Pres­i­dent of the In­ter-Amer­i­can De­vel­op­ment Bank (IDB), Ilan Gold­fa­jn, Fri­day called on Latin Amer­i­ca and the Caribbean (LAC) to put in places poli­cies that will al­low them to take ad­van­tage of their on­go­ing eco­nom­ic growth.

Ad­dress­ing a Busi­ness Fo­rum that forms part of this year’s IDB and IDB In­vest an­nu­al meet­ings of the boards of gov­er­nors, Gold­fa­jn said that the LAC grew faster than an­tic­i­pat­ed in the last cou­ple of years.

He said in­fla­tion is de­clin­ing, due to re­spon­si­ble mon­e­tary and fis­cal pol­i­cy poli­cies. Pover­ty de­clined ten per cent ac­cord­ing to the lat­est da­ta, and like­ly fell fur­ther last year.

Gold­fa­jn said for­eign di­rect in­vest­ment (FDI) in Latin Amer­i­ca and the Caribbean surged in 2022, set­ting a record, that it like­ly matched again in 2023, ac­cord­ing to ini­tial da­ta.

“Labour mar­kets have been re­mark­ably strong. Un­em­ploy­ment rates have plum­met­ed to some of the low­est lev­els in re­cent decades. So, the ques­tion is this: Will this re­cent bet­ter-than-ex­pect­ed per­for­mance last?

“It de­pends on Latin Amer­i­ca and the Caribbean seiz­ing the in­cred­i­ble op­por­tu­ni­ty that the glob­al con­text pro­vides the re­gion. If suc­cess­ful, Latin Amer­i­ca and the Caribbean could be at a po­ten­tial in­flec­tion point.”

The IDB pres­i­dent said the rea­son is that the re­gion has great po­ten­tial to help solve some of our biggest shared glob­al chal­lenges.

“For decades, Latin Amer­i­ca and the Caribbean has been viewed through the lens of its needs; its need for fi­nanc­ing and its need to re­duce debt. But to­day, the world al­so needs Latin Amer­i­ca and the Caribbean. That’s be­cause of the re­gion’s po­ten­tial to be part of the so­lu­tion to our shared chal­lenges,” said Gold­fa­jn.

He said with the right re­forms and in­vest­ment, the re­gion could be at the cen­tre of the ef­fort to pro­tect the world’s bio­di­ver­si­ty, pro­vide it with clean en­er­gy, and al­le­vi­ate glob­al food in­se­cu­ri­ty.

“And so, the ques­tion we ask at the IDB is how can we po­si­tion the re­gion to be part of the so­lu­tion to these glob­al chal­lenges while al­so re­duc­ing pover­ty and in­equal­i­ty?

“The an­swer is to make the right short-term re­forms and in­vest­ments to lever­age these op­por­tu­ni­ties while mak­ing the right long-term re­forms and in­vest­ments to in­crease pro­duc­tiv­i­ty and eco­nom­ic growth over the long term.”

He said to seize the mo­ment, “we must con­tin­ue in­vest­ing in our ca­pac­i­ty to meet the world’s need to pro­tect our great­est nat­ur­al re­sources, like the Ama­zon.

“We must al­so keep in­vest­ing in clean en­er­gy and food pro­duc­tion. At the IDB, we’re help­ing coun­tries do this. For ex­am­ple, IDB In­vest, our pri­vate-sec­tor arm, is pro­vid­ing a US$50 mil­lion loan to Al­lkem, a world-class lithi­um pro­duc­er, to boost lithi­um pro­duc­tion in Ar­genti­na”

He said this will pro­mote low-car­bon and cli­mate-re­silient pri­vate-sec­tor de­vel­op­ment in Ar­genti­na.

But he said in or­der to help the re­gion grow faster, there are cer­tain mea­sures that need to be adopt­ed.

“We need to strength­en the rule of law. Weak rule of law lim­its eco­nom­ic growth. For ex­am­ple, poor con­tract en­force­ment dis­cour­ages in­vest­ment. Who’s go­ing to in­vest if they don’t think laws will be com­plied with?

“In ad­di­tion to le­gal se­cu­ri­ty, the re­gion needs ba­sic phys­i­cal se­cu­ri­ty. It’s not just par­ents who want safer neigh­bours. In­vestors and busi­ness own­ers want them too! Why? Be­cause high crime lim­its growth. The IDB es­ti­mat­ed that crime costs the re­gion 3.5 per cent of gross do­mes­tic prod­uct (GDP) each year, dou­ble that of de­vel­oped coun­tries”

Gold­fa­jn said the LAC ac­counts for just eight per cent of the world’s pop­u­la­tion, but one third of its mur­ders, say­ing that di­verts pub­lic re­sources away from in­vest­ments that could in­crease pro­duc­tiv­i­ty.

“For the re­gion to grow faster over the long term, it must al­so make longer-term re­forms and take a long-term ap­proach to in­vest­ing much more in phys­i­cal and dig­i­tal in­fra­struc­ture.”

Gold­fa­jn said be­tween 2008 and 2017, Latin Amer­i­ca and the Caribbean put just 2.8 per cent of GDP in­to in­fra­struc­ture, say­ing that was half of what East Asian and Pa­cif­ic coun­tries in­vest­ed.

“Part­ly be­cause of that, over the past two decades, emerg­ing Asian economies have grown 12 times as much as our re­gion. And to­day, our mo­bile broad­band speeds can be ten times slow­er than in OECD (Or­gan­i­sa­tion for Eco­nom­ic Co-op­er­a­tion and De­vel­op­ment coun­tries). That lim­its pro­duc­tiv­i­ty.

Gold­fa­jn said in­vest­ing in dig­i­tal in­fra­struc­ture will im­prove con­nec­tions, but al­so pub­lic ser­vices and ed­u­ca­tion­al op­por­tu­ni­ties. If more schools are con­nect­ed, he said, it helped im­prove hu­man cap­i­tal. (CMC)