapt and innovate to better serve the needs of its borrowing member countries.

Seminars, contracts and participants

As is the tradition with IDB annual meetings, a series of seminars was held in Lima on economic and social development in Latin America and the Caribbean. This year subjects included reform of the state, financing for infrastructure, bank supervision and regulation, social inclusion and urban development, rural competitiveness, and remittances.

One of the most well attended seminars was on social capital, youth entrepreneurship and volunteerism. During the event awards were presented for 40 economic and social projects carried out by youths, selected from more than 600 submitted.

One of the award winners, Giovanni Redondo Vanegas, was elected by his companions to speak before the Board of Governors. He underlined the need to invest in youth initiatives to promote economic and social progress.

“Youth volunteerism has a clear potential to support the process of social integration through the application of policies and programs that address development in the region. This must be a priority in social investment strategies, “ said Redondo Vanegas, a Colombian social entrepreneur.

In addition, IDB officials met representatives of civil society organizations to discuss IDB strategies, programs and projects, particularly in Peru.

Agreements and contracts for loans and grants totaling $387 million were signed in Lima. Also, the Nordic Development Fund and the for International Cooperation and Development of Fund Taiwan signed operations for a total of $17 million and $5 million, respectively, to co-finance IDB projects in Central America.

The meeting, the first held in Lima since 1971, had a record attendance of more than 7,200 participants, among them 900 reporters, photographers and cameramen.

In 2005 the Board of Governors will convene in the Japanese island of Okinawa, where one of the main points on the agenda will be Latin America and the Caribbean progress towards meeting the U.N. Millennium Development Goals. Japan was host of the 1991 Annual Meeting.