REGIONAL COOPERATION AS A CATALYST FOR DEVELOPMENT

The case of Latin America and

the Caribbean

Alicia BárcenaExecutive SecretaryEconomic Commission for Latin America and the Caribbean

Dialogue with the ECOSOCGeneva, 8 July 2011

Where does Latin America and the Caribbean stand today?

• Learning from the past• Maintaining a prudent

macroeconomic stance• Socially progressive• Marking out a new

development agenda based on rights to equality

• Unprecedented context: two-speed global economy – sluggish in developed countries and dynamic in emerging countries

• Performance of LAC was outstanding in 2010 thanks to both domestic and external factors

• Challenges:• Risk of inflation• Surge in capital inflows coming

into the region• Currency appreciation• Reprimarization of the

economies• Current deficits• Food and Energy Price volatility• Broadband deficiencies• Asymmetric vulnerability to

climate change

Trade has played a key role in the region’s economic recovery, thanks to South America’s trade links with Asia-Pacific, especially China

LATIN AMERICA AND THE CARIBBEAN: TRADE BY ORIGIN AND DESTINATION(Index: January 2006 = 100)

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

EXPORTS (by destination)

IMPORTS (by origin)

Commodity prices have increased aggravating the risk of primarization

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of United Nations, Commodity Trade Data Base (COMTRADE).

LATIN AMERICA AND THE CARIBBEAN: STRUCTURE OF WORLDWIDE EXPORTS

SINCE THE EARLY 1980s

(Percentages of the regional total)

LATIN AMERICA: COMMODITY PRICE INDEX

(Index: 2000 = 100)

Why time for equality?Main gaps in Latin America and the Caribbean

• To move towards productivity convergence, it is essential to look beyond the commodity price boom: macroeconomic, productive and territorial long-term policies with own vision

• Consensus on priorities and respective funding: a Fiscal Pact with redistributive effect - with access to innovation, labour institutions and job security

• Education is key in the translation of productivity gains into jobs and welfare, when articulated with a labour market geared towards inclusion and equality

• New equation: State-market-society

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

notable achievements.Moreover, poverty and extreme poverty rose less than

expected in 2009 and decreased in 2010LATIN AMERICA: POVERTY RATES, 1980-2008

(Percentages)

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

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

A decade without progress in income distribution…

… Followed by a decade with some steps forward

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

SVALBO

CL

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 countries.a/ Urban areas.

Pending challengesin Latin America and the Caribbean

Review macroeconomic policy to mitigate volatility, stimulate productivity and increase inclusion, making it essential to strengthen fiscal equilibrium in the medium term and develop financial systems with heightened capacity for national saving and support for investment Bridge gaps in innovation and productivity for growth with equality and sustainability Slow progress in reducing poverty and inequality Regressive tax systems Changing demographic trendsGender equality agenda Climate change vulnerability and the need to develop low-carbon economies Need to increase energy efficiency and use of renewable energies

Latin America and the Caribbean is characterized as a middle income region

• The concept of “middle income” masks large disparities in the economic and social situations of the Latin American and Caribbean countries:– Levels of poverty and distribution of income– Institutional development– Ability to generate national savings– Capacity to access international financial markets– Size and level vulnerability (small open economies in the Caribbean)

• Countries in the region must deploy further efforts to reduce inequality within their territories and in poor trans-boundary areas

– Find ways to realize the synergies between social equality and economic vibrancy

• In spite of improved economic and social performance, the region still has limited capacity to tackle important gaps relying on domestic resources only

Challenges for public management

• Tax systems deliver low levels of revenue and are badly designed

– A regressive tax structure– A low tax burden in most countries – High levels of evasion– Widespread exemptions

• Social spending with little redistributive impact– A weak non-contributory pillar– In terms of production: minimum support provided to SMEs and

segmented access to financing

• Insufficient investment for development– In infrastructure– In research, science and innovation– In development banking institutions: inclusive financing– In cleaner matrices from the environmental perspective

The role of cooperation for the region’s development is essential

• The “middle-income” concept needs to be rethought as a criteria for allocating ODA resources

