Geneva, 21 July 1999
ECE/GEN/99/19
STATEMENT BY
MR. JOSE ANTONIO OCAMPO, EXECUTIVE SECRETARY OF THE
ECONOMIC COMMISSION FOR LATIN AMERICA AND THE
CARIBBEAN (ECLAC),
TO THE
ECONOMIC AND SOCIAL COUNCIL
(Geneva, 21
July 1999)
Mr President,
Distinguished Delegates,
I have great pleasure in
addressing this forum for the second time, to report to the
members of our Organization on two matters: first, the
most salient aspects of the economic trends observed in Latin
America and the Caribbean during the past year, in which the
region had to deal simultaneously with high degree of
volatility in international finance and trade, and the
onslaughts of nature as rarely before in the region's
history; and second, the main activities carried out
by the Commission since July 1998. In both cases, I will
limit my remarks to the most substantive points.
1. Current
economic trends
As I just have mentioned, in
1998 the Latin American and Caribbean countries had to deal
with an extremely high degree of volatility in international
finance and trade. Considering the strength of the negative
external shocks that dampened growth and seriously hampered
the management of fiscal and external accounts, the region's
economies performed reasonably well, at least up to the
fourth quarter. This volatility is still in evidence,
however, and many of these shocks have a delayed effect.
Consequently, the outlook for 1999 remains highly problematic
to the extent that it is not possible to dismiss the risk of
having a negative growth rate and an increase in the level of
unemployment.
The average growth rate was
down sharply, from 5.5% in 1997 to 2.2% in 1998, but even so
was higher than the average for the world economy as a whole
(1.7%). These figures are annual averages, however, and
therefore do not reflect the intensification of economic
problems that occurred as the year drew on. The typical
pattern in most cases
was high growth rates during
the first six months, owing to the momentum of the
1997 economic expansion, but very slow growth or even
contractions during the last two quarters. Employment figures
followed a similar trajectory, with the regional unemployment
rate holding fairly steady during the first half of the year
but climbing during the second. The strongest aspect of the
region's performance was in the area of inflation, which has
leveled off at around 10% during the past two years, the
lowest rate since 1949. The current account deficit widened
substantially, jumping from US$ 64 billion in 1997 to
US$ 83 billion in 1998, at the same time that capital
inflows dropped from US$ 80 billion to US$ 62 billion. Thanks
to the region's high level of international reserves,
however, it was able to cover its overall US$ 21 billion
balance-of-payments deficit. It is important to note,
however, that the decrease was due to reductions in
short-term capital and that long-term capital inflows were
nearly as high as their 1997 record level.
It is worthwhile to point
out that the types of problems that were experienced in 1998
and their implications differed significantly across
subregions. For reasons that varied from one country to the
next, South America was especially hard hit. In most cases,
these countries' export prices were sharply lower, and in
Chile and Peru the effects of this downswing were compounded
by the loss of Asian markets. Another factor within the
financial market was that a number of these countries
(especially Brazil and Argentina) have well-developed stock
markets that provide a vulnerable flank for international
volatility.
In contrast, Mexico and most
of Central America were able to take advantage of the United
States' booming economy to increase the volume of their
exports to that country. Furthermore, in a departure from the
trend for the region as a whole, which registered a
deterioration in its imports/exports price ratio, most of the
Central American nations' terms of trade were better than
they had been in 1997. Although various Central American and
Caribbean countries sustained severe damage as a result of
the hurricanes that ravaged the subregion in the closing
months of the year, the brunt of these storms' economic
impact will not be felt until later. Mexico was also hurt by
the year's financial shocks, but thanks to its geographic
location in the northern hemisphere, its economy turned in a
somewhat better growth performance than the South American
countries did. Unfortunately, many Caribbean economies
registered another mediocre year, as average growth for this
subregion was just over 1%.
The first two quarters of
1999 have been overshadowed by the worsening regional
situation, making it evident that, even though the region
weathered the international crisis fairly well during 1998,
the depth of the problems facing Latin America and the
Caribbean should not be underestimated. The region's external
vulnerability, about which ECLAC has expressed increasing
concern in recent years, continues to manifest itself in both
the trade and financial spheres. Export prices remain very
low, and the possibility that reserves may fail to rebound
cannot be ruled out. The cost of financing the countries'
growing current account deficits is very high, since the
spreads over industrialized countries' interest rates for
bond issues have widened by several points while stock
quotations have tumbled.
At the same time, the
Governments face difficult decisions in connection with their
macroeconomic goals. They must choose between raising
interest rates in order to protect their exchange rates and
guard against any setbacks in terms of inflation, thus
slowing the growth of output and employment, or devaluing the
currency in order to maintain international competitiveness,
which heightens the risk of inflation, adds to the external
debt-service burden and may drive down real wages.
