MercoPress. South Atlantic News Agency

Iglesias praises agreement to giver emerging economies greater say in IMF

But he is also fearful a “currencies war” could lead to crude protectionism

Enrique Iglesias, Ibero-America secretary general praised the G-20 decision to reform the IMF giving greater representation to the emerging economies but warned that the so called “currencies war” threatens to trigger a dangerous bout of protectionism at world level.

Speaking on Monday during the XXV Annual Economic Conference organized by the Uruguayan Central Bank, he described this last weekend decision by the G20 in the Korean city of Gyeongiu as a “very good piece of news”, but was not pleased that “no agreement” was reached concerning countries with “excessive” current account surpluses and deficits.

Iglesias who for 16 years was president of the Inter American Development Bank reiterated his fears about the current crisis and the growing difficulties by the international community to overcome the situation particularly the industrialized countries.

“This crisis is far more significant and deeper that that of the thirties last century” and its consequences are going to be experienced “for at least a decade”.

Iglesias praised the initial reaction capacity from the leading world powers in the G-20 as from the multilateral financial organizations, although replies were “uneven” and currently there is a situation with a “strong surplus of mistrust and insecurity”.

“The financial system is not entirely cleansed; unemployment is countries such as Spain is very serious as are the social challenges in France which have triggered massive stoppages and protests”, said Iglesias.

“The world is giving evidence of incapacity to make decisions which is worrisome”, since G20 really functions as “a Parliament” and not as an “Executive”, a responsibility which has fallen on to the IMF. Besides, the world has moved from a single-pole situation under the command of the United States to a multi-polar scenario which will take time to coordinate, given the different visions in different regions of the world, beginning with the Asia-Western world relation.

In this scenario “it will be crucial to build consensus and principles that allow us to live in peace”, emphasized Iglesias.

South America for example has benefited from its close links with China and lesser dependency from the US, (as happens in Mexico and Central America), but now is exposed to the so called “currencies war” particularly Brazil and Uruguay.

“Complicated and difficult to manage, it won’t be easy to find a solution because it is directly linked to competitiveness”, added Iglesias.

Iglesias also mentioned that some countries in the region have a policy of “accumulating foreign reserves and punishing the inflow of capital and are even talking of returning to capital controls”, however he was not optimistic about the results of such a strategy.

“The situation is bound to continue because there are large resources in the world looking for profits in those countries where that possibility exists”.

Finally Iglesias said that if the “currencies war prospers, we’re heading for a trade war and a return to protectionism, which is the worst of all scenarios”.