Alicia BárcenaExecutive SecretaryEconomic Commission for Latin America and the Caribbean

Dialogue with the Second CommitteeNew York, 3 November 2010

The policies pursued since the 1980s did not produce the rapid, sustained economic growth

that was expected…LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH COMPARED WITH TOTAL GDP

OF DEVELOPING COUNTRIES AND THE WORLD(Annual rates of variation)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and World Bank, World Development Indicators [online database].

0

1

2

3

4

5

6

7

8

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Latin America and the Caribbean Developing countries World

LATIN AMERICA (SELECTED COUNTRIES) AND THE UNITED STATES: PRODUCTIVITY

AND BREAKDOWN OF INDUSTRIAL VALUE ADDED

(Percentages of industrial GDP and 1985 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Industrial Performance Analysis Program (PADI), on the basis of official figures.

100

90

80

70

60

50

40

30

20

10

020 0000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 200 000

Engineering-intensive sectors Resource-intensive sectors Labour-intensive sectors

Latin America1990

Latin America2007

United States1990

United States2007

… Nor they worked towards closing the productivity gaps prevailing in the countries of the region, both

domestically and with the United States

In terms of poverty, the lost decade of the 1980s was followed by a difficult 1990s and a new

century with notable achievementsLATIN AMERICA: POVERTY RATES, 1980-2008

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official information.

40.5

48.3

44.3

33

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

30

32

34

36

38

40

42

44

46

48

50

Po

verty rate

The lost decade The difficult 1990s Achievements

The excellent external conditions prevailing in the period 2003-2008 strongly contributed to the historical

achievement of growing with external-account surpluses and improved public finances

LATIN AMERICA AND THE CARIBBEAN: PER CAPITA GDP GROWTH RATE, CURRENT ACCOUNT BALANCE AND OVERALL FISCAL BALANCE

(In annual growth rates and percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Main features and achievements in 2003-2008

• Three simultaneous macroeconomic developments: – Sound fiscal policies and a better public debt profile – More flexible exchange rates and unprecedentedly high

international reserves (+150% between 2003 and 2008) – A regional current-account surplus with economic growth

• Ready access to external financing • Increase in trade (I + X) (value: 138%/volume: 49%) • Terms of trade improved by 25% in the region• Per capita GDP grew by more than 3% per year for five

consecutive years • Unemployment diminished from 11% to 7.3% with job

quality• Poverty rates fell by 11 percentage points (from 44% to

33%)

Nevertheless, the boom in commodity prices has led to the “reprimarization” of the region’s

export structure

LATIN AMERICA AND THE CARIBBEAN: STRUCTURE OF WORLDWIDE EXPORTS SINCE THE EARLY 1980s(Percentages of the regional total)

Source: Economic Commission for Latin America and the Caribbean (ELCAC), on the basis of United Nations COMTRADE database.

LATIN AMERICA (18 COUNTRIES): GINI INDEX, AROUND 1990, 2002 AND 2008 a

Economic growth and improvements in income distribution were powerful allies in combating poverty…

0.70

0.65

0.60

0.55

0.50

0.45

0.40

0.40 0.45 0.50 0.55

1990

0.60 0.65 0.70

AR

CR

PY

ECVE

SVAL

BOCL

BR

HN

CO

GT

NI

PA

MX

UY

2002

Countries in which inequality increased

Countries in which inequality decreased

0.70

0.65

0.60

0.55

0.50

0.45

0.40

0.40 0.45 0.50 0.55

2002

0.60 0.65 0.70

AR

CR

PY

EC

VE

SV ALBO

CL

BRHNCOGT

NI

PA

MX

UY

2008

Countries in which inequality decreased

Countries in which inequality increased

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in the respective countriesa Urban areas.

Number of persons of inactive age per 100 persons of active age:

(0-14) + (60 +) / (15-59)

Sharp fall:Easy yield from the demographic dividend(1970-2010/2015)

Stabilization at low levels:The dividend persists, but its activation depends on other factors(2010/2015-2021)

Beginning of the end of the demographic dividend:The dependency rate begins to rise2021-

50

60

70

80

90

100

… so, too, was the sharp fall in the demographic dependency rate at the regional level

For the first time in the history of the region there were improvements in equality

• Besides growth, the decrease in poverty rates in the region was also stimulated by improvements in income distribution

• It is the first time in the history of the region that there are improvements in equality indicators

• The Gini Index improved between 3% and 10% in 10 out of 20 countries

• Income in poor households improved 20% (equalize to grow)

The backslide in poverty indicators in 2009 did not wipe out the substantial gains of the past six

years, but it did slow the rate of reduction

LATIN AMERICA AND THE CARIBBEAN: POVERTY AND EXTREME POVERTY, 1980 – 2009 a

(Percentages and millions of persons)

Percentages Millions of persons

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in the respective countries. a Estimate for 18 countries of the region plus Haiti, The figures shown above the bars represent the percentage and total number of poor (indigent plus non-indigent poor).