As stated at the beginning,
projections for 1999 suggest that the difficulties of the
second semester of 1998 are likely to continue. Austerity
measures to deal with deficits on the fiscal and/or external
accounts will leave little room for expansion, and have
already resulted in increasing levels of social instability
in some countries. Overall, ECLAC estimates suggest that
growth for the year will be negative, while inflation should
stay in the single digits in the majority of the countries.
2. Main
activities carried out by ECLAC since July 1998
Within this context, in
addition to the delivery of its regular programme of work,
ECLAC assisted the region to face the consequences derived
from those two sets of events that affected the region,
through a mix of normative activities in the comprehensive
analysis of development and public policy making, and
operational activities in the form of technical assistance,
specialised information and training.
Within its analytical
activities regarding the main trends in world economy and the
challenges and opportunities derived from them, ECLAC paid a
great deal of attention to the repercussions of the
international financial crisis. The report The impact of
the Asian Crisis on Latin America, which provided an
extensive analysis of the medium and large run impact of the
crisis and policy making recommendations, was presented to
the XXVII Session. Later on, as the situation aggravated
with the Russian crisis, ECLAC prepared a statement in which
it offered the region an institutional opinion on the
fundamental problem in the global economy: the enormous
discrepancy between an increasingly sophisticated and dynamic
international financial world and the lack of proper
institutional framework to regulate it, and called for the
establishment of an appropriate institutional framework for
financial globalisation. ECLAC also co-ordinated the
Executive Committee on Economic and Social Affairs (EC-ESA)
Task-Force which produced the report Towards a New
International Financial Architecture.
Another area in which ECLAC
continued to be active is the support to member States in the
analysis of the conceptual and practical problems they face
as the region advance in the fulfilment of integration
commitments. During the Second Summit of the Americas (18-19
April 1998, Santiago, Chile), in addition to requesting ECLAC
to continue with its support for the Free Trade Area of the
Americas, the Heads of State requested the Commission to
wider its assistance to the integration process to the areas
of education, transportation, Micro-Small and Medium
Enterprises, and women issues. As a result of this, during
the period reported there was a significant increase in the
activities in support of the different institutional
arrangements established for the implementation of the
Santiago Plan of Action, such as Negotiating, Consultative
and Expert Groups, as well as ministerial level fora at the
request of which ECLAC has produced different kinds of
inputs.
ECLAC continued with the
analysis of the significant economic and institutional
reforms carried out by Governments in the region, aimed at
evaluating their impact on the performance of the region's
economies, with emphasis on the results in terms of economic
growth and social equity. In order to widen the scope of the
analysis, both in terms of the links between micro and
macroeconomics, as well as those between economic policies
and social evolution, the inter-divisional cooperation was
deepened through the implementation of multi-disciplinary
research projects, such as the one entitled "Growth, Employment and Equity: Latin
America and the Caribbean in the 1990s". In fulfilment of a mandate from the XXVII
Session, national seminars on "The Fiscal Covenant" were carried out in Argentine, Brazil,
Jamaica, Mexico, as well as subregional seminars for the
Caribbean and for Central America. Support was also given to
countries in the design, implementation and monitoring of
social policies and programmes, particularly in the areas of
education, health and poverty eradication and income
distribution.
At the level of
microeconomic analysis, ECLAC continued collaborating with
the countries in the region in the development of policies
designed to strengthen the technological dimension of
production activities, to increase competitiveness, to
overcome bottlenecks in key production markets, and to
stimulate entrepreneurial development. Activities also
continued in the area of technological innovation, technical
and professional training, small and medium-sized firms and
international competitiveness, and the development of land
markets and access to them by small agricultural producers.
In the area of sustainable
development ECLAC continued assisting governments in the
region to move forward within the overall framework of the
region's efforts to implement Agenda 21, to follow up on
Habitat II and to fulfil the Latin America and Caribbean
Regional Plan of Action on Human Settlements. In this context
ECLAC has provided technical support to the Inter-Agency
Technical Committee of the Forum of Ministers of the
Environment of Latin America and the Caribbean - established
in 1998 - particularly in the preparation of reports dealing
with the region's environmental perspective and with the
types of initiatives needed in the area of water resource
management. ECLAC and Caribbean Community (CARICOM)
secretariats acting as interim secretariat to the Programme
of Action for the Sustainable Development of Small Island
Developing States (SIDS-POA) established an inter-agency
group to support its effective implementation. ECLAC also
continued providing technical assistance to countries in the
region in policy making, institutional building and
regulatory matters, particularly in the fields of energy,
mining, marine resources and human settlements. Activities in
this area included technical assistance to parliaments in the
development of regulatory frameworks for mining, energy and
water resources aimed at improving its efficient
exploitation.
