Good evening. President Garcia, national and local authorities. It is a real pleasure to be here, for me and for those who have come from all corners of Latin America and the world. And a special word of thanks to Peru and Arequipa for how you have welcomed us and for the success that I know this forum will have.
I wanted to begin by noting that a year has passed since the international financial crisis began. A crisis that has not had as much of an impact in our region’s financial sector as has on its trade. A recent study by the International Monetary Fund showed that the overall losses of North American and European banks totaled more than US$ 3.4 trillion dollars. It is as if the gross domestic product of all Latin America, an entire year, had disappeared. As if it had turned into smoke overnight. But more significantly, to have a measure of this crisis, these same countries will have to invest close to four times what they lost, according to the IMF’s calculations, to be able to recover the growth rates that we had one year ago.
So, against all predictions about Latin America and Caribbean, this crisis did not have the dimensions that we all feared a year ago. There have certainly been many lessons. In 25 years we had 35 financial crises, none of which cost more than 10 percentage points of the gross national product.
Certainly many lessons arose from there. Lessons that prepared us to mitigate many of the effects of this crisis. We learned, for example, that good macroeconomic policies pay. We also learned that good financial regulation pays. Not by coincidence, for instance, did any Latin American financial system have toxic assets on their financial institution’s balance sheets. Diversified economies also pay. There is no better substitute for dynamism than the innovation of the entrepreneurial sector. And that is why the question for us now is how we want to face the future. Given the challenges we face, we want to be thinking as a region about a world in which growth is going to be sluggish before it returns to the levels we saw prior to 2008 and 2007.
This brings me to Peru, a country where the economy continues to grow. A country that is at the vanguard of many of the IDB’s priority programs: environmental sustainability; all the initiatives associated with climate change, sustainable energy that seeks viable energy solutions not only from the point of view of the environment but also from the point of view of the economy.
The Initiative for All that President Garcia has promoted with such zeal, which offers an array of tools to help close the gap of coverage of water and sewerage services. But it also touches on some of the principles of the Millennium Development Goals. These are all challenges of the 21st century, challenges that the IDB faces in its work in Peru. In addition, all of these projects are focused not on the next election but on the next generation of Peruvians. For this, Mr. President, we want to thank you, for the work we have been able to do these years.
There is no doubt that the public sector will play an essential role in how these challenges will be addressed in the future. The regulatory challenges, the financial policy challenges and above all the challenges associated with productivity, which will be one of the key issues, for which there is no doubt that the big issue pending is in the area of science and technology. If we added everything that’s being done in this one area by the academia, the private sector and governments in our region, we don’t even come close to what is being done today, for example, in a country such as South Korea.
So I believe that what we are also doing here in Peru is what we want the IDB to focus on in the future, which is to help our region join what has come to be called the green economy.
All these issues of climate change can be seen in a city such as Arequipa, where we can view the volcanoes, and not only the peaks that had snowcaps in the past; all the high peaks of the Andes, today are bare. Climate change is already with us and just like this new clean economy it is going to be an extremely important issue.
We are also at a forum on microenterprise and microfinance. And I want to recognize the fact that for several years we have been conducting a study [on the climate for microfinance] with the Economist Intelligence Unit. The latest study, which covers more than 50 countries, finds that the country that is at the vanguard in all this group is Peru, in the top spot. And so I believe it is entirely fitting that we celebrate this forum here in Peru, where there is vast knowledge not only on the part of regulators and microentrepreneurs but also the on the part of microlenders.
And when we think of the role that microenterprise plays in our region, we realize that it generates a significant portion of all employment in Latin America and the Caribbean. At the end of 2008, for example, there were an estimated 636 microfinance institutions in the region, with a portfolio of over $11 billion dollars and more than 9.5 million clients.
However, there are many challenges pending. These numbers sounds like a lot. But what is clear is that this sector is only reaching 15 percent of all microenterprises. The challenges are many. Thus at the IDB we want to work on a series of immediate issues. Today, Mr. President, we had the opportunity to launch a fund that you heard President Obama speak of among other things at the Trinidad and Tobago summit. A fund that will have close to $250 million dollars and is specifically focused on how we can help microfinance institutions grow more rapidly.
The other lesson we have learned is that times of crisis are times of change. And in finance, change requires caution. The best-run microfinance institutions are currently dedicating more and more time and resources to identifying good clients and monitoring more closely the clients they already have. It is also a time for innovation. For example, we launched a program with several partners that will train women microentrepreneurs, since studies show that women save more and reinvest in their businesses.
For all these reasons, Mr. President, we are very happy to be here in Arequipa, which has played an important part in the IDB’s history. It was here where the Bank made its first loan, nearly 50 years ago. Precisely for Arequipa’s water and sanitation company, which was basically rebuilt after an earthquake.
I would like to finish by saying to all microentrepreneurs and all microfinance institutions here today, that really the future is in your hands, that that future doesn’t care about the size of the companies. There is no doubt that every day it is more important to strengthen the relation between state and businesses and to improve the way in which the relation is articulated. But innovation and job-creation are in your hands.
Finally, Mr. President, I would like to share an impression. Whenever I come to Peru, you surprise me, you who know my country (Colombia) so well, it’s said that to be Colombian is an act of faith, as Borges would say.
I am always surprised whenever I arrive here, because the first question the press asks is loaded with pessimism. A tone of “why is everything going badly here in Peru.” And so last night I was thinking, with the marvelous cuisine Peru has, a cuisine that any country would love to have, I was thinking about how tourism has been developing. In the fact that despite this global crisis, this is the only country that continues growing. That while Latin America has contracted by almost 2 percent, Peru is growing by almost 2 percent. That not for a single day has it stopped generating employment.
But also it is a country that has an immense future. So this disconnect is something that calls one’s attention.
But I’m guided by the optimism of the people who set to work everyday. And I see them sure that a better tomorrow will be built for all. And I want to say to you, Mr. President, the Inter-American Development Bank, is ready to accompany you in this effort. In this effort in which everyday you try to build a better tomorrow for all Peruvians. Thank you very much.
- Romina Tan Nicaretta