Madam President, Secretary General, ladies and gentlemen, Ambassadors who accompany us, members of the different delegations, and friends-

I want to begin by pointing out the enormous honor that it means to me to be present at this gallery, especially knowing all who have come before me, and obviously I will try to make an effort to respond to this honor and invitation to discuss the topic of Latin America’s challenges. I believe it is important to begin by making a simple reflection of where we are and how much we’ve progressed, because at times we tend to view the region and particularly the situation in which the darker side seems to be more seen rather than the brighter side of what we have, in the lights and shadows which is our Latin America.

The return to democracy which took place during the last 20 years in which as of 2005 and 2006 we’ve had more than 13 or 14 elections, allows us to say that we have a solid democracy, allows us to say that it is true that sometimes we have had unexpected changes in governments and leaders, but let us say that all of the changes were made in the legal process of those respective countries. We have economies in order, there’s practically no inflation in the region, and we should say that we also know what can and can’t be done in economic terms. We all know what is responsible management of fiscal policies, and we all know what we can do in monetary political matters. There are technical teams in the region which in the past did not exist. It is true during the great part of the 90s, and this we will discuss later, the denominated Washington Consensus appeared to permeate as a great prescription, and I would say that yes, it is probably a good prescription to maintain economic stability, but it is not a prescription regarding what are our social needs, which our societies still have. Growth or the markets do not provide the possibilities to be able to advance from a social point of view. Therefore I believe that one of the first challenges that we have to take on if we want to take advantage of what we are living today – these five years of uninterrupted and continuing growth in the region – and how we can take advantage of it in a certain way so that we don’t say later that we had an opportunity and we missed it.

I also believe that at the same time that we have these elements we have social tensions in the region, because it is still basically a very unjust region. I remember many years ago they asked President Cardoso, “Tell me, is Brazil a rich or a poor country?” and he said, “Brazil is an unjust country,” and I believe that in that sense it is certain – we have inequalities, but it is also true that we are becoming a region, shall we say, of medium revenue. Medium revenue in the sense that we are not at the level of developed countries, but medium in the sense that we have a level of revenue per inhabitance and that helps us to measure that which we could say that practically very few of our countries qualify for foreign aid. The financial assistance for our countries is for three or four of them and no more, and consequently at times we tend to think that because we are a country of medium revenues then we don’t belong to those who fought to leave behind their development, but neither have we reached that other status. I believe that is where a great number of our challenges are based, and I would like to share with you this afternoon five challenges which I believe are the central ones.

The first one has to do with the reason of why this Organization of American States is so important, and has to do with the perfecting of our democratic system. We have advanced much; but we also know that as soon as we have social problems, they tend to change the democratic goals that we have. Consequently the form of legitimizing the democratic and republican institutions is how we are able to advance in social topics which are more important. I believe that there is a role for the OAS, the Inter-American Democratic Charter, and the reflections that the Charter brings to these topics, which prevent me from having to insist on them further. But I believe that here we have an environment in which that first challenge appears with great force. A democracy that is not efficient, a democracy that does not deliver, a democracy which is unable to create realities, the advances of a long range, social perspective, is a democracy that can fall into a void in the ritual of elections, of the new authority, of the new president, but from the point of view of what our countries expect, it is not the most adequate.

Together with this I want to say that there is a second challenge which appears to me to be even more crucial, and that is how we are able to face the dichotomy of Market versus State (if there is such a dichotomy). I believe that the basic challenge that we have here has to do with how we are capable of facing growing social challenges, which are a result of a situation of an insufficient advance, including economic advances. And I believe that here the central element is determined by the capabilities of our countries to provide public goods and services. What do I mean by this? That every society from the beginning when man begins to live in societies determines certain elements that need to be satisfied – and the first is defense. Take the first time that man determines that he can cultivate something from the land – the first thing he will deal with is the defense to make sure that another tribe from nearby tribes doesn’t make it theirs.

