Latin America needs a political pact for productivity

A major pact is required in order to return to the path of economic growth, allowing the development of a more prosperous and inclusive Latin America through productivity. This was the proposition made by Luis Carranza, Executive President of the Development Bank of Latin America (CAF), to more than 1,000 global leaders gathered on September 6 and 7 at the 21st annual CAF Conference, held at the Mayflower hotel in Washington DC.

Latin America has achieved macroeconomic stability over the last few decades, with lower inflation and greater purchasing power among its population. During his keynote speech at the 21st CAF Conference, Carranza stated that social policies were implemented against poverty, which was effectively curtailed from around 50% to under 25% on average, over a period of just over 10 years.

"The region has undergone two major political agreements in recent years, covering macroeconomic stability and inequality, and we have been successful in both of them. Now we need to consolidate the progress that we've made, and that requires fiscal prudence. But we also need an agreement regarding the productivity increase which should be part of all of our agendas, both in the public and private sectors. We must develop global production chains, productive clusters, significantly increase investments in infrastructure, develop and strengthen the middle class, and help improve institutions in our countries," he said.

In the first Conference panel moderated by Michael Reid, columnist for The Economist, a group of leading international experts agreed that Brexit and the renewed protectionist stance adopted by Trump's administration will directly impact the new economic world order. In this regard, the panelists concluded that the changing alliances between countries and the growing relevance of players traditionally regarded as secondary - such as the southern hemisphere countries - are shifting the balance of power and creating new leadership opportunities among emerging powers. 

"Globalization has diluted our power. The global economy has allowed many countries to reach a solid economic performance," said Pierre Pettigrew, former Canadian Minister of Foreign Affairs.  According to Gabriela Ramos, Director of the OECD Cabinet, however, this economic performance was not equitable and regions such as Latin America still struggle with massive social inequality - which limits their efforts to achieve widespread development. According to Ramos, this scenario forces public policies to focus on the most vulnerable of the population, which represents 40% of the total population. 

Chris Alden, director of the Southern Global Unit of the London School of Economics, stated that the southern hemisphere countries currently play a decisive role in shaping the new world order. "Thinking about how to solve global issues without involving all players is simply unfeasible," he said. 

Regarding the growing importance of China in the global geopolitical scenario, Wang Huiyao, President of the Center for China and Globalization, stated that "China is not creating a new world order, but the existing order has some issues that require adjustments."

According to Susana Malcorra, former Minister of Foreign and Religious Affairs of Argentina, Latin America needs to create a set of common rules in order to be better inserted into global value chains and improve its business performance.

The panel featured Pierre Pettigrew, Gabriela Ramos, Chris Alden, Wang Huiyao, Susana Malcorra, and Lionel Zinsou, President of Terra Nova and former Prime Minister of Benin. 

The promotion of transparency, strengthening of institutions, and accountability mechanisms to curb corruption are just some of the topics that will be addressed in the daily sessions held on Thursday morning, September 7.