SANTIAGO, Chile – Finance ministers from the Community of Latin American and Caribbean States (CELAC) have agreed to move forward to a common regional agenda in response to the global economic crisis.
Finance ministers from Latin America and the Caribbean (ECLAC Photo)Their decision was taken during a high-level face-to-face meeting held at the headquarters of the Economic Commission for Latin America and the Caribbean (ECLAC) here and organized by St. Vincent and the Grenadines, as the Pro Tempore President of CELAC, with the support of ECLAC.
The meeting was in compliance with the mandate derived from the Buenos Aires Declaration issued by the seventh Summit of Heads of State and Government of the regional bloc held in January 2023 in Argentina.
St. Vincent and the Grenadines Finance Minister, Camillo Gonsalves, called for the repositioning of CELAC as an active organization that addresses the challenges faced by the countries of Latin America and the Caribbean.
He spoke of the importance of creating fiscal space for development in response to disasters, aiming to accelerate the achievement of transformative development goals.
Gonsalves said that most Caribbean countries have not yet recovered their pre-COVID-19 pandemic production levels.
He said that the statement that this decade is more “lost” than the previous one is particularly true for the Caribbean states that are heavily reliant on tourism, noting that their production levels have not yet reached the levels recorded in 2019.
Gonsalves also stressed that the regional debt problems originate from external shocks rather than from macroeconomic management in the countries of the region.
In his address to the meeting attended by ministers and officials from 18 Latin American and Caribbean countries, ECLAC executive director, José Manuel Salazar-Xirinachs said that the region is currently facing challenging global macroeconomic conditions, making it exceedingly difficult to conduct macroeconomic policy.
He said the conflict between Russia and Ukraine has contributed to weakening global growth, causing increased volatility in international financial and commodity markets. He said this volatility has reinforced global inflationary pressures and prompted advanced economies’ central banks to swiftly and synchronizedly tighten monetary policies in 2022 to stabilize inflation expectations. Consequently, this has significantly reduced capital flows to emerging markets.
“This is the situation we are facing, worsened by external shocks and the lingering effects of the pandemic. In this context, macroeconomic policy must navigate a slowdown in economic growth and rising inflation, while simultaneously addressing the pressing need to revive economies, create high-quality jobs, and strengthen social policies.”
The ECLAC official noted that the average economic growth of the region during the 2014-2023 decade will be 0.8 per cent, which is less than half the average growth experienced during the renowned “lost decade” of the 1980s when it was two per cent.
He said the current circumstances, characterized by significant needs and substantial constraints, necessitate two key actions. Firstly, there is a need to review fiscal covenants based on a framework of public finance sustainability. This framework should prioritize and combine increased revenues with a more effective use of resources on the expenditure side. Secondly, there is a need for reforms within the international financial system to facilitate the restructuring of external debt.
“We must not forget that the political feasibility of proposals to increase revenues depends on improving the quality, equity, and accessibility of public services.”
Salazar-Xirinachs urged the implementation of measures at the international level to work towards reducing the restrictions on growth and development that affect most Latin American and Caribbean countries due to the high servicing of public debt and its implications for fiscal space.
