Enrique García: Challenges for Latin America and CAF’s role in the regional development process

(Caracas, March 6, 2012).- "In a context where the global economy is going through a period of great uncertainty, emerging economies, especially in Asia and Latin America, have been the mainstay of global growth," Enrique García, president & CEO of CAF - Latin American development bank - said. He added "in particular, Latin America continues to show excellent results in terms of growth and macroeconomic stability, attributable to a combination of good news on both the foreign and domestic fronts, and the prudent macroeconomic policies which most countries have adopted."

However, the CAF chief stressed the great challenges that this situation creates for the region, especially diversifying economies and reducing heavy reliance on natural resources which has created so many problems in the past. "To do this, the region must not fall into complacency but commit itself to an ambitious reform agenda."

"Particularly important is the productive transformation of Latin America by means of sustained increases in productivity and gains in competitiveness. In this direction, a fundamental challenge is to add value to the region’s natural advantages through technological development and building human capital" García said in his presentation to the CAF Board.

Another challenge, no less important - he added - is the adaptation and development of infrastructure for regional integration as means of expanding the benefits offered by the rapidly growing trade with Asia. "The challenge is to channel funds through increased savings and domestic investment and intelligently attract foreign capital. To achieve these objectives, the region must continue to work on improving the business environment for the private sector and the quality of its institutions."

García also highlighted one of Latin America’s great achievements in recent years, based on its favorable economic performance, which is reduction of poverty. However he cautioned "an important social debt persists, mainly in terms of income distribution. This means it is imperative to continue with a broad and innovative social agenda that integrates excluded segments into society so that they benefit from the region’s achievements."

CAF’s role and its integrated approach to the development process

García emphasized the strong support that CAF has offered its member countries in designing and implementing an integrated agenda of reforms. "With its Latin American essence, the strong commitment of shareholders, its human capital and financial strength in turbulent times, CAF has expanded its reach and is accompanying the development process in Latin America with projects, programs and technical cooperation."

CAF approvals for the region in the last five years totaled US$45 billion, specifically "in 2011, 50% of approvals, over US$10 billion, were directed to finance economic and integration infrastructure, 30% to social and environmental development, and 20% to development of productive sectors," the CAF president said.

CAF helps its member countries to implement their development plans, particularly the important challenges of productive transformation, institutional development, innovative social policy, integration infrastructure projects and trade facilitation. In this context, CAF continues to be a flexible institution, capable of adapting to complex environments and the demands of its shareholders.

The institution is now a major source of multilateral financing for Latin America and the leader in infrastructure and energy, especially projects that promote regional integration.

"In 2011 CAF reinforced its efforts in favor of strengthening regional integration, as a decisive factor for achieving a significant presence in the world economic and political context and intelligent international participation," the head of the financial institution said.

In its role as bridge between Latin America and the rest of the world in 2011 CAF strengthened its relations with Asia, Europe and North America through agreements signed with major finance and development institutions.

In addition, with its links to an extensive global network of think tanks and universities, and its growing publishing and knowledge dissemination activities, CAF is now positioned as a regional think tank on Latin American development issues for the rest of the world.

The new dimension of CAF "With the extraordinary increase in paid-in capital, decided by the Board at the end of 2011, CAF will be able to continue its support for countries in achieving their sustainable development plans, and will strengthen its counter-cyclical and catalytic role," García said during the subscriptions of the capital increase by Argentina, Bolivia, Ecuador, Panama, Peru and Uruguay. These are the first member countries to complete this process and others are likely to follow this path in the short term.

The CAF CEO emphasized the institution’s commitment to all its shareholders, and the permanent support of its member countries, resulting in regular capital increases and full compliance with all its financial obligations.

With the entry of new members in recent years – now 18 shareholder countries – and the recent capitalizations, CAF has acquired a new dimension which will make possible approvals totaling US$75 billion for Latin American development during the 2012-2017 period.