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Iglesias: Latin America keeps to its economic and political course while confronting a crisis

FORTALEZA, Brazil -Latin America and the Caribbean are emerging from a discouraging two years of stagnant growth, but the region is firmly keeping to responsible economic policies and democracy, the president of the Inter-American Development Bank said today.
“Latin America is going through certain moments of concern, difficult times,” said IDB President Enrique V. Iglesias in his closing address to the 43rd Annual Meeting of the Bank’s Board of Governors. “But in general terms, these are birth pangs, not death throes.”

Iglesias noted that in recent years Latin America and the Caribbean have made great efforts to consolidate macroeconomic stability and that the region continues to demonstrate the will to recover growth, without making concessions to “the easy option of populism.”
According to the IDB president, if this same crisis had overtaken the Latin American countries under macroeconomic conditions of two decades ago, the results would have catastrophic.

“Latin America has accomplished much, which is evident in the way it is overcoming its present problems,” said Iglesias. “This is manifest in its political maturity, the lack of returns to its authoritarian past, in the maturity of its macroeconomic policies.”

Nevertheless, he added, the region still faces major challenges, principally its external vulnerability and the social deficits that afflict its peoples. The key for overcoming these challenges, said Iglesias, is to significantly increase competitiveness in its productive sectors, boost the efficiency of its governments and spur economic growth.

The Argentine crisis was the focus of this year’s IDB annual meeting, which was held this year in Brazil’s northeastern city of Fortaleza. Iglesias underlined the pledges of solidarity by the Bank’s other member countries with the government and people of Argentina. He declared that the IDB is committed to support recovery efforts in that country, which is negotiating a new agreement with the International Monetary Fund.

Given the current international economic situation, the IDB member countries are considering alternative approaches for stimulating economic growth and reducing poverty, inequality, and social exclusion. Among these approaches, Iglesias said, are support for regional integration, measures to stimulate microenterprise, and efforts to increase productivity and create a legal and regulatory environment conducive for investments.

In order to help borrowing countries address the effects of financial turbulence, the IDB’s Board of Governors created an emergency line of credit for $6 billion for the period 2002-2004. Iglesias noted that these resources will be available to alleviate the social costs of the economic readjustment processes and to help the countries preserve the gains from their reforms.

The IDB president said the Bank’s member countries will have to address these topics in the United Nations meeting on development and finance that will be held next week in Monterrey, Mexico.

In closing remarks, Brazil’s Planning Minister Martus Tavares, the new chairman of the IDB Board of Governors, emphasized the role the multilateral institutions should play in mitigating and preventing the effects of volatility in international markets.

Tavares said the part of the solution to this problem is in the hands of national governments, which should maintain responsible macroeconomic policies. He added that international financial institutions are essential to this purpose.

The planning minister praised the decision of the Board of Governors to authorize a new line of emergency loans to assist countries affected by financial turbulence, but he cautioned that more new instruments are needed to avoid crises that spread and affect the economies of all the region.

The governors acknowledged several proposals contained in a report of the External Advisory Group on how the IDB can contribute to improving the competitiveness of the economies of the borrowing country members. The Advisory Group, presided over by Mexico’s former Secretary of Treasury Angel Gurría, emphasized the need to take steps such as improving the investment climate, intensifying support for the private sector, developing national capital markets, designing financial mechanisms to prevent crises and deepening regional integration.

Tavares supported a proposal to form an external advisory group for the Inter-American Investment Corporation.

This year the IDB Annual Meeting was held in Fortaleza, capital of the state of Ceará. Iglesias stressed the importance of holding the meeting in a developing area and noted that the Northeastern city was the ideal setting to understand how a poor region in adverse circumstances can develop with effort, appropriate programs and political will.

During the meeting documents referring to more than $4.1 billion in operations by the IDB and the Multilateral Investment Fund were signed to support economic and social development in several Latin American countries.

Seminars on economic, social, and political subjects

As is the tradition in annual meetings, a series of IDB seminars were held on current economic topics as well as on subjects related to medium- and long-term development. The seminars, which were held with the support of a number of member country governments, attracted hundreds of government officials, specialists, academics, and representatives of the private sector, civil society, and international organizations.

The IDB’s Research Department held a seminar on the Argentine crisis and its lessons for the region. Participants included ministers of finance of Argentina, Chile, Mexico, and Peru.

Speakers described how open economics can recuperate more rapidly than closed economies. They also emphasized the need to bring stability to financial systems to enable them to restore economic activity and develop anti-cyclical policies to reduce the volatility that has characterized the region.

Other seminars analyzed the results of structural reforms carried out the past two decades, the resurgence of macroeconomic crises, the challenges of the new regionalism, the future of regional and world trade negotiations, the development of new financial products and services for small- and medium-sized firms, and regional integration initiatives such as Plan Puebla-Panama, and the South American infrastructure initiative.

In addition, seminars were held on the development of rural economics, the fight against poverty, administration of water resources, expansion and quality of higher education and science and technology, the challenge of HIV/AIDS and the successful Brazilian experience in combating this disease, sustainable tourism, social dialogue and the participatory experience of Brazil’s environmental councils and the formation of young leaders and the contribution of youth to the development of their countries and communities.

The IDB annual meeting also was the setting for two conferences on political themes. Brazilian President Fernando Henrique Cardoso, and his counterparts from Peru, Alejandro Toledo, and of Ecuador, Gustavo Noboa, participated in a seminar on risks to democracy in Latin America. Together with Chilean former president Patricio Aylwin and the president of Italy’s Lombard region, Roberto Formigoni, they analyzed the challenge posed by social deficits accumulated by the region.

Presidents Noboa and Toledo participated in a seminar on the consolidation of peace and economic development on the border between Ecuador and Peru, a process in which IDB and other countries and international institutions are participating.

Resolutions of the IDB and IIC Annual Meetings

During the Fortaleza meeting, the Boards of Governors of the IDB and the IIC adopted the following resolutions:

  • The IDB Board confirmed a framework for Bank operations for the period 2002-2004. During these three years, the IDB will have an lending capacity of $26 billion, which includes $15.5 billion for investment projects, $6 billion for emergency lending, and $4.5 million for sector loans.
  • The IIC Board took measures to increase the Corporation’s operational capacity and attract more co-financing resources from non-borrowing countries.

The next IDB-IIC annual meeting will be held on March 24-26 2003 in Milan, Italy.

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