Last week, the Inter-American Development Bank held its annual meeting in Asunción, Paraguay, for the first time in 52 years. In that period, GDP per capita in Paraguay has gone from $185 to over $4,700, with growth averaging 6.4 percent over the past four years.
Importantly, Paraguay has focused not only on growth per se but on employing that growth to increase social inclusion and decrease disparities. At the start of this century, 1 in 2 Paraguayans lived below the poverty line. Today that number is 1 in 5. Paraguay is one of a number of Latin American and Caribbean countries that have made great strides in the past decade on many economic indicators, including the reduction of poverty.
The main takeaways from the annual meeting reflect this progress.
Takeaway 1: The LAC region steps up again
Two years ago, the IDB’s 26 borrowing member countries assumed greater responsibility for the resources needed to fund future development lending to the private sector, agreeing to provide more than 55 percent of the funds needed when the IDB spun off the Inter-American Investment Corporation, its private sector lending arm. Last week, the borrowing member countries again agreed to increase their contributions by providing 55 percent of the $317 million pledged for the third replenishment of the Multilateral Investment Fund — as compared to 8 percent of the resources for its 2007 predecessor, MIF II. Japan, who together with the U.S., co-founded the MIF in 1993, led the non-borrowers with a pledge of $85 million. This replenishment extends MIF operations from 2019 through to 2023.
Established in the early 1990s to promote private sector-led development, the MIF has been a highly successful innovation lab that has provided close to $2 billion in grants to more than 1,500 projects executed in partnership with private, public and civil society organizations in the LAC region. To mention just a few areas where it had outsized impact, the MIF was a pioneer in working to decrease cost and increase access to remittances; it helped transform microfinance in the region; and it opened the market for micro-green finance. It also led the way in establishing the venture capital business in LAC, investing almost $300 million in 74 early stage VC funds (leveraging an additional $1.1 billion) that has been invested in 660 businesses, generating $1 billion in revenue and 28,000 jobs.
The replenishment of the MIF was both recognition of this track record and an affirmation of its future strategy. Going forward, the MIF will focus on promoting climate-adapted agriculture, inclusive cities and the knowledge economy, seeking to generate income opportunities and raise living standards, especially for marginalized groups and communities.
Takeaway 2: Regional integration is a hedge against potential trade barriers
More than 800 public and private sector leaders gathered at the bank’s annual Business Forum of the Americas to discuss ways to boost economic growth and deepen regional integration, a theme echoed by the IDB’s new Macro Sustainability Report issued last week. That report calls for greater intra-regional trade in order to lessen the impact of potential trade restrictions.
After a few years of fiscal adjustments of approximately 2 percent of GDP, the LAC region has largely stabilized its debt levels. However, the region is susceptible to the impact of the imposition of potential trade barriers. It’s no surprise that this vulnerability decreases as intra-regional integration increases. Therefore, the IDB had two pragmatic suggestions to boost regional integration without prescribing the long and difficult creation of a new, larger free trade area: First, fill in the limited number of “missing links” amid the region’s 33 trade agreements with a handful of bilateral agreements; second, simplify the multitude of rules of origin.
The result of getting this right? A $5 trillion, resilient economy that is the fifth largest in the world. Today’s global environment may be just the impetus needed to spur the region forward toward greater integration.
Takeaway 3: Gender equality is front and center
Throughout all four days of the meeting, a cross-cutting and ever-present theme was the importance of gender equality. Public sector and private sector alike now understand that gender equality not only increases growth but it increases equitable, inclusive growth. We saw this throughout the panels at the Foro Empresarial and at the official meetings of the governors. Diversity was recognized as a necessity for innovation, growth and productivity; demonstrating, once again, that gender equality is both the right thing to do and the smart thing to do.
Perhaps this was best seen at Demand Solutions Paraguay — an event that featured 16 LAC women whose cutting-edge work in science, technology and the arts is delivering solutions to the region’s development challenges — from Natalia Rolon’s single-person electric vehicles being produced in Paraguay, to Gabriela Galilea’s use of gaming to detect and correct vision problems early and inexpensively. From Victoria Flexer’s leadership of a team focused on shortening and improving the lithium extraction process to make it more environmentally sound, to Katia Canepa’s fusion of technology and cosmetics to transform the body’s surface into an interactive platform and aid people with disabilities. All of this makes even more clear the importance of the work of Leticia Romero, Ilana Milkes and Carla Zeltzer, all of whom are teaching young girls (and boys) to code and to have fun, while using those coding skills to build robots and educational games.
At this annual meeting, we witnessed a new Latin American reality take shape, a dynamism confirmed by the region’s willingness to shoulder a greater share of the cost of development, and to embrace the need to integrate further; by an understanding of the importance of innovation and creativity to finding solutions to development challenges; by the recognition that the key to the region’s economic well-being is ensuring that women are offered equal opportunities and are equally represented in the workforce.
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