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Financial crisis may increase calls for governments to boost spending

The global financial crisis will increase pressure for governments in Latin America and the Caribbean to boost spending, according to Luis Alberto Moreno, President of the Inter-American Development Bank (IDB).

“The pressure for bigger spending will gather popular support in many countries that do not have the right conditions to meet that demand,’’ Moreno said during the opening of a seminar about quality of life in Latin America and the Caribbean, in Medellin, Colombia.

Moreno opened the seminar, which discussed the role of perceptions in shaping public policies during periods of economic crisis. It is extremely important for governments, legislators and members of the civil society to keep the political debate at a high level so decisions are balanced and responsible, contributing to the long-term welfare of the region, Moreno said.

Panelists Moisés Naím, editor of the Foreign Policy magazine, Roberto Lavagna, former Argentina’s Finance Minister, and Alain Touraine, research director at the École des Hautes Études en Sciences Sociales discussed the political implications of perceptions during periods of financial crises. The debate was moderated by journalist Michael Reid from The Economist and the author of “El Continente Olvidad La lucha por el alma de América Latina,” a book about the economic, political and social changes in the region, launched this month.

The seminar about quality of life is part of a series of events preceding the 50th Annual Meeting of the IDB’s Board of Governors that will begin on March 29.

Hundreds of government officials, economists, civil society representatives and academics are taking part in IDB-sponsored seminars to discuss the current economic situation and policy responses to the ongoing global financial crisis and long-term developmental challenges.  During the two-day board meeting, representatives of the Bank’s 48 member countries, which this year will include China for the first time, will discuss ways the IDB can increase support to the region.



Moisés Naím said misguided public perceptions can increase support for bad public policies or cause changes in good policies that will reduce their effectiveness.

“The biggest problem in Latin America is lack of patience," Naím said. “Certain policies need time to start bearing fruit and, many times, there is pressure to change those policies.”

Roberto Lavagna said the multilateral system has an important role to play during times of economic crisis by helping countries implement effective anti-cyclical policies.

During the event, Reid talked about some of the main findings in the Bank’s flagship publication Development in the Americas entitled “Beyond Facts: Understanding Quality of life.” 

On the occasion of its fiftieth anniversary, the IDB took on the challenge of consulting its most important constituency—the people of the region—about a most basic issue: the quality of their lives. Using data from the Gallup World Poll and other public opinion surveys, the Bank uncovered some fascinating results.

The study showed that the poor in several countries in Latin America and the Caribbean tend to better evaluate public services than richer segments of the society.  The lack of aspirations by the poor can hurt demand for better public services, particularly during times of constrained budgets.

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