Mexico's former Secretary of the Treasury and Finance Angel Gurría urged Latin America and the Caribbean to focus on achieving greater competitiveness and stronger governance to encourage a resumption of capital flows, which have been drying up.
“The private sector is the name of the game,” Angel Gurría said in a talk last week at IDB headquarters in Washington D.C. “The challenge is to re-establish capital flows, and the question is what can the multilateral development banks can do about it?”
Gurría's presentation, part of a series on development issues sponsored by the IDB's Forum on the Americas, was titled “How to Keep Multilateral Development Institutions Relevant.”
The former secretary noted that Latin America is now struggling with “two or three years of no growth” and falling capital flows. He suggested multilateral institutions could be more effective in reversing this trend by focusing on stimulating private sector growth through the use of guarantees that would strengthen capital markets, pension fund systems, secondary mortgage markets, local banking and finance and water and sanitation.
Another avenue of activity he suggested was lending by the multilateral development banks to subregional development banks, such as the Andean Development Corporation and the Central American Bank for Economic Integration.
Latin American nations must become more competitive to revive their economies, he said, noting that China was steadily taking an increasingly larger share of U.S. trade, squeezing out other countries, while also becoming the world's leading destination for foreign investment.
According to Gurria, good governance is critical in building an investment climate to attract capital flows. “The fact of the matter is we are losing ground when compared internationally,” he said.
Multilateral financial institutions can “think through” issues such as competitiveness and governance “and be leaders” in obtaining reforms, Gurría said. They can also translate ideas into concrete programs and projects because of their financial resources, he added.