Transcript Mobilizing international resources for development Rogerio Studart Executive Director for Brazil, Colombia, Dominican Republic, Ecuador, Haiti, Panama, Phillipines, Suriname, and Trinidad Tobago The World Bank Group [email protected].

Mobilizing international
resources for development
Rogerio Studart
Executive Director for Brazil, Colombia, Dominican Republic,
Ecuador, Haiti, Panama, Phillipines, Suriname, and Trinidad
Tobago
The World Bank Group
[email protected]
Some principles behind Monterrey
• Additionality:
– More resources for sustained inclusive development
and poverty reduction, thus to meet the Millenium
Development Goals;
– net real resources transfers from developed to
developing countries;
• Stability and enabling environment
– To promote a fair and inclusive trade system
– To promote orderly flows of capital to developing
countries
– To avoid uneven distribution, and especially, volatility
of capital flows
Additionality...
• Trade: Sustainable growth of developing
countries exports (which in turn would
allow a sustainable increase of imports of
essential goods for development);
• Capital flows: Orderly and even
expansion of net capital flows to
developing economies, which again lead
to sustainable increase of imports
Stability and enabling environment
• Sound macroeconomic policies and
appropriate rule of law in developing
(assuming developed economies would
also follow this principle);
• Enabling international economic
environment, including fair trade system
and stable and inclusive international
financial architecture
What have we achieved?
Additionality I:
• Net exports from developing countries have
increased fast, but
• For the great majority of developing countries it was partly a result of
a hike of commodity prices, as a side-product of a rapid increase in
demand in developed economies (and in secondary demand coming
from those developing economies which supplied labor-intensive
consumer goods to developed economies);
• For most developing economies, a significant part of such expansion
ended up as accumulated reserves, or was used to repay debt
• In many developing economies this reserve accumulation led to
exchange rate appreciation which stimulated demand (of the rich)
rather than expansion of infrastructure, productive capacity or
consumption of the poor
Additionality II
• Net capital flows have also increased but
– North-South FDI has been directed to a limited number of
developing countries, which
• Happened to be the fastest growing ones, with expansion led by net
exports, not always faring well when it come to the conventional
“doing business” and other “investment climate” indicators
• Therefore to developing economies that did not require more capital
flows in order to finance their domestic investment
– Other North-South financial flows went after arbitrage gains,
created either by excessively high domestic interest rates
(particularly if exchange rate appreciation was occurring) and
where securities markets provided cyclical, speculative,
investment opportunities
Stability…
• Trade growth was only partly the result of trade liberalization; it was
more the outcome significant and unsustainable disequilibria in
world macro economy (consumption in the “North” and exportrelated infrastructure investment in the “South”);
• Financial flows have also been the result of the rapid and
unsustainable increase in liquidity partly based on highly speculative
expansion in the main developed financial markets (including the
mortgage and consumer credit markets);
• Note: South-North flows went primarily to finance increasing public
debts in the developed World, as a result of a clearly unsustainable
macroeconomic policies. Only recently South-North and SouthSouth FDI has increased (interestingly this phenomenon has been
significantly criticized in multilateral fora).
In sum…
•
Since Monterrey
–
We moved very little towards a trade system which facilitated the sustainable increase of net
exports for all the developing world
–
We have failed to establish an international financial architecture that led to the sustainable
increase of productive capital flows to the developing world, and allowed for expansion of
financial fragility in developed countries markets (which ended up in the crisis we see now)
–
Macroeconomic policies in the developed economies did not warrant a enabling international
environment and did stimulate fragility (and instability) –in some countries those policies
were clearly not sound and/or sustainable.
–
In the developing world, many of us counted too much on globalization as an engine of
growth and prosperity, underestimating
•
•
•
the need to enhance domestic mechanisms of resources allocation,
the necessity to invest in infrastructure and increase domestic markets (as engine of growth) and
the advantages in fostering regional integration and South-South cooperation (again as engines of
growth and development)
We need to dig in and get to
work…
Developed economies (I)
• Use all instruments available to avoid a
deepening of the current financial crisis;
• Move on with the trade agenda, prioritizing
developing economies’ access to markets and
technology
• Reestablish sound macroeconomic policies (but
cautiously…), with particularly attention to
sustainable growth of demand (that would be
good for the environment too, by the way).
Developed economies (II)
• Commit to a rapid increase to ODA
• Fully support a widening of the role of Multilateral institutions,
and keep your minds open and flexible
– Institutions such as the IMF, the World Bank, the Asian Development
Bank, the African Development Bank, Inter-American Bank, CAF etc;
should be ready to use all their existing instruments (and to create new
ones) to expand their support their developing economies in the years
to come;
– Promote a review of culture, business environment and conditionalities
– Understand that more equitable Voice, Quota and Representation
Structure is a matter of justice, but also a matter of efficiency (you serve
the clients better and more promptly if your can hear them more)
• Work harder on the other parts of the international financial
architecture, such as regulations, transparency and controls, in
order to avoid another crisis is 5 years
Developing economies (I)
• Sound macroeconomic policies important, but
not enough: the challenge now is how to achieve
sustained Inclusive growth (as Undersecretary
Barbosa said yesterday)
• Expanding trade is good, but focus on
expanding domestic markets through
– social and economic inclusion (not to mention that
this is a question of equity and justice too)
– Infrastructure – for growth and for the poor
– Regional integration
Developing economies (II)
• Improving governance and business climate is
good, but not enough
– develop appropriate domestic financial architecture
(or risk-sharing mechanisms, as mentioned by
Professor Kahn yesterday)
– Replicate and scale up experiences of developing
countries
– Be pragmatic (rather than dogmatic) and deal with
risk-sharing problems with what you have in hand
• Create appropriate incentives to attract
productive foreign capital, but be cautious of
short-term, potentially destabilizing capital flows
Thank you, and good work
and luck for us all.