But then we have the other element, which is more important, which is internal order and justice, and as of then we begin a growing process of understanding that there is a group of goods and services which have to be available to all and not some. And when we speak about advances in topics of education, advances in topics of health, advances in topics of infrastructure, what we are saying is how do we guarantee a society in which those rights are guaranteed? And here is where I believe there is a distinction which I believe is central. Public goods or public services are those services which citizens define should be available to all – the citizens, us; what consumers define are the products which the market offers. We are all consumers and we are all citizens. The great small difference is that consumers have different levels of purchasing, and as far as citizens, we are all the same. And therefore when we state that the market will be the responsible element for assigning practically all the resources, we are pointing at a society that will have the same inequalities as the market. When you say that it is the citizens who will determine specific goods and services which should be at the reach of everyone, then you are going away from the rules of the market and are establishing a group of political and public norms which want to make those goods and services available to everyone. And this distinction, which to me appears as central, if you hurry me, one could say then that democracy is the element with which you define what should be the goods and services at the reach of everyone. It is true that the public well being defined as such is a dynamic element which is constantly changing. What today appear as indispensable services in society tomorrow will appear as insufficient. See what has been the story of education in Latin America. What did we do throughout the twentieth century? Say that we have education, number one, obligatory—yes or no. Into the twentieth century all of our countries said it was obligatory, later they said it is four years in Chile’s case, later they go up to six, then eight. Today most countries have twelve years of obligatory education. In other words, you begin to introduce a dynamic element of a public good, education for the reach of everyone, and you begin introducing greater demands. And when you say that I want to have a strong society in the face of health, or with public housing, what you are saying, if not introducing an element, a definition of its citizens and not of the market. And why do I say this? Because this does not necessarily mean that public well being will be solely provided by the State – it could be provided by the private sector, but you have to take measures to place it within everyone’s reach. So therefore I believe that a great part of the debate which we have in Latin America today is that in recent times the topic of public politics and the topic of how we are capable of having more equitable societies is determined by how we make the decision as citizens to have certain services at the reach of everyone and to see that that decision is implemented in the reality of our countries. And here is where I believe is the central theme of our debate today, because of course saying that we want portable water in our cities is easy – you connect to the main supply. Saying you want portable water in the rural world is much more expensive. And if you say portable water also in the rural world, at least in the experience of our country, this has a cost of one, two or three thousand dollars per rural family. And if there is no one, two, three thousand dollars per rural family, if there is none, then you develop as a responsibility, providing rural portable water. This sounds simple. The capability of being able to make this effective is I believe the central element that needs to distinguish the future debate in our region and how we are able to make it happen. And together with this I would say that in recent times, somewhere after the experience in the 90s, there has appeared recently a stronger action by the State, because more space is being generated for citizens to make demands. And therefore, from those demands by the citizens, the first challenge, the second challenge is how we are able to take on this task that we have regarding the services that we want to make public. Go and create health reforms, and the great topic there is how you can make it efficient. I don’t want lyrical declarations, I want guarantees. And how do I guarantee what I’m promising can be done? The topic of guarantees is the great element which we must be able to incorporate. And to this I would add, since we are discussing the topic of Market versus State, which areas are from the point of view of the definition of the Market, and which are from the point of view of the citizens; in the same manner I believe it becomes a central point. The reevaluation which specific companies—public companies—are experiencing are judged by our societies to be a central element to the State with strategic importance. A good part of the energetic companies in the region remain and are still State-owned companies, and there we have an important difference with other regions in the globe.

