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HIGH QUALITY ECONOMIC POLICY VITAL TO HANDLING REGION'S CRISIS

A two-day meeting of the Montevideo Circle opened at the Organization of American States today, stressing high quality economic policies are vital to tackling the crises that have faced the region in recent months.

Speaking at the opening of the meeting, OAS Secretary General César Gaviria said that the countries of Latin America have, over the last few years, experienced one crisis after another, "and we still seem unable to come up with an effective response."

He recalled the early 1990s as a period of euphoria and optimism-with the belief that sound economic policies were all countries needed to become prosperous. "But that soon proved seriously flawed as the crises broke out in Mexico, Russia, Asia, Brazil and, most recently, Argentina," he noted, warning that unless Argentina finds an orderly way out of its crisis, "a solution that enjoys consensus and meets certain criteria, the contagion will be huge. And if that happens, it will seriously affect our involvement in the international economy."

The Secretary General said "globalization has dealt mercilessly with political systems" and has unmasked all their defects. Furthermore, there is a generalized concern in Latin America that government has become more dysfunctional. "The weaknesses of the state severely affect the economies and the behavior of the economies bear heavily upon democracy and the political systems."

Julio María Sanguinetti, President of the Montevideo Circle, touched on the dominance of the financial system in a globalized world, agreeing with Gaviria that "the region is falling into financial crises that are sapping confidence in the value of democracy which is, most definitely, the essence of Western philosophy and thought."

A former president of Uruguay, Sanguinetti warned of such very destructive "hidden conflicts" as drug trafficking in the Hemisphere. He said some democracies are weakening and where political parties are very weak, anarchy or authoritarianism could result.

Meanwhile, the President of the New York Federal Reserve Bank, William McDonough, noted that the economic system per se "delivers neither justice nor well-being for the poor," and cited the situation in "emerging" countries which, he felt, should defend the use of private sector capital.

He described the Argentina situation as "the most difficult I have seen in 40 years," and criticized the Argentinean government for using loans to address current expenditures. He said no one he knew-himself included-was "innocent with respect to what happened in Argentina."

Formed in 1996, the Montevideo Circle is the brainchild of President Sanguinetti. The group seeks to contribute to social and democratic debate surrounding the challenges and opportunities facing the region, as well as new avenues for Latin America.

The meeting of the Montevideo Circle ends Tuesday with a press conference at which the meeting's conclusions will be discussed.

Reference: E-113/02