“Latin America Must Adapt To A Changing World”: CAF President Calls For Further Regional Integration:

“How do we get our countries to agree on a long-term agenda? How do we rebuild the political consensus and the way our society discusses political issues?” These were just two of the key questions posed by Enrique Garcia , the Bolivian Executive Chairman of the Corporacion Andina de Fomento (CAF) when he addressed a packed meeting at Canning House (“The home of the Hispanic & Luso Brazilian Council” in London’s Belgrave Square) on Monday 24th January. None his audience disputed his assertion that, despite Latin America being very much “back on the map,” its constituent nations “need to find a way to resolve some of their differences in order to secure their place in the world”. If they fail to do so “They won’t be able to rival the big global players”. Among those attending were the ambassadors of Ecuador, Brazil, Venezuela, Andorra and  El Salvador, diplomatic staff from the Uruguayan, Peruvian, Chilean and Panamanian legations, the Director of the British-Colombian Chamber of Commerce plus  representatives from  organizations such as Citibank, BAE Systems (the British defence, security & aerospace company) and BP. They were there to hear Sr. Garcia’s views on the prospective “ Growth and Trade Opportunities” in the area as well as the potential impact of “Rising International Currencies”. It is not necessary, he told them, to be “ideological” (whether left or right) to have good micro-economic policies – but that a strong private sector and access to credit is essential. The current 4%-5% rate of growth and 21% investment in infrastructure is simply ”not enough”: It should be at least 6% and 27%.  Even then, this would be far behind what is being achieved in Asia, where investment has reached 40% and beyond.

Throughout his talk, Sr. Garcia stressed that competence, efficiency and stability are vital elements in ensuring  sustainable development. He was cautiously optimistic about the region’s future. but was concerned that “Although poverty is diminishing, Latin America still has the worst distribution of income in the world. More funds need to be allocated to education, especially as preparation for the constant changes in technology” He queried whether possessing a wealth of primary commodities should be considered “ a blessing or a curse”, advocated wider diversification, such as dealing more with Europe once the “old continent” had put its house in order, described Chile as economically the most successful country in Latin America and contended that the “realities facing countries who are not particularly friendly to the private sector” would oblige them to “move in a pragmatic way to a central position”. This would also require “The re-thinking of the role of the state in the private sector (a recurring theme throughout the session): “How do you manage fiscal resources?” The traditional integration structures and free-trade arrangements in the area are “not working well” at the moment. This was a reference to The Andean Community (until 1996 called the “Andean Pact”), consisting of Bolivia, Ecuador, Peru & Colombia ; Mercosur (Argentina, Brazil, Paraguay & Uruguay) and Caricom (15 Caribbean countries and dependencies).

Sr. Garcia careful avoided being drawn into discussing the polemical aspects of ALBA (“The Bolivarian Alliance For the People Of Our America”; member countries: Bolivia, Cuba, Nicaragua, Venezuela), characterising it mainly as “A concept” which provides left-leaning politicians with a quick answer to the problems they have to resolve. President Evo Morales, ”Has not changed policies pursued in Bolivia 25 years ago”. An example of this was when he “tried to increase the price of gas by 75%” – a measure he had to hastily abandon when confronted by angry nationwide protests. Although there are clearly “ conceptual differences” within the Andean community, ”there are not inflationary problems as before”. Could these resurge? Latin American nations “have to be careful in managing what for many is a boom period” so as to avoid the up to 20% inflation levels of the past and the appreciation of their currencies. The present fiscal policy in the USA “ Will last a few more months – until the end of the year”. Interest rates will then have to go up, ”which will help Latin America”. The region, however, should not look to the international markets for all the answers: It must retain the ability to “adjust as and when necessary” to the constant fluctuations in global economic circumstances.

CAF has recently announced several ambitious new projects in Latin America: It will lend US$48 million to Ecuador as partial financing of the Valle de los Chillos road in the Pinincha province; US$126million to Bolivia for a five-year water & irrigation programme; US$6 billion will be allocated to Colombia by the end of 2014 for public and private sector ventures. Included in its many other commitments is a US$50 million contribution to a water & sanitation improvement enterprise ( total cost: US$72.3 million) to be carried out by Hidroven in six Venezuelan states. CAF also sponsors a wide range of social, cultural and sporting activities such as the Caracas Marathon 2011 (February 20th). The Corporacion acknowledges on its website that it is frequently asked about the origin of its resources. These, they say, are derived from the global capital markets. It also “receives deposits from central & commercial banks in the region, obtains loans & credit lines from international commercial banks & official institutions”. Export credit agencies furnish an additional supply of funding. The “Responding To Climate Change” organization (RTCC) profiles CAF as “ a multilateral financial institution, based in Caracas, whose mission is to support the sustainability and competitiveness of its shareholder countries (twelve from Latin America plus Jamaica, Trinidad & Tobago, Spain and 18 private banks in the area). Moreover, that  CAF’s “strategic priorities” are its work in the environmental & social fields of action and the strengthening of democratic institutions and governance.” According to “La Moncloa” (Spanish Government) website, CAF has significantly increased the scope of its operations in the past few years and consequently become the principal source of infrastructure funding in Latin America. –  surpassing the Inter-American Development Bank (IADB) and the World Bank, both of which are based in Washington.













Filed under: Politics | Posted on February 2nd, 2011 by Colin D Gordon

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