The third challenge has to do with the more complex element which makes the type of society which we are going to create in our America. If you think about it, we have had successes in the past years probably as a result of social policies combined with the increase in the growth of our economies. We have been able to convert part of that growth into social policies which have resulted in a reduction of poverty – not as quickly as we’d like at a regional level. We have, however, important examples in this matter. But the fact that you have successes in the fight against poverty, the fact that you begin to have a higher income per inhabitant, creates a situation in which our societal composition, the medium sectors, begin to experience demands greater than what we imagined in the past. In other words, the effort and the focus of our worries of public policies and social policies have been focused on defeating poverty, of defeating indigence; however, the demands of the medium sector, particularly the educational sector, becomes a central point. When I was once asked which the most important statistic in my country is, I said one: today in Chile out of 10 young people in universities, 7 are first generation in their family to attend university. And the demands you have over the medium sectors is how do you guarantee access to university? And therefore there we still have a significant breach. We’ve advanced much, yes, but the breach that remains is enormous. Then, why do I say this? Because I believe that the great debate we will have in the region is which type of society we will define. In the manner in which social demands, such as access to education, social demands to eradicate the fear of disease because we have a system of guarantees in areas of help which functions; social demands because we have a system of guarantees in the area of unemployment which functions as insurance; social demands such as a system of guarantees that deals with the concerns of the aging which functions. If you look at societies around the world in face of all these topics, you may find answers which emphasize an individual solution, be it a way of insurance. I’ll begin saving when I have a child, and when he gets to university he has a certain insurance. He has another insurance to cover his health to deal with catastrophic illnesses. I have another insurance to cover me in my old age. We have a society with more solitary characteristics such as a European in which, let’s not mention a state of “well being” which is not an expression that today can be used much, but yes let us say societies which have an organization in which a great part of these events are covered collectively. Consequently it appears to me that what we will have in the coming years is a debate about these two types of societies which there are. In many countries, individual insurances exist; you advance into insurances of a more solitary character and you can surpass the insurances which today you have as an individual. You can have a mix of both. I remember Chancellor Schroeder of Germany pointing out that it is impossible to maintain social insurance for the aged in Germany, and what possibility would there be to have a portion of them covered with individual insurance? In other words, it is a beginning of saying – can I cover part of this with individual insurance or a mixture of both? And I believe therefore that this debate will take place in Latin America with vigor. But this debate is not indifferent, because this debate arrives as a result of different economic needs.

And I go to another topic which is way above this and vital – the tributary pressure in the majority of our countries is more a tributary pressure of less developed countries than developed countries. We have a tributary pressure of 12% in some countries, 15%, 20%; the exception is Brazil, which has a greater tax pressure. Without an adequate tributary pressure, the debate, which you’ll have about the type of society, will inevitably take you to a fiscal and tax debate. I know that in many of our countries we begin backwards by discussing that taxes are “high” or “low.” Taxes are neither high nor low, but rather in relation to the needs that we want to satisfy. If we want to satisfy more needs, you will have higher taxes. Another thing is, if the taxes are effective to satisfy those needs. Consequently the countries which have a higher competitiveness in the world, the Nordic countries, have very high taxes, but their people don’t complain that taxes are high as long as there is a level of satisfaction of needs related to that tax. I remember that when I was a candidate for the presidency many would tell me, well Mr. Socialist you should learn from Felipe Gonzalez. The more they told me to study Felipe Gonzalez, I began to further study what Felipe Gonzalez had done. I discovered something that surprised me very much. Felipe Gonzalez governed between 1982 and 1996 – 14 years. Felipe Gonzalez received Spain with a tributary pressure of 23% (in other words taxes represented 23% of its Gross Product) and left Spain in 1996 with a tributary pressure of 36%. In other words, Felipe Gonzalez increased almost 1% per year, governed 14 years and increased Spain’s tributary pressure by 13 points for the Spain which today we all know and all applaud. I explained this to many people and they did not like my response to Felipe Gonzalez, but I believe that this has a great deal to do with the type of country that we want to build. If this debate will be there, because of course this debate will imply how the citizens understand the way they want their societies to function now that we are growing. And we want a more solitary society, or a society of more individual characteristics; both very legitimate, however that is a decision to be resolved by its citizens.

