Opening Statement by Mr. Enrique V. Iglesias, President, IADB
to the Inter-American Development Bank Consultative Group
Meeting for the Reconstruction and Transformation of Central America.
Stockholm 25 May 1999.
On the occasion of the inauguration of this Consultative Group meeting, I want to
welcome:
Mr. Göran Persson, Prime Minister of Sweden
Mr. Arnoldo Alemán, President of Nicaragua
Mr. Carlos Roberto Flores, President of Honduras
Mr. Luis Flores Asturias, Vice-President of Guatemala
Mr. Enrique Borgo Bustamente, Vice-President of El Salvador
Mrs. Astrid Fischel, First Vice-President of Costa Rica
Mr. Kofi Annan, Secretary General, United Nations
Mr. César Gaviria, Secretary General, Organization of American States
Mr. Manuel Marín, Vice-President of the Commission of European Communities
I also want to welcome the distinguished members of the Central American and donor
delegations participating in this meeting.
On behalf of all the participants, I wish to express our appreciation to the Government
and the people of Sweden for their generous support for this meeting including providing
these excellent facilities in the beautiful city of Stockholm.
This meeting comes at a critical juncture for the Central American countries facing a
series of important challenges and opportunities including:
- Rapid Recovery and Reconstruction from Hurricane Mitch
- Deepening the Transformation Process
- Effective implementation of National Reconstruction and Transformation Plans
- Strengthening Central American Integration
1. Rapid Recovery and Reconstruction from Hurricane Mitch
The top priority is rapid recovery and reconstruction of the devastation caused by
Hurricane Mitch, the worst disaster in Central American history.
Honduras and Nicaragua suffered the greatest damage with Guatemala and El Salvador also
seriously affected, while Costa Rica is troubled with the indirect impact of increased
migration flows.
The human tragedy includes tens of thousands of dead and missing and millions of people
displaced, many of whom are still homeless.
The economic losses run into the billions of dollars with the destruction of crop lands
and infrastructure including roads, bridges, water supply systems, schools, clinics, etc.
2. Deepening Transformation Process
Equally important is the continuation of the transformation process. The
watchword of the CG Meeting last December was "Recontruction Must Not be at
the Expense of Transformation".
The transformation process, which began in the 1990's with the Central American
countries experiencing peace, freely elected Governments, rule of law, poverty
alleviation, modernization of the state, and steadily improving economic growth, needs to
be deepened and accelerated.
3. Effective Implementation of National Reconstruction and Transformation
Plans
In the pursuit of recovery efforts, expendiency should not take precedence over
good governance.
The effective implementation of National Reconstruction and Transformation Plans
requires that the Governments continue to improve:
Transparency and Accountability, in the use of both donor and
domestic resources and in the provision of public services.
Decentralization and Participation, by various elements of
society, including local communities, indigenous groups, NGO's, and the private sector.
Managerial, financial and legal capacity at the local level needs to be expanded.
Environmental Protection and Poverty Alleviation, so as to
reduce ecological and social vulnerability; and
Democratic Institutions and the Rule of Law, so as to protect
human rights.
4. Further Strengthening of Central American Integration
In order to meet the challenges of the 21' century, the Central American integration
process needs to be strengthened and the Region integrated into the global economy.
Internal barriers to intra-regional trade and investment need to be reduced, as well as
negotiating greater market access for Central American exports. It is through expanding
trade and investment that sustainable development and higher living standards can be
achieved in the Region. Existing obstacles to the integration process need to be studied
and removed through joint agreements.
In addition, there is a need for a regional approach for environmental protection, for
example, in river basin development and in the planning and management of multi-country
infrastructure projects.
I would like to make a few observations on our work-at this CG meeting.
Lessons Learned from Hurricane Mitch
To quote George Santayana, "Those who cannot remember the past are condemned to
repeat it".
Hurricane Mitch provided important lessons which clearly demonstrated the extreme
vulnerability of the poorest segments of the population. The poor, living in high risk
areas, bore the brunt of Mitch's destruction. Deforestation, cultivation of steep
hillsides, and building shelters in the flood plain provoked immense flooding and mud
slides.
As Governments go forward with reconstruction, action needs to be taken in several
important areas to:
- Strengthen sustainable environmental practices particularly conservation measures in
agriculture, forestry and land use.
- Develop early warning systems and community organizations for disaster response in order
to mitigate the impact of future disasters.
- Economic impact and need for balance of payments assistance and debt relief
In addition to the physical damage, Honduras, Nicaragua, Guatemala and El Salvador
suffered the destruction of major export crops and loss of production in other sectors
which have reduced foreign exchange earnings, created major unemployment problems, and
decreased the capacity to finance public expenditures.
In order for these economies to recover and start growing again, they will require
non-project assistance or program assistance as well as debt relief, particularly in the
case of Nicaragua and Honduras.
There are a number of recent favorable developments with regard to debt relief
including:
- Paris Club members' decision in December 1998 to a three-year deferral of debt payments
by Honduras and Nicaragua. In April of this year the Paris Club granted Honduras the
Naples terms with a 67% reduction in their debt service payments.
- The Central American Emergency Trust Fund established in the World Bank to help Central
American countries meet their debt service payments to multilateral institutions has
already received pledges exceeding US$100 million and further contributions are expected;
- Lastly, the Bretton Woods institutions are currently examining the possibility of
Honduras becoming eligible under HIEPC and Nicaragua reaching the HIPC decision point more
quickly, which would result in significant multilateral debt reduction. The IDB is ready
to contribute its share to the H1[PC Initiative.
Donor Support
At the Consultative Group meeting last December in Washington, the international
community demonstrated its solidarity and indicated its support of about US$6.3 billion to
help the people of Central America rebuild the economies and transform their societies.
Donors recognized that their initial support at the December CG meeting was a strong
first step toward meeting longer-run costs of reconstruction and transformation, and
that additional resources would be needed for several reasons.
First, the actual costs of the reconstruction would be much higher than the assessment
of damages because the reconstruction needs to comply with up-to-date disaster resistant
and environmental standards.
Second, the National Plans that we have before us now go beyond 1998-99 and outline the
financing requirements for the medium-term. In this connection, at the December CG meeting
many donors only indicated the level of their assistance for 1998-99, pending the
preparation of medium-term National Reconstruction Plans and donors' parliamentary
approval of assistance allocations.
With the availability of multi-year National Reconstruction and Transformation Plans,
we expect donors at this meeting to provide information on the allocation of their
assistance for each of the Central American countries including the funds pledged last
December and additional assistance for the next four years.
IDB Program
The IDB will continue to be the largest funding source for Central America. We are
planning to commit approximately US$3.5 billion to the five Central American countries for
the period following Hurricane Mitch in November 1998, through the year 2002. A
substantial part of this amount is concessional financing and it includes debt relief,
redirection of funds from existing projects and new projects which give priority to the
task of transformation in these countries.
The Bank's program also includes US$100 million allocated to a new Fund for Central
American Reconstruction and we invite other donors to contribute and participate in this
Fund.
Full Agenda and Follow-up CG's
We have a very full agenda which was necessitated by the number of countries affected
by Hurricane Mitch and by the number of important issues that need to be discussed at this
meeting as outlined in the agenda. In addition, at the end of this meeting we will also
need to decide on the follow-up for future CG meetings.
Conclusion
Given the high level of interest and participation at this meeting, I am very confident
that we will have a meaningful interchange with our Central American partners and that we
will be successful in our joint efforts of supporting reconstruction and transformation in
Central America within a framework of sustainable growth and social justice. |
