MILAN, Italy – Latin America and the Caribbean are ready to resume economic growth this year despite world tensions and crises in some countries, Inter-American Development Bank President Enrique V. Iglesias said today.
Inaugurating the 44th Annual Meeting of the Bank’s Board of Governors in Milan, Iglesias said nations of the region should focus on developing a long-range vision while dealing with present-day uncertainties and difficulties. They must also redouble efforts to achieve sufficiently high rates of economic growth that will reduce poverty and ease social tensions.
“The immediate prospect for the world economy and for our region is one of uncertainties . . . exacerbated by the complex situation of the Middle East,” Iglesias said. “Nevertheless, the economies of several countries in the region have begun to improve compared to the beginning of 2002.”
If international conflicts do not worsen, the economy of the region could grow between 1.5 and 2 percent this year, he said. If the upward trend continues, growth could reach 4 percent in 2004, he added. In 2002 the region’s gross national product fell 0.5 percent.
In order to make inroads against the poverty that has trapped up to 44 percent of the population of Latin America and the Caribbean, the regional annual growth rate must reach an average of 2.7 percent annually over the next 15 years, the IDB president warned.
Iglesias recommended an agenda for sustained recovery that includes maintaining macroeconomic equilibrium, focusing social policy to benefit the neediest sectors of the population, expanding foreign trade, deepening integration, attracting investment, promoting growth of the private sector and increasing business productivity, especially for small- and medium-sized enterprises.
Summarizing the results of economic reforms of the past decade, Iglesias said Latin America had succeeded in reducing inflation to historically low levels; governments are investing more resources in education, health and social security networks; the public sector has begun a significant process of modernization and decentralization; and countries have drawn closer together politically and through economic and physical integration.
Iglesias noted that many countries of the region, instead of promoting domestic savings, have become dependent on foreign capital – a situation that exposes them to international financial volatility.
Some of the past reforms contained weaknesses, Iglesias said. Moreover, they were applied inconsistently, without the necessary legal and regulatory frameworks, he added. Corruption and errors in handling privatization in some cases resulted in a loss of public support that is a prerequisite of a reform’s success.
The IDB president identified a series of strategies to deal with the crisis, noting the Bank’s readiness to assist borrowing member countries in carrying them out. In order to assist in focusing social policies on the groups that need help the most, the Bank supports networks for employment protection, nutrition and school attendance. To promote the expansion of foreign trade as a motor for growth, the IDB offers loans to broaden the financing of imports and exports. The Bank also assists Latin American and Caribbean countries in the preparation and negotiation of commercial agreements while promoting the deepening of subregional cooperation.
The Bank finances a variety of programs to support growth, productivity, and access to credit by microenterprise and small- and medium-sized businesses – the main source of employment for the region.
Iglesias pointed out that present regional and international circumstances require that the Bank constantly review the effectiveness of its policies, procedures and instruments in order to adapt them to the changing needs of the member countries. The Bank is taking steps to increase its flexibility and streamline its administrative processes.
Among the IDB’s new financial instruments is foreign trade financing. It has also reopened an emergency loan program, broadened its financial guarantees and introduced a new lending product -- interest rates for its loans based on LIBOR.
Iglesias emphasized the importance of promoting greater transparency and reinforcing it within the IDB itself. “The Bank has adopted a zero tolerance policy on instances of fraud, abuse or corruption,” he said. The Bank is updating its Ethics Code to enforce ethical standards for staff members, consultants and contractors. The IDB is also updating its information dissemination policy through an extensive consultation process with diverse groups, from governments to civil society organizations.
Iglesias informed the Governors that the Bank will review legislation that provide specific measures insuring corporate integrity such as the Sarbanes-Oxley law to insure that substantially similar measures and controls are incorporated in the institution.