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latin america rising

Friday 29 July, 2011

Fellow Thunderbird alumnus Luis Alberto Moreno, President of the Inter-American Development Bank (IADB), was a guest of the Chicago Council on Global Affairs to talk about The New World Rediscovered: The Rise of Latin America Based in Washington, D.C., the IADB has 26 member countries, & is the oldest & largest source of multilateral assistance in this hemisphere. IADB is seeking a capital increase of $300M from congress. Illinois exports $9.2B to Mexico, which is more than it exports to China.

Latin American (LA) countries are the most democratic emerging markets. The financial crisis shifted the balance of power. Inflation is in single digits as a region & they are now a global creditor. LA bounced back quickly by reaping the benefits on 1990’s reforms. The new middle class now encompasses 60% of the population as illiteracy is being eliminated. They are meeting & exceeding the Millennium Development goals by shifting mortality to less than 23/1000. Mobile phones have penetrated 90% of the population. US influence is waning from 55% of imports in 2002 to 32% of imports on 2009. Asian trade, particularly with China, is picking up that slack. Copper prices supported Chile in the crisis, but they are getting away from the boom & bust commodity cycles of the past. The stock exchanges of Colombia, Peru, & Chile recently merged. SME’s comprise 90% of business & create 70% of jobs.

Unequal distribution of wealth is still a problem. There is slow progress in Haiti. Public services need to be improved-80% of sewage is still dumped raw. Productivity still lags. Violence issues affect 8% of GDP. LA is still vulnerable to disasters & climate change. They are implementing disaster risk management strategies against hurricanes, floods, droughts, etc. IADB is financing sustainable energy projects. Some places get 65% of their power from hydroelectric power, but droughts impact upon that. Education & innovation lags as indicated by standardized tests & patent submissions.

Luis was in Santiago, Chile for Obama’s speech there, when he encouraged new trade ties & vowed to connect LA SME’s with American SME’s. Lessons learned from dictatorships were that democracy works best. An LA summit coming up sets the goal of doubling GDP, dropping poverty from 32% to 10%, having the middle class reach 500M by 2025, which requires 4.8% growth.

Q&A

  • US consumption of drugs drives problems in LA. As ambassador of Colombia, Luis took 120 congressmen to Colombia. None were willing to legalize drugs. The US needs to consider gun use too. We need to take a hard line on crimes by starting with drugs & moving on to other crimes too.
  • LA learned the hard way about money-laundering. They had 31 financial crises from 1975-2001, & have made huge advances by subsequently changing their banking laws.
  • Advice to America: quick responses help. Send bankers to jail. Taxpayers shouldn’t save those too big to fail. Solve major fiscal problems. Economic power is greater than military might.
  • LA has had good & bad history with privatizing public goods. Water was privatized @ the city level in the 1980’s & that failed because people didn’t want to pay for water. Chile changed pay as you to to a system where they created a 3rd pillar with more private savings. Telecom, toll roads, & airports have been successful privatizations.
  • Chinese consumption drives LA agricultural growth. The Chinese are interested in ports & logistics. The US consumes on China’s credit card. There is competition out there, so strategic vision is required to compete.
  • IADB should be lending 25% of their projects on climate change, for example on watersheds. 70% of LA live in cities, so there is a local dimension. They adopted mass transit early on. Clean coal, hydroelectric, & natural gas are all important power sources.
  • Despite the fact that Brazil & Mexico comprise 2/3 of the GDP of LA, they should deepen their relationships regionally. Soon all countries on the Pacific will have Free Trade Agreements, so they need to develop reasons to group together.
  • Unions fight the trade agenda. There is no risk to the FTA with Colombia. We pay duties on goods being exported to Colombia while they pay none in the reverse direction.
  • America’s rising health care costs provided opportunities to provide health care in Costa Rica.
  • Despite Corporate Social Responsibility programs, poverty is not being alleviated. Coke sent mangoe juice to Haiti. We need to apply success of intervention in public/private partnerships.

 

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