PANAMA CITY, Panama -- Despite advances in quality of life and economic growth in Latin America and the Caribbean over the past decade, more needs to be done to keep the momentum going and meet future challenges, said Luís Alberto Moreno, president of the Inter-American Development Bank.
That was a key message at the 54th annual meeting of the IDB, the main source of development financing in the region. The gathering brought together finance ministers and central bank presidents from 48 member countries and some 3,000 representatives from development agencies, banking institutions, businesses and civil society organizations.
On Sunday, the last session of the four-day meeting, the IDB board of governors approved a resolution directing the bank to come up with a proposal by Oct. 31 to better manage the bank’s lending to the private sector. As part of a $70 billion capital increase for the bank that was approved in early 2012, more resources are being made available for private sector lending.
“This is simply the first step in transforming the private sector in our region,’’ said Panama’s Finance Minister Frank de Lima, the newly elected chairman of the IDB.
During an address to the board Saturday, Moreno said the region’s economies are expected to grow by 3.6 percent in 2013. Also, a dramatic reduction in poverty, higher incomes and growth in the middleclass in the region over the last 10 years were reported
But Moreno said, “These achievements are insufficient when we look at the challenges ahead in consolidating just and prosperous societies.’’
The IDB meeting coincides with “an ever more complex international context” in which growth in many developed countries is expected to continue at low levels, he said.
And that has had a decelerating impact on regional economies. In 2008, before the full effects of the worldwide economic crisis were felt, economic growth in Latin American and Caribbean countries averaged 5 percent annually.
Much of Latin America’s recent growth also has been fueled by high commodity prices.
“The fact is that boom times don’t last forever as has been demonstrated multiple times in our history and are only fruitful if harnessed well,’’ said Moreno.
“We do not know how much longer the capital inflows that have provided us with abundant and cheap funding will last, but in large part they depend on decisions taken by central banks in the United States and Europe, and although it still seems a long way off, more costly and selective access to global savings should be included in any calculation about the future,’’ he said.
Now is the time for countries in the region to make structural reforms, Moreno said, that will “accelerate growth and consolidate social progress.”
Areas where improvements are needed, he said, are investments in roads, ports and airports, technological innovation, justice systems, fighting crime and healthcare and education. “These are indispensable initiatives to ensure that we are able to keep competing in the global economy,” said Moreno.
“Education is a priority for the region,’’ said Moreno who added that he wasn’t simply talking about increasing access to education but improving quality.
PUSHING TO GROW
Rethinking Reform, an IDB report released Sunday, said that with world economic growth likely to remain below potential for several years, the alternative for Latin America and the Caribbean is to embrace structural reforms tailor-made for their circumstances.
Over the next five years, the report said economic growth in the region is expected to average 3.9 percent, and lower commodity prices and a slowdown in world trade are expected to depress regional consumption and investment.
“It is not a question of using fiscal and monetary policies today to counter a negative shock and bring growth in the region up to its potential,” said José Juan Ruiz, the IDB’s chief economist. “We need to find measures to increase our potential rate of growth.”
Latin American and Caribbean nations have the economic resources to grow much faster than current rates if they deployed their resources more efficiently, said Andrew Powell, chief advisor in the IDB’s research department.
If efficiency were increased to the levels of the United States over 10 years, productivity in the region would jump by 20 percent and a typical country’s growth would increase by at least 1 percent per year during that decade, according to the report.
The IDB also announced a flurry of new initiatives and studies during the meeting. Among them:
• The bank and the People’s Bank of China approved the China Co-financing Fund for Latin America and the Caribbean. The first of its kind, the fund will complement IDB’s own resources on projects designed to alleviate poverty and inequality as well as support private sector projects aimed at promoting sustainable growth in the region.
The partnership will “narrow funding gaps in sectors with high developmental impact and enhance the social and economic impact of our projects. It will serve as a benchmark for future models of cooperation with China and other countries,” said Moreno.
China is expected to contribute $2 billion with up to $500 million co-financing IDB loans to the public sector and $1.5 billion for bank loans to the private sector.
• The bank launched a Biodiversity and Ecosystems Services Program that will help the region leverage its natural capital, the economic value of its biodiversity and ecosystems, into projects that lead to new business ventures and policy reform as well as increased knowledge of the region’s natural wealth.
Accounting for 40 percent of the world’s biodiversity, the region is known as a superpower with an array of species. For example, the region is home to 43 percent of the world’s bird species.