Another area in which ECLAC
has been providing services to the region is software
development in the fields of censal information and country
competitivity analysis. During the period reported the
Windows version of "Redatam-Plus" was launched, together with a derived tool
called "ZonPlan". These programmes, developed by CELADE,
facilitate the use of censal information at the local level.
Progress was also achieved in the improvement of the Windows
95 versions of the Country Competitivity Analysis Programme
(CANPLUS) and the Programme for the Analysis of Industry
Dynamics (PADI).
ECLAC has continued with its
efforts to increase and optimise the dissemination of its
works, including the findings of its monitoring of economic
and social trends. In the case of the Preliminary Overview
of the Economy of Latin America and the Caribbean, the
1998 edition included an evaluation of the impact of the
international financial crisis and, for the first time,
projections for the following year. During the period
reported, ECLAC published the editions of its Social
Panorama of Latin America corresponding to 1997, which
focussed on the structural aspects of income distribution,
the composition of employment and the transmission between
generations of educational and labour opportunities; and to
1998, which concentrated on social expenditure and the
situation of poverty in the region. Likewise, the editions of
the Report on Foreign Investment in Latin America and the
Caribbean for 1997 and 1998 were published. The first one
took a new approach to the subject and included detailed
analysis of FDI corporate strategies of major investors and
paid special attention to regional investment abroad; the
second one, on the other hand, emphasised the fact that,
despite the global financial crisis, the flows of Foreign
Direct Investment to the region went from US$ 40 billion in
1996 to US$ 58 billion in 1997.
ECLAC also published for the
third time the Overview of Latin America and Caribbean's
position in the International Economy, which has become
one of the Commission's flagship reports; the 1997-1998
edition of the Economic Survey of Latin America and the
Caribbean; and the 1998 edition of the Statistical
Yearbook of Latin America and the Caribbean.
In 1998, ECLAC began the
process of standardisation in the format of its major
publications aimed at strengthening the institutional image
among its wide and growing public. Along the same line, ECLAC
also launched Notas de la CEPAL, a new bi-monthly
newsletter which replaced four different publications
produced previously by its Information Service. One of the
most significant indicators of the progress achieved in terms
of dissemination of the Commission's works, are the internet
statistics: the number of visits to ECLAC Santiago website
and its U.S. mirrorside have almost four folded since
March 1998.
As mentioned before, during
the period reported several natural disasters affected the
region. ECLAC sent multidisciplinary missions to assess the
socio-economic effects of the disasters to seven countries
and prepare detailed reports for the national Government.
These reports include estimates of damage and reconstruction
costs by sector, including the environmental impact and
project profiles for the stages of rehabilitation and
reconstruction, using a methodology developed by the
Commission over more than 25 years of experience in this
field. The scale of these disasters, and the level of damage
they caused, showed the region's extreme vulnerability to
such events, underlining the indissoluble link between
development, environmental sustainability and the risk of
catastrophic damage.
In the area of training, the
Latin American and Caribbean Institute for Economic and
Social Planning (ILPES), offered six international and one
subregional course, with the participation of 163
professionals; and the Population Division (former CELADE)
offered the XXI Intensive Course on Demographic Analysis for
Development, with the participation of 18 professionals from
the region and some African countries. In addition to this
direct training activities and the training component of most
technical assistance activities, ECLAC collaborated with many
universities and higher education centres within the region
and in Europe.
The activities in follow-up
to Global Conferences include the preparation of the report
entitled "Latin America and the Caribbean:
review and appraisal of the implementation of the Programme
of Action of the International Conference on Population and
Development", presented to the ICPD+5 Session;
the activities carried out with CARICOM in relation to the
implementation of the Programme of Action for the Sustainable
Development of Small Island Developing States (SIDS-POA); and
the organisation of two meetings of the Presiding Officers of
the Regional Conference on Women, at which ECLAC reported on
activities carried out in fulfilment of the Regional
Programme of Action, the Santiago Consensus and the Platform
for Action in the light of the planned review of
implementation of the agreements emanating from the Fourth
World Conference on Women to take place at the VIII Regional
Conference, to take place in February 8-10 in Lima, Peru.
Finally and in preparation
for the second Regional Conference in follow-up to the WSSD,
which will take place during the Commission's Sessions, to be
held in Mexico City in April or May 2000, an interdivisional
task force has begun the discussion, research and drafting of
an in-depth, empirical analysis of the major social policy
concerns now facing the Governments of the region.
Preparations have also began at the sub-regional level,
including a Caribbean Preparatory Meeting, to take place at
the beginning of September 1999 in Port-of Spain, Trinidad
and Tobago.