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The Inter-American Development Bank (IDB) will hold its annual meeting in Montevideo, Uruguay, next week. IDB President Luis Alberto Moreno talks about the key issues that will be discussed during the meeting as well as the economic prospects for Latin America and the Caribbean, and Bank operations this year.
What is important about this Annual Meeting in Montevideo?
Every annual meeting is an opportunity for the IDB and its partners to closely examine together the economic and social challenges we face in the region. Latin America and the Caribbean have performed very well over the past few years, and our ability to overcome external shocks has improved. However, we face multiple challenges in areas such as competitiveness and productivity, education, public security, infrastructure and climate change.
I would like to thank the Uruguayan government for its support. We are very pleased to be holding our Annual Meeting in Montevideo. This is an event that draws more than 3,000 people from around the world, including high-level financial and economic authorities from both the public and private sectors. The Bank has a long and remarkable history of working with Uruguay. We have funded programs with more than US$3 billion over the past 10 years in areas such as social investment, education, science and technology, and transportation infrastructure, among others.
The economic outlook for the region is an important topic at the Annual Meeting. What can you say about the region's economic performance?
In the midst of a difficult international economic environment, the region has performed well. Growth, although it has slowed, remains robust. The region grew 4.3 percent in 2011, and this year we expect growth of about 3.6 percent. It is remarkable the way the economic growth of recent years has been accompanied by significant progress in social areas and in employment. It is also notable the way Latin America’s contribution to world economic growth is increasing: in 2010 and 2011, our region contributed 14 percent of total growth, well above its historical average of 8 percent. Obviously, the economic outlook is influenced by the performance of the global economy. We realize the region is not immune to what happens in the world and we are closely watching developments in the European, U.S., and Chinese economies.
In this context, what are the main challenges facing Latin America and the Caribbean?
In this climate of complex conditions, the wind clearly blows in our favor, and the region continues to advance. Thanks to solid economic growth, prudent macroeconomic policies and more effective social programs, today one of every three Latin Americans lives below the poverty line compared to almost half in 1990. The number of poor people in extreme poverty has fallen to record lows. We have a burgeoning middle class in our countries. Our public accounts are strong, especially when compared with developed countries.
Having said that, we still have too many people living in poverty, and income distribution is poor. It is important that countries maintain their commitments to fiscal discipline, prudent monetary and financial policies, and above all, that they remain attentive so they can detect and react to emerging vulnerabilities. The region has made great strides, but it also has a long list of outstanding issues whose resolution cannot be postponed. Our main enemy is complacency.
What should we do so we don’t become complacent?
The Bank is focused on several key issues that are on the agenda in Montevideo. Two of our biggest challenges is competitiveness and productivity, which are bottlenecks for private enterprise and progress. We must act decisively to improve the quality of education so our human capital can compete in a globalized economy.
It is also essential that we overcome the backlog in infrastructure. While investment in infrastructure has increased in recent years, it still lags behind other regions. In 1980, the region invested 3 percent of GDP in infrastructure, but by the beginning of this century investment had fallen to just 1 percent of GDP. We have to reach 4 percent and more. Moreover, recent natural disasters in many countries of the region have highlighted the vulnerability of our ports, roads and bridges. In Montevideo we will discuss how to use public-private partnerships to address this urgent task.
Greater integration with the rest of the world is certainly something we can’t afford to miss. The expansion of South-South trade is an engine that will drive growth at faster rates.
Finally, I cannot fail to mention the security problems and violence that are a drag on the development of the region because of their high economic costs and the damage they cause in peoples’ lives.
How can the Bank support the region in the tasks you mention?
Thanks to the ninth capital increase, approved in December, the Bank has strengthened its ability to provide credit and technical support to respond more effectively to the development needs of the region. We expect to approve an average of around $12 billion a year in new lending in addition to technical cooperation resources, which countries do not have to repay. The skills of our experts and the support we provide to countries in the design and implementation of projects are of great value to our clients.