From this point we will have a debate regarding the fiscal policy which finances the type of country we want, and therefore, excuse me for saying it like this; I believe it is of the utmost importance in our America this debate about fiscal policy without saying anything about tax evasion, which is a whole other topic. But let us say again that in our Latin America, we have a level of tax evasion that is closely correlated with the level of development that we’ve been experiencing, and in that sense there remains for all of us a very long path to walk. We have levels of tax evasion between 25%, 30% and 35%. In my country we had a level of tax evasion of 25% in the year 2000, and we were able to reduce it as a great feat to 18%. But in developed countries – their level of evasion is in the order of 10%. We have a long walk.

The fourth topic, and I will go quickly, is a beaten path that is known as “integration.” I would like to distinguish the interaction amongst ourselves from the necessary integration to be able to engage and compete with the world. Why do I say that it is a very long story and very unhappy? Because I believe that soon I think we will be able to celebrate the 50th anniversary of our integration efforts beginning with the LAFTA, later ALADI towards the end of the 1950s, beginning of the 1960s, and where we are today. In truth, all of our integration efforts have been guided by a fundamentally economic effort trying to create some sort of common market through the union of duty free customs, and we said that integration will not be solely that. In the decade of the 1960s, the 1970s, of internal growth, what we wanted was to create larger markets, and for that we fought for integration. I believe however that we never had the sufficient clarity to say, why don’t we distinguish a political integration (political in capital letters) to negotiate before the world, or to organize ourselves in our respective homes? Something of this emerged with the Rio Group when we wanted to organize the topics which were pending in Central America. Something of this emerged when we debated in the Rio Group topics such as what we do with the participation of different Latin American countries in helping our friends in Haiti. A second level in which we are recently entering is physical integration, and whether you have the Puebla Panama plan or IRSA with respect to its position on South America, and what can we say about the CARICOM countries, which in my opinion are the most integrated countries in all of the efforts that we have in the region. Whether it’s the political characteristics or their form, they have integration to the level of having a Supreme Court of the Caribbean – that is really integration. Now in that sense there is a third level in which we are trying to advance, which is in the energetic environment, and where I believe that the topic of coal and iron for the European Community can advance perfectly at this time. But the most important I believe is an integration at the cultural level, which is very far away, because I believe that we think that culture is always a little bit on the outside, and we don’t understand that culture is at the root and center of our public policies. Culture is what gives us our roots and identity, and culture is also what gives us an identity as Latin Americans, and therefore the fact that this always ends up toward the end of our numeric points speaks very poorly to that which in the long term will be preserved. I can assure you that not many will remember who the presidents of Chile were in the 20th century, to give a recent example, but I can assure you that all will remember in this 21st century who was Pablo Neruda, Gabriela Mistral, or Vicente Huidobro. But all this debate about integration emerges in a moment in which a world changed, and now we have a globalized world, and globalization has such different characteristics. It is here therefore where I believe that we still have a great deal to learn. Why? Because for some globalization is a product of neo-liberal policies, an expression of a specific form of seeing the world and that we are heading toward a global market. For others, globalization is a bad word that we need to fight, and consequently we should be capable of removing ourselves of that. I believe neither one nor the other. In a recent communication with a mutual friend, Juan Gabriel Valdez, he quotes Manuel Castells, the Spanish sociologist, and he says, “Well, globalization is in an essence global expansion of modern production technologies. It is a process derived from certain human capabilities,” says Castells, “more notoriously, finances and economics of operating as a single unit, connecting the planet under a network of a flow of functions, in real time, in planetary scale, incorporating from the fields of finances and economics to the globalization of science, communications and even organized crime, which is part of globalization.” In other words, as he says, a multidimensional historic transformation defined by the transformation of the production system, organizational system, cultural system, and the institutional system. All this is from a base of a technological revolution which is not the cause but the indispensable support of the globalization phenomenon. And why does this synthesis from Castells appear important, as highlighted by Valdez? Because it captures the essence of the globalization process, and therefore they include a high degree of neutrality in the face of those who see this phenomenon as black or as white. And what I would like to say is that the phenomenon is here to stay, whether we like it or not.