• International cooperation: international community must support development efforts, considering that over 90% of poor in the region live in non-poor countries

– Increasing ODA towards the region, channeled with greater efficiency and effectiveness through strengthened institutional capacities

– Combining ODA with innovative financing and other cooperation mechanisms such as technology transfers for sustainable development

• Regional cooperation and integration, in their different modalities, are crucial catalysts for:– Cross-fertilization of transversal issues and strengthening the

regional voice in global fora– To improve the articulation of development strategies at the regional

and domestic levels– To enhance South-South cooperation and sub-regional integration

schemes

Regional initiatives to address inequality and social protection gaps

• The Inter-American social protection network promotes exchange of experience on the formulation, implementation and impact of social protection and employment policies and measures with the support of OAS-ILO- ECLAC :

• Emphasis on conditional transfer programmes

• SICA has created the Central American Secretariat for Social integration (SISCA) fostering sub-regional cooperation on social protection issues

• CAN countries place increasing emphasis on the sub-regional policy dialogue on social protection, the care economy and families

• The Caribbean Development Round Table (Trinidad and Tobago, September 2011) will focus on identifying challenges faced by small economies in social protection and regional integration, among other issues

• Ministerial conferences foster sub-regional dialogue on the impact of the rise in commodity prices on social development in Central America and South America (Santiago and El Salvador) with UN inter-agency support

• The regional plan of action on information society eLAC 2015 promotes e-health policies

Investing in education and the region’s human capital

• Priorities of regional cooperation and inter-regional partnerships :

– Improve the quality and equity in primary education – Reduce traditional and emerging gaps in education (illiteracy,

coverage, reproduction of social inequities, learning gaps, access to an quality of employment, access to and use of ICT) education).

– Enhance the efficiency of social spending in education

• Ibero-American countries have established “Educational goals 2021” in three phases: complete secondary/preschool

– 2011- 6 billion– 2015- 24 billion– 2021- 79 billion

• The regional plan of action on information society eLAC 2015 promotes policies aimed at enhancing access to and the use of ICTs in education

Strengthening financing, investment and productivity in the region

• The Rio Group and CELAC promote regional common positions in the International follow-up Conferences on Financing for Development (Regional consultation, Santiago, August 2011)

• The Central American Council of Ministers of Finance and Economy (COMIECO and COSEFIN) are currently developing the Plan for investment and financing for Central America, Panama and the Dominican Republic

• Regional cooperation in the area of Information and Communication Technologies (ICT) to foster development – Regional Plan of action eLAC 2015– Regional dialogue aimed at ensuring universal access to broadband

and creation of a Regional Information Center on Broadband (ORBA)– Mercosur Group for Productive Integration aimed at promoting SMEs,

investments and value chains– Inter-regional initiatives: Ibero-American policy dialogue on the

development of SMEs (IBERPYME) and “Pathways to prosperity in the Americas”

Intra-regional trade shows a dynamic performance but not enough…

LATIN AMERICA AND THE CARIBBEAN: INDEX OF INTRA-REGIONAL EXPORTS(In percentage of total exports)

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

MERCOSUR MCCA

ECLAC as a catalyst in regional cooperation for development

• Multi-sectoral forum for regional policy dialogues

• Follow-up to global conferences and technical support to countries in reaching regional consensus

• Technical secretariat and catalyst for the formulation and monitoring of regional plans of action

• Identification and analysis of emerging development issues and placing them as priorities on the regional policy agenda

• Promotion of South-South cooperation and harmonization of good practices through capacity building

• Development of regional observatories for comparative analysis and exchange of experience

• Promotion of inter-agency cooperation at the regional level

Support for high-level fora

Tools for regional cooperation

Final messages

• Regional cooperation is essential for an effective strengthening of the Development Pillar of the UN

• While there is great potential in MICs to enhance regional cooperation, it is essential to achieved progress in MDG 8: Global partnership for development

• Regional Commissions play key roles and complement the regional offices of global UN entities:– Catalizing regional and sub-regional cooperation– Enhancing coherence between the regional institutional landscape

and global processess