“Overlapping crises” cloud Latin America’s economic outlook, says IDB chief

The new president of Inter-American Development Bank (IDB), Ilan Goldfajn, said this Saturday in Panama before the heads of finance of the nations of Latin America and the Caribbean that the region’s economic prospects are clouded by “overlapping crises”.

Goldfajn heads the annual meeting of the IDB, which is attended by the governors of the 48 member countries of the Bank, mostly finance ministers, after a black week for the banking system in the United States and Europe.

“Future Prospects [de la región] they are affected by the consequences of the overlapping crises we went through: from the (COVID-19) pandemic to the Russian invasion of Ukraine, with higher debts and record inflation, food and energy insecurity and, of course, the climate crisis”stressed the IDB helmsman, who did not mention the turbulence in the banking sector.

“It is vitally important that today we think about these challenges that go beyond individual countries, they are regional and global problems”added the Brazilian economist in a speech before the governors of the Bank and the Panamanian president, Laurentino Cortizo.

The IDB assembly will culminate on Sunday with the release of a macroeconomic report with data and forecasts for the region.

The conclave began on Thursday with discussions by officials, businessmen and experts, amid concerns over the bankruptcy of three US banks, including Silicon Valley Bank, as well as difficulties at the US First Republic and Swiss Credit Suisse, whose stocks have plummeted.

In these forums, which continued on Friday, the storms in the banking system were not addressed, but Goldfajn anticipated that the issues of “joint” will be discussed by the IDB governors in their deliberations behind closed doors.

Goldfajn pointed out in his speech that he told the governors this Saturday, in a session behind closed doors, that “Governments must overcome the historic plagues of poverty and inequality, increase productivity and accelerate growth, while coping with more frequent weather events, and with scarce resources.”

“None of this is easy,” said Goldfajn, who took the reins at the IDB two months ago. “The challenges we face were not created overnight and we will not solve them overnight. But […] with patience and persistence we can make impressive progress”, he added.

“Contagion can be fast”

There is concern that the turbulence in the banking sector could affect Latin America and the Caribbean, as the failure of three banks in less than a week in the United States marks the worst bankruptcies since the 2008 financial crisis.

“You have to be vigilant because in the financial markets contagion can be very fast”Chilean Finance Minister Mario Marcel told AFP.

“Market reactions can reach our countries. In fact, the price of raw materials these days have been falling and when raw materials drop, our own currencies weaken”, he added.

Marcel explained that “To the extent that the interventions of the central banks are effective, this can be changed, but as long as other types of complex situations do not appear.”

“Amazon regional project”

In addition, Goldfajn led a meeting with ministers from Amazonian countries and donors to seek ways to finance conservation programs in one of the largest lungs on the planet.

“It is time to increase ambition, to the level required by the amazon”, said the head of the IDB in this appointment, according to a statement from the IDB.

“We have to collaborate with all the neighboring countries, acting as a regional integrator for the Amazon, and we trust the IDB for that”said for her part the Minister of Planning and Budget of Brazil and Governor of the IDB, Simone Tebet, quoted in the statement.

The IDB, created in 1959 and headquartered in Washington, is one of the main sources of long-term financing for the region and within the framework of this assembly some countries signed credit contracts with the Bank.

Chile signed a loan for 1,000 million dollars for loans to small and medium-sized companies, and Honduras another for 75 million dollars for anti-poverty programs.

For his part, President Cortizo thanked the IDB for Panama’s support and expressed his confidence that the decisions adopted in this assembly “will be beneficial” for the countries of the region.

At the IDB meeting is the candidate appointed by the US president, Joe Biden, to lead the World Bank, Ajay Banga, who comes from a tour of nations in Africa and Europe.

Traditionally, the candidate nominated by Washington becomes the new president of the World Bank.

Source: AFP