MercoPress. South Atlantic News Agency

Latinamerica will need 400 billion USD in new capital next year

Pamela Cox, World Bank president for Latinamerica

Latinamerica will need to borrow 400 billion US dollars next year to compensate the lack of national capital and to help reactivate its economy after the downturn, according to Pamela Cox, World Bank vice-president for Latinamerica.

“It will not be simple, even for multilateral financial institutions used to this level of borrowing, among other things, because the capital available in developed countries is being used for their own stimulus measures”, said Ms Cox during the annual Americas Conference presented by The Miami Herald, Florida International University and the World Bank.

Ms Cox said that worldwide the role of the state has grown in response to the crisis in ways unthinkable years ago but “the more-optimistic economists at the World Bank believe this historic recession also provides an opportunity for citizens to demand more from governments”.

With fewer resources available to the state but more expected of it -- from regulating finance to facilitating job creation – “it seems time for taxpayers, particularly those who earn the most, to accept a slightly higher tax burden”.

However for taxpayers to be willing to pay more, governments will need to improve transparency and be held accountable.

“This is a matter not only of greater public access to government information, but also a matter of governments setting goals and benchmarks so that public spending can be evaluated on results. Citizens have the right to know what their money is being used for”, underlined Ms Cox.

She pointed out that according to the Organization for Economic Cooperation and Development less that 4% of Latinamerica’s budget revenues come from direct income tax compared to an average of 27% in the industrialized countries.

Ms Cox also said the region suffers from high unemployment because of a deep fall in exports.

“Exports are projected to fall 11% in 2009, the biggest fall in 72 years and the region’s economic growth for 2010 will hardly manage 1% “ she said quoting figures from the United Nations Commission for Latinamerica and the Caribbean, Cepal.

“An improvement in the world's economic landscape will benefit prices and a stronger demand for goods, services and exports, which the region depends greatly on'' added Cox.

According to the World Bank, half of the Latam economic growth in the 2002-2008 period was due to higher prices of commodities and exports in the world market.

“Latinamerica probably will enjoy a shorter route to economic growth than other countries, among other things because of new financial regulations. This avoided deep currency devaluations and bank failures”, she stressed. And the region's growth was not better because of the Mexico crisis. Mexico, the second largest economy of the region behind Brazil had a negative growth of 3%”, added the World Bank official.

Pamela Cox ended her speech with a positive not saying that “whatever you call them, the old left, the new left, liberals, neo-liberals or conservatives, the truth is that Latinamerican leaders have implemented pragmatic solutions, a mix of social and fiscal policies with a human face. This pragmatism is a big help in reducing the gap between rich and poor in Latinamerica and will be a key issue once the crisis is over''.