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Attracting and keeping private investors

While everyone agrees on the importance of attracting private investors to promote growth and expand opportunities for the poor, there is still discussion about how to create and maintain the conditions to make it happen. A Public/Private Summit on Investment Climate held at IDB headquarters will examine the issues involved in creating and maintaining a favorable environment for private businesses in Latin America and the Caribbean.

The summit will analyze private sector needs and public sector constraints, how to promote an attractive investment climate, and the political consensus, stability, sustainability and enforcement of required reforms. Speakers will include ministers, private company executives, and high-ranking officers from multilateral institutions.

Despite reforms to enhance the investment climate in most countries in the region over the past decade, entrepreneurs still complain about many of the same problems: insufficient access to credit, overpowering regulations, complex tax regimes, and unstable economic policies. Foreign direct investment in Latin America fell by 33 percent in 2002 compared with 2001, dropping from $84 billion to $ 56 billion. “It is clear that a new set of initiatives is needed to promote private sector development in the region,” says Antonio Vives, Deputy Manager of Private Enterprise and Financial Markets at the IDB.

Two research papers to be presented at the conference will provide insight for the discussions. They focus on the roles of government and the private sector in improving the investment climate and political aspects of private sector reform. An Investment Climate Initiative to support the enhancement and maintenance of conditions to attract private investors to the region will also be unveiled.

The IDB has financed a wide variety of operations to enhance the investment climate in the region over the past 10 years, particularly through sector reform loans. The Multilateral Investment Fund (MIF), a member of the IDB Group, has approved technical cooperation grants for a wide range of initiatives, including development of prudential norms, strengthened supervision and regulation of financial intermediation and securities markets, reduction of red tape, secured transactions, corporate governance, and regulatory frameworks.

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