SANTIAGO, Chile - Latin America and the Caribbean face three great social, economic and political challenges at the dawn of the 21st Century: reducing poverty, increasing competitiveness, and consolidating integration, Inter-American Development Bank President Enrique V. Iglesias said today.
Iglesias emphasized these three goals in an address at the inauguration of the Annual Meetings of the Board of Governors of the IDB and the Inter-American Investment Corporation, a member of the IDB Group.
The ceremony took place in the Diego Portales Building in the Chilean capital with the participation of presidents Ricardo Lagos of Chile, Fernando de la Rúa of Argentina, and Jorge Batlle of Uruguay.
"As Latin American and Caribbean nations move into the 21st Century, it is imperative, now more than ever, that they find ways of propelling economic growth to improve the lot of their people, rearranging priorities to push poverty reduction, and social progress concerns generally, to the top of the list," Iglesias said.
In spite of the efforts of the past decades by countries of the region to consolidate economic stability and democracy, approximately 220 million persons live in poverty, and almost half of them are indigent.
At the same time, Iglesias added, serious inequities persist in most countries of the region. About 40 percent of the national income in the region is in the hands of the wealthiest 10 percent of the population, while at the other extreme of the social scale the poorest 30 percent of the population receives only 7.5 percent of the total.
"Growth that fails to extend opportunities to the masses can end up interrupting or even reversing gains of economic, giving rise to populism and the weakening of democracy and social harmony," Iglesias said.
Growth, competitiveness and productivity
The scourge of poverty and inequality are linked to the lackluster performance of the region’s economies, whose production remains far below its potential, he noted.
This situation could be overcome through greater efforts to increase competitiveness of the Latin American economies. Iglesias recognized the issue was complex and will test the will of the countries of the region to advance.
"One formidable challenge for Latin America’s economies is to achieve more efficient production and make more efficient use of economic and human resources," the IDB president said. "Productivity gains are imperative if the region is to step up economic growth and equip itself for global competition."
"But this is only one facet of the challenge," he continued. "If we aspire to an equitable society, we need economic growth robust enough to remedy the problem of unemployment and create gainful employment for a growing workforce."
At the same time, Latin America must intensify efforts to reduce vulnerability to external crises. In addition to expanding and diversifying production and exports, the countries of the region must redouble efforts to increase internal savings and strengthen their financial systems to reduce dependency on foreign capital flows.
To achieve these goals, Iglesias said, governments must overcome current policy restraints and find better tools.
"Neither the mature industrial powers nor the newly industrialized Asian countries managed to grown, modernize institutions, or advance technologically without a good dose of sectoral policies and targeted incentives," Iglesias noted. "Why should Latin America and the Caribbean, with their enormous development gaps, remain defenseless and passive, wasting their production potential and opportunities to go forward?"
Integration and FTAA
One way for the region to successfully insert itself into the world economy is through integration. Iglesias pointed out the advances of Latin America and the Caribbean in the past decade with the so-called "New Regionalism," but he questioned whether these efforts were losing momentum, as occurred with other integration schemes of the past.
"After nearly a decade, the ‘easy’ stage of the New Regionalism in Latin America and the Caribbean may well be over, and a bolder political vision may be needed to push through more sweeping collective commitments," he said.
"It would be a tragedy to forfeit that investment."
To assure the success of both existing subregional agreements as well as more ambitious ones, like the Free Trade Area of the Americas, Iglesias proposed that the countries of the Hemisphere set goals to eliminate nontariff trade barriers, adopt transparent mechanisms to resolve conflicts, liberalize commercial services, advance in the area of macroeconomic and monetary policy, modernize commercial institutions and deepen structural reforms.
"The prospects for a FTAA in 2005 seem good," Iglesias said. "The negotiation process is advanced, and a few delegations support moving the closing date for negotiations. It would be my view that focusing on concerted procedures for moving forward as quickly as possible, while ensuring that negotiations address substantive concerns for a balanced agreement, is more important than a formal advancing of the closing date as such."
The role of the IDB
Iglesias told the IDB governors that a frontal attack on poverty continues to be the main objective of the institution as part of an ambitious social development agenda that is aimed at generating greater equality of employment opportunities and the inclusion of the most disadvantaged social sectors, including women, youth, people with disabilities, and racial and ethnic minorities.
At the same time, he said, the Bank will continue to support countries in the region in their efforts to stimulate equitable and sustained economic growth, integrate into the global economy, and modernize political institutions in order to improve management of the public sector, promote social dialogue and combat corruption.
Iglesias pointed out that the Bank possesses an array of instruments to carry out its mission, but he recommended that they be made more flexible. He noted the importance of evaluation mechanisms.