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IDB to launch initiative for broad-based growth in Latin America and the Caribbean

BELO HORIZONTE, BrazilThe Inter-American Development Bank will launch an initiative to promote broad-based economic growth in Latin America and the Caribbean, focusing on the region’s low-income population, a vast majority historically sidelined from progress.

At the opening of the seminar on innovative ways to provide high-quality and affordable goods and services to the region’s majority, IDB President Luis Alberto Moreno today said: “If there is an issue in which we want to put a lot of energy, this is it.”

Moreno, who took the IDB’s helm in October 2005, believes the region needs fresh approaches to address its deep-rooted economic and social exclusion, which keeps hundreds of millions trapped in low living standards. While Latin American per capita GDP has grown 95 percent since 1960, poverty and inequality levels have barely budged.

As a result of the pervasively skewed distribution of economic opportunities and assets, most people in Latin America and the Caribbean have limited access to what they need to earn a decent living. To tackle these problems will require a combination of forceful efforts by the private sector, civil society and governments.

The seminar’s keynote speaker, University of Michigan professor C.K. Prahalad, author of “The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profit,” said that in order to overcome poverty and build prosperity, every person must have access to the benefits of the global economy.

Prahalad, who holds that poor people should be treated as consumers and producers rather than charity cases, said his proposal is not as Utopian as it might sound. As he pointed out, 50 years ago most people in the world lived under colonial or Communist regimes.

“Democratizing commerce will be the real challenge of the 21st century, just as democratizing politics was the great challenge of the 20th century,” he said at the seminar held ahead of the annual meeting of the IDB’s Board of Governors, which will take place here April 3-5.

But in order to reach the majority at the base of the economic pyramid, the private sector must find ways to meet the needs of the excluded. Prahalad gave examples of how companies in India and Brazil have succeeded in creating markets for low-income clients, providing them quality goods and services at decent prices.

Prahalad further recommended that Latin American and Caribbean countries not to look for solutions abroad but find sources of innovation within their own borders.

The IDB’s broad-based economic growth initiative will be launched at a June 11-13 conference in its Washington, D.C. headquarters, featuring an “economic atlas of the majority” with statistics and indicators on low-income people in the region.

The initiative will focus on a few priority areas where the IDB can make a difference, such as expanding low-income people’s access to formal financial services by building on the experience of microfinance.

Another area of precedence will be improving access to basic infrastructure such as electricity, roads, water and sewer networks, especially beyond urban areas. Narrowing the “digital divide” through greater access to affordable information and communications technologies will also be goal. In that field, cellular telephone companies have set an example of how to serve poor clients in developing nations.

The IDB also intends to work with member countries on improving their business climate, addressing obstacles that drive entrepreneurs into the informal economy and prevent them from growing and generating more jobs. It will also foster partnerships between small and large companies seeking to develop new market opportunities at the “base of the pyramid.”

Housing is a sector of particular interest, given its potential for fueling economic activity and generating employment. Projects could include expanding access to plots with basic utilities, property titling and mortgage financing.

The IDB’s initiative, Building Opportunities for the Majority, will grow gradually, starting with projects capable of producing strong demonstration effects and working with the public and private sectors as well as with civil society organizations.

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