18.622.5

18.5 19.413.3

12.6 12.9 13.7

40.5

48.343.8 44.0

36.334.1 33.0 34.1

0

10

20

30

40

50

60

1980 1990 1999 2002 2006 2007 2008 2009

Indigent Non-indigent poor

62

93 89 97 7168 71 76

136

200 211221

193 184 180 189

0

50

100

150

200

250

300

1980 1990 1999 2002 2006 2007 2008 2009

Indigent Non-indigent poor

The speed of recovery in this crisis was faster compared with other crises

LATIN AMERICA: GROSS DOMESTIC PRODUCT IN CONSTANT US DOLLARS FROM 2000

(Rates of change, with seasonal adjustments)

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

-5 -4 -3 -2 -1 0 1 2 3 4 5

1994-1995_(II/1995) 1998-2000_(IV/1998)2001-2002_(III/2001) 2008-2009_(I/2009)

QUARTERS

• The previous exceptional period of prosperity created a larger space for the implementation of public policies, with the exception of the Caribbean

– Monetary and financial policy– Fiscal policy– Trade policy– Labour policy

• Trade is increasing• Terms of trade are improving• Tourism is recovering and

Remittances begin to increase again

• The region returned to the international financial markets

• Private sector expenditure is recovering

• Private consumption is pushed up by increased employmentSource: Economic Commission for Latin America and the Caribbean (ECLAC), on

the basis of official information.

Latin America and the Caribbean will grow above 5.6% in 2010

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH, 2010 a

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official information.a Forecasts.

Why time for equality?

• The crisis has produced questions about the dominant model, creating a turning point —and thus an opportunity to chart a new course

• That model had been associated with two decades of high wealth concentration

• The challenge at this juncture is to achieve greater equality

• For the region, this means facing up to its historical and more recent liabilities:– Worst income distribution in the world– Increasingly heterogeneous production patterns– Segmentation of the labour market and social protection– Racial, ethnic and gender discrimination – Asymmetrical vulnerability to climate change

Social equality and economic growth are not mutually exclusive

• Growth needs equality; equality needs growthWith macroeconomic conditions that mitigate

volatility, stimulate productivity and favour inclusion With production patterns that close internal and

external gaps• Promoting equality by building human skills and

actively redressing disparitiesUniversalizing rights and social benefitsFostering inclusion through the labour marketAchieving territorial convergence

• With a smarter and stronger State in order to be able to redistribute, regulate and supervise

A development agenda based on six pillars

• Macroeconomic policy for inclusive development to mitigate volatility, stimulate productivity and favour inclusion

• Overcoming structural heterogeneity and productivity gaps through more innovation, dissemination of knowledge and support for small- and medium-sized enterprises (SMEs)

• Overcoming territorial disparities affecting productive, institutional and social development capacities and hindering national production linkages

• Creating more and better employment to improve equality of opportunities and social inclusion

• Closing social gaps through a steady increase in social spending and stronger social institutions

• Building consensus around social and fiscal covenants and a new role for the State

The fiscal covenant: a sine qua non• Never before had the region so many democratically elected

governments and for such a long period of time • Democracy is ultimately the reflection of the decisions of the

citizens in terms of which public goods should be provided to the population, in which manner and magnitude

• A fiscal covenant is essential in order to enhance the State’s capacity to redistribute resources and play a more active role in promoting equality and production convergence: – There is significant scope for promoting and strengthening the

redistributive role of the State, as regards both – Social expenditure and – The collection of revenue to finance it (tax structure)

New equation:State-market-society

• The public sphere as a forum for collective interests and not simply for State or national matters

• Political agreements for a new social and intergenerational covenant, with specific responsibilities and accountability systems

• Consolidation of a culture of collective development based on tolerance of difference and diversity

• Strategic internally defined long-term vision that promotes covenants between the stakeholders in production

• Policies of State —not only of the current government or administration—channelled through democratic institutions