And therefore, when this occurs defined as such, there is a topic that takes us to the fifth challenge, because the topic of integration is intimately related to the fifth challenge, which is that you have a globalization which advances at a rampant pace, but the rules of the globalization process don’t exist. Or they exist, but they are imposed by those who have more power. In other words, multilateralism, which establishes those rules in the elements of global realm, let us not say it enters in crisis, but multilateralism requires an adjustment to be at the same level of the realities of the 21st century. And in that adjustment, to be on par with the realities of the 21st century, we then have the fifth challenge, because that challenge is there already. Latin America will have a level of participation as such in that world; let’s not call it new – different from the multilateral institutions inherited from post World War II. Whether it’s the Charter of the United Nations with a Security Council and the five major powers with veto rights, or any of the many Organizations that we have today, correspond to the realities of 1945, not to today. We can debate the UN a lot, but that’s what we have. The institutions which emerged from Breton Woods – the World Bank, and the IMF – what are they? The World Bank we forget already is the Bank for the reconstruction, at the last minute they added, and development. It was created primarily for the Marshall Plan and the reconstruction that the United States undertakes regarding Europe. And then of course it seems normal to say, okay, we’ll place the president, and you Europe, the Monetary Fund. With the greatest respect to Robert Zoellick, I have no doubt that he will be a good president of the World Bank, but that is something which can no longer be resisted in this world, speaking frankly. And a perfect demonstration of this is that in order to solve economic problems, it is the finance ministers who give origin to the group of 8, and which later they adapt so that the Heads of States in governments are the ones who meet. But let us also state that the reality of the G8 has its limitations, and since beyond it is now the G8 plus 5. And the plus 5 is an effort to rubber stamp, and with the greatest respect to how these gatherings take place, I believe that here we have a key debate. And why do I refer to Latin America? Because in the happy world of 1945 when we arrived in San Francisco there were 19 countries from Latin America out of a total of 51 – now it is different. Then the question is, will Latin America have a role in this that is developing before our very eyes? Evidently as a result of the advances which are taking place, there’s a topic of Asia with its giants, and the growth of Asians looking amongst themselves. The growing role of China, India – I don’t need to point it out here, and at the center of this debate we can add the other, which is the emerging need for global public services. How much time transpired in our societies, each one of our countries, before we debated public services? And now, excuse me if I put on a hat, more recently there is talk of climate changes, global warming, and we demand action. Then in that demanding of action, in that debate, as in any other debate, where is Latin America? Look here, in Kyoto the developed countries have a limit – the sub-developed an intention. Now we on the other side of the page have the debate moving forward; how will this discussion take place, where will it take place? Why do I say this? Because I believe that consequently here we have a very complex challenge for Latin America. It is certain then when it is the G8 plus 5, in the plus 5 we have two – we’re not doing badly – Mexico and Brazil. But we must say that in the organizing center, it is Mexico and Brazil acting in accord in order to be able to be heard as a region, and this is a very important topic. We had our turn on the Security Council. I’ve never understood why countries dispute so much over being part of the Security Council, because when you’re there at times the situation is complex. We had the Iraq issue, and well, what I recall from experience, that in a topic of this magnitude, complexity, and difficulty, because there was a clear understanding of the two Latin American countries – Mexico and Chile – we were able to maintain a common position. Once we maintain that common position, other elected friends, not permanent of the Security Council, began reaching out to us, such as Pakistan or the African countries. In other words, by having order amongst us implies also an important coordination in order to be able to have a voice, which is different because there is a different level of development. I believe that in the case of Kyoto it is a very important topic, because I believe that it is not possible that ten years later, when we begin to have a discussion again of saying yes, but excuse me, but I believe that I still have a right to continue polluting, because you polluted a great deal in the past, etc. I know that historic responsibility exists. We have to find fair forums to provide relevant facts, but I believe that we all have to make an effort.

