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OAS Holds Roundtable on Political Implications of Economic Growth in the Americas

Washington, May 21, 2104.- Political and economic experts from the region highlighted the importance of social inclusion policies to address successfully the coming years in which Latin America will see slower economic growth, during the 58th Policy Roundtable of the Organization of American States (OAS) held at the headquarters of the Organization in Washington DC, under the title “The End of the Affair? The Political Implications of Economic Growth in Latin America and the Caribbean, 2014-2019”.

The Director of the Western Hemisphere Department of the International Monetary Fund (IMF), Alejandro Werner said that Latin America will grow at a slower pace than in the last decade. This is due in part to slower growth in China and India which will have an impact on the price of commodities; and also, to the improved performance of the United States economy, which will lead to a rise in interest rates in the long term, and will lead to more expensive financing terms for the economies of the region.

“For Latin America it is expected that in the next five years the region will grow at an average rate of 3.2 percent, compared with 4.3 percent in the previous eight years, resulting in a significant reduction in the growth of the region," said the Mexican economist.

Director Werner indicated that the region must commit to policies of social inclusion and improvement in education to continue growing. "With regard to unemployment, almost all economies of Latin America are operating near their maximum capacity. This means, for example, that if we do not increase the role of women in the workplace there will not be room to grow," he said. He noted that the economies of the region face common challenges and chief among them is education. "If we look at the indicators in the PISA tests, which are common standards in reading comprehension and mathematics, among others, we see that all the countries of the region are in the lower values for performance,” he added.

In concluding his presentation, the IMF official noted that the scenario for Latin America will present a major political challenge for governments to maintain the current context of financial and fiscal health. "We will have a less favorable position, especially with the higher social demands of a population that is reaching certain levels, a growing middle class, a population that is coming out of poverty-and that demands the maintenance of these living standards, and also increasingly demands a better quality of public services and more representative political system”.

The Secretary General of the OAS, José Miguel Insulza, delivered the welcoming remarks to the event, in which he highlighted the connections between the subject of the Roundtable and the central theme of the upcoming OAS General Assembly, “Development with Social Inclusion,” which will take place in Asunción, Paraguay between June 3 and 5.

The OAS leader recalled that in the first decade of the 21st century, Latin America and the Caribbean experienced significant economic growth, which allowed for the reduction of poverty in the region and, marginally, inequality as well. That growth, said the Secretary General, created “a certain optimism.” But according to current forecasts, warned Insulza, “growth is going to be more difficult and more complex”.

“The problem is all the expectations that have been created and the fact that the decrease in poverty has not necessarily meant a more equitable distribution of income,” said Insulza, who added that inequality is seen not only in income, but also “in access to public services, in the quality of those services, in public security, problems of discrimination for indigenous peoples, Afro-Americans, and one parent homes headed by women,” among others. “The socio-political reality is that there is a great demand and the people want what was promised to them in the periods of economic bonanza,” said the OAS leader.

Following the presentation of Director Werner, a panel moderated by the Secretary for Political Affairs of the OAS, Kevin Casas-Zamora; which included the Director of the Washington DC Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Inés Bustillo; and the Senior Fellow and Director of the Latin America Initiative of the Brookings Institution, Harold Trinkunas, debated the issue.

Director Bustillo summarized the current state of the economies of the region, the restrictions to growth and the possible responses to the current context. In terms of the current situation, she said the growth perspectives for the region are lower than they have been, and that “it is going to be the developing region of the world with the least amount of growth.” This will affect the generation of employment, said Bustillo, and moreover puts at risk some of the advances of the region in the reduction of unemployment and inequality. With respect to the restrictions on growth, the Director said “we have not moved toward economies more based on technical progress and knowledge” and that much will depend on how the region responds to the economic transformations of the future.

In her conclusion, Bustillo emphasized that the answer to many of the economic challenges of the region lies in “the productive integration of the region, in moving forward in the channels of productive integration.” Politically, she said, “to advance in the agenda of development with inclusion, the key lies in public policy and in trying to achieve consensus”.

For his part, the Director of the Latin America Initiative of the Brookings Institution, Harold Trinkunas, said the different abilities of countries to respond to an economic deceleration “will change the diplomatic dynamic” in some regional blocs, “in ways that we cannot yet predict,” and that this would change “the diplomatic map” of the region.

In addition, Trinkunas highlighted that “we see an economic deceleration and a need to protect the advances that we have made in the reduction of poverty and inequality, at the same time that some emerging middle classes are feeling greater anxiety over their future economic prospects and are making greater demands of their governments for services in education, security and infrastructure.” This, said Trinkunas, creates a serious challenge for the governments of the region: “We are seeing perhaps fewer resources for governments at the same time as greater demands”.

Prior to the Roundtable, Secretary General Insulza met with Director Werner, Director Bustillo and Director Trikunas. The Secretary for Political Affairs of the OAS, Kevin Casas-Zamora, and the Secretary for External Relations of the OAS, Alfonso Quiñonez took part in the meeting.