Alicia Brcena urged to strengthen multilateral, regional, sub-regional and national banks and improve their coordination to meet the financing challenges of Latin America and the Caribbean

Strengthening multilateral, regional, sub-regional and national development banks, while improving cooperation and coordination between them, is essential to meet the financing challenges of the region in the context of the crisis caused by the COVID pandemic -19, Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), reported today during a hybrid meeting (in person and virtual) hosted by the Government of Costa Rica at the follow-up to the thirty-sixth session of the Committee of the Whole, held at United Nations Headquarters.

Regional and subregional development banks, such as the CAF-Latin American Development Bank and the Inter-American Development Bank (IDB), and national development banks have provided the most vigorous response to the pandemic, a stressed Bárcena during the presentation of a working document prepared by ECLAC on the response of development banks to COVID-19 and their role in a sustainable recovery.

“For a sustainable recovery, the role of banks will be critical,” insisted the senior United Nations official.

The event was chaired by Rodolfo Solano, Minister of Foreign Affairs of Costa Rica, the country which holds the pro tempore presidency of ECLAC. In his opening speech, the Minister underlined that “our countries in the region have the demand to obtain financing which breaks with the known models”. The goal, he said, is to arrive at the fifth meeting of the Forum of Latin American and Caribbean Countries on Sustainable Development – to be held in March 2022 – “with a concrete and pragmatic proposal that can be implemented as quickly as possible, because our fellow citizens, our vulnerable populations, cannot wait. ”

Other speakers at the meeting included Humberto Rodríguez Guzmán, head of asset and liability management at the Central American Bank for Economic Integration (CABEI); Eric Parrado, chief economist and director general of the research department at the IDB; and Adriana Arreaza, director of macroeconomic studies at CAF-Latin American Development Bank.

Remarks were also made by the High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell (via recorded message); Ambassador Juan Manuel Gómez Robledo, Deputy Permanent Representative of Mexico to the United Nations (on behalf of the pro tempore presidency of the Community of Latin American and Caribbean States, CELAC); Rodolfo Sabonge, Secretary General of the Association of Caribbean States (ACS); Armstrong Alexis, Assistant Secretary General of the Caribbean Community (CARICOM); and Luis Antonio Lam Padilla, Ambassador Extraordinary and Plenipotentiary of the Permanent Mission of Guatemala to the United Nations, on behalf of the Central American Integration System (SICA).

Before the pandemic, Latin America and the Caribbean were already on a stagnant trajectory, Bárcena noted. In 2020, the region experienced the worst contraction on record (-6.8%) and investment plunged (-10% in real terms).

In this context, the Executive Secretary of ECLAC reaffirmed that the region has a limited capacity to mobilize national and external resources to meet its investment challenges.

Latin America and the Caribbean are currently the most indebted region in the developing world: on average, gross public debt stands at 77.7% of regional GDP, and debt service accounts for 59% of its exports. of goods and services.

National development banks have also provided substantial counter-cyclical support to economies in the region, Bárcena said. Besides credit, guarantee schemes have become the most dynamic instrument to support micro, small and medium enterprises (MSMEs) during the pandemic. These guarantees represent 32% of the financial support provided by national development banks, she said.

To achieve a sustainable recovery, countries in Latin America and the Caribbean must in particular increase their capacity to mobilize resources and channel them to public and private projects in strategic productive sectors, said Bárcena.

The lending capacity of development banks can be increased through greater capitalization, which should be accompanied by a change in the composition of investments, said the executive secretary of ECLAC.

“We believe that regional and sub-regional banks can be essential in redirecting investments, for example, towards climate change. To increase financing based on environmental criteria, it is necessary to develop innovative financing instruments, such as than the issuance of durable bonds “, she underlined.

“It is a moment of reflection on how we can achieve greater regional and sub-regional integration”, argued Bárcena, highlighting initiatives such as the Plan for self-sufficiency in health prepared by ECLAC. at the request of CELAC, and the Fund to Alleviate COVID-19 Economics (FACE) proposed by Costa Rica, among others.

“Coordination and articulation between development banks at different levels is fundamental for the region’s financing strategy,” Bárcena concluded.

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