Media Center



December 4, 2006 - Washington, DC

Ladies and gentlemen,

It gives me great pleasure to open this Caribbean/Central American Action’s 30th Miami Conference on the Caribbean Basin. This means that for three decades you have been committed to advocacy on behalf of the countries of the Caribbean and Central America. This Conference gives us, therefore, an occasion to reflect on what we have done over the past decades and what we are doing now, and the continuing challenges that we have before us.

Democracy in Action

FIRST, I should begin by saying that 2006 has been the most active electoral season in the history of the Americas. Never before in our hemisphere have so many presidential, general, legislative and local elections taken place in one year - from December 2005 to December 2006. And never have elections ever followed one another in such quick succession. We had the second round of elections in Ecuador one Sunday ago, yesterday we had Venezuela and next week we have the general elections in St. Lucia, which will close out the 2006 electoral season, after 16 elections in one year. I am proud to report, that in general, these elections have been competitive, participatory and much better – generally speaking – than at any other stage in our history as independent nations.

Of course, there is a lot of ideological rhetoric surrounding these elections. But this is, after all, what you call internally in your countries, an “electoral year,” during which people get into discussions and arguments about the best way forward for their countries. We sincerely hope that after this year of democratic elections we will be able to settle in again to deal with the realities of governing. And we hope that the new administrations will take a more practical, less ideological approach. It is telling that none of the candidates have indicated real plans to abandon the sound macroeconomic policies that have been pursued in recent years. I think we all agree that economic stability is integral to the continuity of our democracies.

Now, the Latin America and the Caribbean of today is quite different than that of 30 years ago, when you held your first Miami Conference. In 1976, much of Latin America was governed by authoritarian regimes. In Central America, we had civil wars. In the Caribbean, though democratic rule was the order of the day, many of the current members of CARICOM had not yet achieved full independence from the United Kingdom.

Today, the people of our hemisphere continue to speak loudly in favor of the democratic model of government. And now that we have mastered the holding of democratic elections, we should continue with the much more difficult, but more important, task of governing in a democratic way.

Sustained Economic Growth and Associated Benefits

The SECOND development of interest of the past few years is that this is the second time in a quarter of a century that Latin America and the Caribbean have experienced four consecutive years of growth. The Caribbean is projected to grow this year by 6.3 percent and Central America by 4.5 percent. Prospects for 2007 are also very encouraging. This is all particularly remarkable given the negative impact of this year’s high oil prices on economic development.

Now, the region’s sustained growth is the result of a highly favorable external environment – we agree on that. Several countries in South America and other parts of the region have experienced an upsurge in economic activity due to high commodity prices, whereas a robust demand from the United States and other developed countries has been instrumental in fostering growth in the Caribbean and Central America.

THIRD, we have avoided in these four years of growth, expansionary fiscal policies. Rather, several countries have opted to reimburse their debt, thus decreasing their dependence on external saving. As you know, the standing debt of several countries of our region, with the international lending institutions such as the World Bank of the International Monetary Fund, has fallen practically to zero. The region’s reduced vulnerability to external shock is a development of great relevance.

FOURTH, there have also been improvements in the region’s labor markets and the employment rate. In fact, in 2005 and for the third consecutive year, Latin American and Caribbean countries registered an increase in their employment rate, up to 53.6 percent of the working-age population. I must stress that this is still too low. This low rate is not just a phenomenon of high unemployment; it is also that women are not sufficiently incorporated into the job market, as they are in other regions of the world. The unemployment rate also fell very strongly and should remain low.

And, FIFTH, for the past 15 years, according to the International Monetary Fund, the region’s inflation rates have closely tracked world averages.

The Competitiveness Challenge

Now, ladies and gentlemen, we have had free and fair democratic elections, we are experiencing an export boom and sustained growth performance, BUT our countries still rate poorly in the economic forecasts because we are still struggling - struggling to improve our competitiveness. According to the 2006 Global Competitiveness Report of the World Economic Forum, the only two Latin American and Caribbean countries to be ranked in the top 50 of 117 countries surveyed were Chile (27th) and Barbados (31st). All the other countries were in the bottom 50 percent in terms of competitiveness.

