DEVELOPMENT-LATIN AMERICA: New Challenges

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Branko Milinkovic

THE HAGUE, Jan 26 2000 (IPS) - “Although the era of fragility and hyperinflation is behind us, problems of Latin America have not gone,” according to Enrique Iglesias, President of the Inter- American Development Bank (IDB).

“We still face poverty, unequal distribution of income, unemployment and exclusion of entire social groups, like indigenous population”, he said during a lecture in The Hague, The Netherlands, this week.

Before joining the bank, Iglesias was a professor of economic development, Minister for Economic Cooperation in Uruguay and member of the UN Economic Commission for Latin America. He gave the lecture at the Institute of Social Studies, a leading developmental think-tank in The Netherlands, on current challenges facing Latin America.

His lecture, Tuesday enumerated five big issues of the future developmental agenda in Latin America – growth, social change, sustainability, institutional reforms and gradual elimination of the democratic deficit from the political life.

“The present 3,5 percent rate of growth is simply not enough to solve all problems of the continent. I strongly believe that regional integration is the best response for this challenge. In the current era of globalisation regional integration is more important than ever before, since it might minimise risks and maximize benefits”, argued Iglesias.

The first initiatives for economic integration of Latin America dates back to the early 1950s. Although these initiatives have yet to be realised, several sub-regional economic groupings emerged on the continent, such as MERCOSUR, Andean Community or Central American Common Market.

Iglesias believes that the growing environmental awareness, spurred by the activities of non-governmental organisations mushrooming in the region, might improve chances for sustainable development.

Environmental protection and poverty reduction are new priority areas in the multi-billion-dollar annual lending programmes of Inter-American Development Bank (IDB).

IDB is the oldest and largest regional multilateral development institution, which was established in 1959. Over the last four decades its annual lending has grown dramatically – from 294 million US Dollars in loans approved in 1961 to 10 billion US Dollars approved in 1998.

In addition to the countries from both Americas and Caribbean, the bank also has 16 European donor member states. One of their biggest activities last year was an international conference held in Sweden to meet the demands of Central American states after hurricane Mitch devastated the region in 1999.

On the most recent bank’s list of approved projects at least two of them deal with the consequences of natural disasters – reconstruction of infrastructure damaged by “El Nino” in Peru, and hurricane rehabilitation in Belize.

“The most important and, presumably, the most difficult task in the region on the long run is the need for the institutional changes within the national governments. We badly need efficient government which will be capable for intelligent and friendly intervention in the national market economy”, Iglesias said.

“Governments should also be more opened for a dialogue and joint activities with various segments of the civil society which are traditionally very strong in Latin America. At the moment there are too much suspicions on both sides that have to be overcome”, he added.

The most appropriate activity of the Inter-American Development Bank is Small Projects Programme that started in the late 1970s. This programme seeks to promote the conditions necessary for the growth and development of the micro-enterprise sector in the region. It has considerably intensified during last decade.

Since 1990, the bank has financed 471 micro-enterprise operations for a total of 452 million US Dollars. Currently, it is involved in the implementation of the so-called “Micro 2001 programme”, which aims to increase investment in micro-enterprise development.

“Our two decades long experiences have shown that micro business is very successful instrument of poverty reduction. Bank’s projects cover about 50 million units of small enterprises. If you assume that economy of one unit supports three persons on average, this means that some 150 millions of people are dependent on this project”, Iglesias explained.

“We have also noted that great part of this micro business is run by women. They are usually much more capable to manage poverty than men”, he added.

Discussion in The Hague highlighted some bad and good examples among the Caribbean countries. Despite substantial aid, half of which is coming from the IDB, Haiti is still the poorest in the region with a very unstable political system.

On the other hand, Dominican Republic and Costa Rica were singled out as positive examples because they have managed to catch up with the modern technological developments and to create vibrant economies ready to offer services instead of traditional raw materials like sugar or bananas.

On the political front, some recent polls have indicated that about 60 percent of population in Latin America are not satisfied with the political life in their societies. They demand stronger political participation at all levels.

“It seems that people of Latin America would like to see that political system is reactive to their real needs. Politicians should make a clear message of concern because of this fact. I believe that time has come for some changes in the way how politics is conducted”, said Hans Opschoor of the Institute of Social Studies.

In the last several years the bank has focused on small-scale projects to improve local neighborhood. Some of the projects aim to elevate living conditions in favelas, sprawling suburbs where urban poor live.

“I will always remember two small kids in the suburb of Rio de Janeiro close to the airport whom I met during my last visit to Brazil. They were so happy and proud to show me that, as a result of our modest neighborhood project, they finally live in the house with the house number. This is more than symbolic for them since it also solved many practical problems in their everyday lives”, Iglesias said.

Several other ongoing projects are also good illustrations of very practical approach taken by the bank. They include Atlantic coast development in Nicaragua, rural roads programmes in Paraguay, telecommunication network in rural Chile or development of the ecological tourism in the Amazon region in Brazil