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.