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Leaders urge Latin America to take steps to improve business climate

Leaders today urged Latin America to make a greater effort to improve the business climate, especially for small and medium-sized enterprises, as a way to speed up economic growth and reduce poverty.

The appeals came during a conference at the Inter-American Development Bank that gathered together more than 200 policy-makers, business leaders and experts to examine the bottlenecks to doing business in Latin America and the Caribbean and to recommend corrective measures.

Chilean President Ricardo Lagos, addressing the conference in a video from Santiago, warned that countries must make targeted social investments to accompany policies that promote growth.

He said the “Washington Consensus,” the policy that promoted stabilization and certain macroeconomic reforms as a precondition for growth, was “not enough.” Other investments were needed to improve the investment climate by promoting social stability.

“Without social cohesion, there is no possibility of competing in the world,” he said.

He cited Chile’s program of raising compulsory education from four to 12 years as the type of social investment that leads to both stability and growth.

“Leaving people behind is a source of social conflict,” he warned.

IDB President Enrique V. Iglesias, in an opening talk, said despite recent advances in macroeconomic stability the cost of operating a business in countries of the region “continues to be noncompetitive, because of weak institutions, rules that discourage investment, inadequate infrastructure and limited access to financial resources.”

Noting that infrastructure investment in the region is far below the $70 billion required annually, Iglesias said that “a renewed effort is necessary” not only in drafting the appropriate laws and regulations, but also in developing the appropriate institutions to carry them out.

Other opening speakers included U.S. Under Secretary of the Treasury John B. Taylor, who stressed the importance of private business in creating “80 percent of the jobs” and also noted that many of the poorest countries also had the most impediments to starting up a new private business.

He said the key pillars of growth are “economic freedom,” “investing in people” – especially health and education – and “governing justly,” including combating and reducing corruption.

Taylor noted the potential multibillion-dollar impact of reducing the cost of remittances sent to countries by emigrants abroad and the importance of studies and other steps by the Multilateral Investment Fund of the IDB to enhance the economic and social impact of the remittances.

Other speakers expected to address the conference include Mexican Finance Minister Francisco Gil Díaz, Brazil’s Planning Minister Guido Mantega, and Chile’s Economy and Energy Minister Jorge Rodriguez Grossi, as well as other senior officials from the private sector, government, and nongovernmental institutions.

The IDB has invested more than $13 billion since 1990 to promote an improved investment climate in Latin America and the Caribbean and is proposing a new plan and additional measures to attract greater private investment with a more favorable environment.

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