In summary, how do we take on these tasks? In a world which we know is changing from the globalization process, which is changing as a result of the mutations that take place as a result of the relationships between countries, and which is changing as well because we are conscious that a great part of the world of 1945 has to give way to the world of the 21st century. It is here when at times one looks with concern to what is happening with our America with concern, because some days ago speaking with a European friend (well Europe has individual relations with China, India, with all countries, and let us say it – Latin America is far behind), the eyes all look toward, as they once looked toward Eastern Europe, Asia and the manner in which Asian countries are integrating at a more accelerated speed than us, and with greater political differences if I may add. But the growing role of China and the Asian countries create a reality of enormous importance, and I believe that here we must be capable of being able to speak with a single voice, and speaking with a single voice is not easy. However, I would like to believe that in light of what we have been able to build in the years, of what is this Organization of American States; where we have the capability and the possibility to converse at the Hemispheric level; and where a great part of these topics can be discussed, because here we have another two partners of tremendous importance, such as the United States and Canada; and where in terms of geography we conform the same hemisphere; it is possible to advance many of these topics and in this way be able to advance further beyond this hemisphere. Excuse me for saying it, but at times when there is a common sharing of power in the face of topics of international politics of major magnitude, what is the form in which Latin Americans talk amongst themselves? Or Latin Americans as such converse with the U.S. and Canada? It should be here. When a situation arises such as Iraq, what you have are infinite bilateral conversations between Latin American leaders, but there is no forum where we can go to say – can we try to determine a common position with regard to that topic? The U.S. goes to NATO and debates with those who are in favor or against the position, and I believe that consequently here there is an environment, let us not even mention the Asian countries. And I believe that here we have a challenging environment for Latin America of a major magnitude, and the issue is whether we’ll be at the level of the past two generations when in San Francisco they were able to agree and were able to impact the Latin American group in that meeting. Of course it came out of a global conflagration, but every crisis is an opportunity and a crisis of that Second War led to the creation of the Charter of the United Nations. Therefore, when we again have a new world, a new world because of globalization, a new world because of global public services, it is the first time that human beings have had to go from making sovereign decisions of Nation States to decisions which are collective, and that is a result of what we have all done on this planet. And how are we to make this leap, this leap that was initiated 500, 400, 300 years ago with the Nation States of a feudal world of Nation States, that leap of a Nation State, the topics which have to be addressed globally? How will we achieve this? How will we propose this? And we, in that leap – what role will we play?

A final reflection to share with you this afternoon is that, together with these, we have another change, which is the change since Westphalia sometime around 1650, when foreign relations was an equilibrium of nations. In those times, nations of the world were Europe, so it was a European equilibrium. And what is foreign relations? Equilibrium. Try to break the equilibrium and you return to equilibrium. One could say the Cold War was the last experience of equilibrium in the planet. But today there is a single power from the political-military perspective in a true meaning of the phrase. But we also know that the limitations, despite being the only political-military power with the magnitude that is the United States, is the fact of being that only power. Therefore, that power as well as the rest of us have to get used to a new world in which there is no equilibrium from the political-military perspective, but there is an equilibrium which calls us to participate in the future of the planet as we have all seen in the events that have occurred recently. Consequently, to learn to walk in a world with those characteristics is also an experience which all countries have to go through, and which is not easy, and which at times seems to be unattainable. In summary, to conclude, what I would like to share with all of you is that this fifth challenge is nothing more than how we are able to have a Latin American identity that will permit us in a world that will become even further globalized an expression of what we are, of our roots, of what is ours, of our values and our identities. And in that sense, I believe that this Organization of American States is perhaps a good starting point. Thank you very much.