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IMF's Rato: priorities and challenges to lay foundation for economic growth in Latin America

Latin American countries need a renewed commitment to essential reforms and stable political leadership to lay a foundation for higher economic growth, International Monetary Fund Managing Director Rodrigo de Rato said at the Inter-American Development Bank.

In an address to IDB executive directors, senior management and guests on Wednesday, Rato reviewed the priorities and challenges Latin America will face this decade and outlined how international financial institutions can help borrowing member countries achieve their goals of reducing poverty and increasing social equity.

Among the areas that will require revitalized reform efforts, Rato mentioned fiscal discipline to reduce public debt; monetary and exchange policies consistent with macroeconomic stability; strengthening banking systems; improving conditions for private investment; addressing labor laws; and, increasing the region’s integration in global markets.

“I am sure that this new decade, which is already underway, will represent a big change. There is a great potential. The efforts made in the last years have not been wasted, but are yet to be totally developed,” said the former Spanish economy minister, who took office as the IMF’s managing director on June 7.

“I truly believe that in the areas that I mentioned, and others in which you are working, there will be a better situation in the future,” he added. “At the Fund, we are committed to work with governments to implement policies that will increase growth and lead to increased employment, reduced poverty and enhanced social equity”.

Decisive political leadership will be needed to address these policy priorities, Rato said. However, he added, authorities must be given time to carry out their proposals. Without stability, governments will not be able to achieve their goals, and it will be impossible to secure popular support for reform. “Reform cannot be imported from international institutions or foreign experience. And that ownership of reform has to be based on a stable political environment,” he said.

In the coming years international financial institutions will have an essential role in providing governments the inputs needed to analyze policy options, in developing the institutional capacities required to implement policies and in providing financial resources to complement private markets during crises, he said. These institutions must also continue to assist borrowing member countries in strengthening their judicial systems, line ministries, specialized agencies and local governments.

Rato also said industrialized countries should go beyond offering aid to developing countries and contribute substantively to multilateral trade liberalization. “The IMF has and will continue to express a very clear view that trade liberalization is a necessity and, in many respects, is the responsibility of developed countries,” he said.

In his introduction of the speaker, IDB President Enrique V. Iglesias noted that Rato had played a key role in helping Latin American countries overcome crises during the eight years he served as Spain’s minister of Economy. In that capacity he was a governor of the IDB, the World Bank, the European Bank for Reconstruction and Development and the IMF itself. A lawyer and an economist, Rato was also a member of Spain’s parliament.

 

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