MIAMI, Florida - The Inter-American Development Bank today sounded a note of optimism on the strength of Latin America and the Caribbean to weather the turbulence roiling international financial markets, but called on the region’s governments to press ahead with pending reforms.
Speaking here at the opening of the annual meeting of the IDB’s Board of Governors, President Luis Alberto Moreno said the Latin American and Caribbean region is “heading into the current storm greatly strengthened and armed with the experience of having successfully navigated much choppier waters than these.”
In the past, Latin America and the Caribbean went through severe crises when it was far more vulnerable to shocks, Moreno said. Today the region is less dependent on foreign capital inflows and has a more diversified export base, more solid institutions and around $450 billion in international reserves.
“No one knows for sure what the current spell of turbulence will bring, but our region is better equipped now to manage it than at any time in its history,” he added.
However, Moreno cautioned that the exceptionally favorable external conditions that helped Latin America grow by an annual average of about 5.6 percent for the last five years may have masked some structural weak points.
Citing the latest IDB study on the region’s macroeconomic performance, he noted that in most countries fiscal efforts had fallen short, since revenues generated during the bonanza were largely spent rather than invested. Governments should weigh the risks of a global slowdown and be prepared to act swiftly to head off problems, he added.
The Board of Governors is the IDB’s top policy-making body. Governors are finance ministers, presidents of central banks and other senior officials from the Bank’s 47 member nations, which include 26 borrowing countries in Latin America and the Caribbean.
Among the guests of honor at the opening ceremony held at the Fillmore Center in Miami Beach were prime ministers Hubert Alexander Ingraham of the Bahamas, David Thompson of Barbados and Dean Barrow of Belize. Miami City Mayor Manny Diaz welcomed the participants of the meeting, which will close Tuesday.
U.S. Treasury Secretary Henry M. Paulson, who was elected chairman of the board, said in his speech that, despite the slowdown in the United States, “the good news is that Latin American economies and financial markets have proven more resilient to the recent global financial turmoil than many might have expected.”
Paulson said the U.S. government was taking aggressive measures to minimize the impact of the recent economic downturn, adding that long-run fundamentals remain sound. “I believe we will work through this period as we have worked through past periods. And we will, as we always do, return to robust growth that benefits the American people and our neighbors in the Americas,” he said.
Guatemalan Finance Minister Juan A. Fuentes, the outgoing chairman of the IDB’s Board of Governors, welcomed the steps taken by the United States to avoid a severe contraction that would particularly hurt the region’s smaller economies.
Fuentes emphasized the role the IDB may play in helping its borrowers deal with the challenges of spiraling energy and food prices, which are hitting the poor the hardest.
The IDB is undergoing its own reforms to become more effective, Moreno noted. It has put in place new management team and is hiring more experts in key sectors. It is deploying more staff in the field and devising new instruments to suit borrower’s requirements.
“At the heart of this process has been the realization that times have changed, so we need a more nimble, flexible bank that can move quickly to meet client needs and add value,” Moreno said.
Last year the IDB approved $9.0 billion for Latin America and the Caribbean, up from $6.9 billion in 2006, confirming its role as the region’s leading source of long-term financing for social and economic development programs.
Moreno highlighted the increases in lending for infrastructure, a crucial factor for increasing competitiveness, and for potable water and sanitation, an investment essential to improve living standards in the region.
The IDB is also following a new strategy that emphasizes partnerships with companies, foundations and non-governmental organizations to fund the expansion of innovative projects to reduce poverty.
The 49th Annual Meeting of the IDB Board of Governors is being held jointly with the 23rd Annual Meeting of Governors of the Inter-American Investment Corporation (IIC), which specializes in financing for small and medium-size enterprises.