Now, a basic feature of the stagnation of our region, is our insufficient insertion into the world economy. We speak a lot about trade, but actually there is still a lot of space for Latin America and the Caribbean in the world economy. We have made great strides from the protectionist decades of the sixties and the seventies, but we still have a lot of problems here. Those countries that have most opened their borders to trade and commerce are precisely the ones that have achieved the highest levels of competitiveness in our hemisphere.

But the broader parameters of a country’s competitiveness capacity must be brought into the frame of policy analysis and response to understand the real challenges facing us. It is not just a matter of getting rid of barriers to trade and opening our economies. There are a many things that we still have to do to improve our capacity to compete.

For the smaller countries of our hemisphere, the challenge of economic competitiveness has to do with the need to overcome their economic, social and environmental vulnerability.

We cannot and will not become internationally competitive unless the root causes of these vulnerabilities are understood and addressed.

Some of these vulnerabilities are inherent.

For example, many countries in our region are handicapped by small size. The size of some of our economies, especially those of the small islands, means that economies of scale are not in our favour. While we can mitigate this problem through economic interventions and the pooling of resources, the lack of economies of scale will always make these small states more vulnerable to external shocks.

Another inherent vulnerability is the lack of conventional energy sources in many countries of the region. The OAS has actually been working with several of the countries represented here in developing new sources of energy.

However, there is much we could do to mitigate our inherent handicap in terms of energy. For example, we have the capacity to produce much more renewable energy than we currently use, but we have not done so - whereas industrialized countries, which possess a much smaller share of renewable energy sources, have made greater strides in their use of this energy source. While reliance on renewable energy will not solve our energy needs, it would mitigate our inherent handicap.

Other aspects of our vulnerability to external shocks are acquired, not inherent, and thus we should be able to do something about them.

For example, the Latin American and Caribbean region has very poor quality financial institutions, which, as past financial crises demonstrate, makes us very vulnerable to economic shocks.

We also have shortcomings in our fiscal policies. As an example, I visited one of the countries of the Caribbean and Central America recently and was shocked to learn that the income tax in that country was still at the level it was when they established the tax 30 years ago – 5 percent. The tax rates in some of the countries of the Southern Cone of Latin America are much higher, although the collection rate remains below 50 percent. In general, the degree of institutionalization in our region is very low, which results in poor public policies.

Although Latin America is getting quite good at democracy, it is doing poorly at enforcing the rule of law. We need to greatly strengthen the cooperation between the private and public sectors, in order to improve law enforcement. For example, in matters of corruption, many point to the existence of corrupt bureaucrats, but they don’t mention the willingness of many in the private sector to pay these officials.

In general, we have several acquired shortcomings and limitations that we must work on if we want to be really competitive.

Certainly, one of them is the work that needs to be done in the area of trade. Even though Central America and the Caribbean have made a lot of progress in matters of trade this year, it is very important that we continue to consolidate these gains. The development of the CARICOM toward a single economy and the strong integration of the Central American region should help us to begin discussions again, in a better framework, about creating a Free Trade Area of the Americas, which has been lagging behind for several years.

We had a meeting of Heads of State in Mar de Plata at the end of 2005, and the big discussion at that time was how we would push forward the FTAA. The FTAA talks have now been paralyzed for almost three years. Let’s face it, our failure to deepen our trade integration signifies a large advantage that our continent is ceding to other more competitive regions of the world. We are not moving toward an integrated market of the Americas, and that is a major shortcoming that we must overcome.

When I talk about the Free Trade Area of the Americas, I am talking about creating a larger market for all of our products. But probably the largest market for our products will come from better social, rather than economic policies. We still have 200 million poor people in Latin America and the Caribbean who are not fully integrated into our societies. This group includes Afro-Latino and indigenous communities, as well as female headed households, who continue to be discriminated against in the social, economic and political spheres. Let us not forget that Latin America and the Caribbean is still the most unfair region in the world.

Addressing these social challenges is very important to improving our competitiveness. Competitiveness is not only a matter of improving our economic situation; it is also a matter of creating equal and integrated societies, that will improve the quality of life of our people and of our hemisphere as a whole.

In closing, I think we should all look forward to the challenges that this hemisphere and this region is facing. We have made a lot of progress over the past 30 years, but we still have a lot to do if we are going to be competitive in the world economy. I am certain that we will work together to do this. I think that private-public sector cooperation is an important element of all of this and I commend you very much for your work in this area.

Thank you very much.