The executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Barcena, has reiterated the importance of reforming the international financial system to address the debt problem within the region.
Barcena indicated that the external debt of Latin America and the Caribbean increased by 10 percentage points and that the region allocates 59 per cent of its exports of goods and services to the payment of debt service.
Consequently, she stressed that new initiatives are needed to address this issue, including the redistribution of Special Drawing Rights of the International Monetary Fund from developed countries to developing countries, and funds multilateral organisations, such as the Fund for the Relief of COVID-19 proposed by the Government of Costa Rica.
“Changes in the international financial architecture must include a multilateral sovereign debt restructuring mechanism to address commitments with private creditors, hand in hand with the creation of a multilateral agency that acts as a counterweight to the current oligopoly of risk ratings,” Barcena argued recently during a session entitled ‘Investing on the SDGs’ of the United Nations High-Level Political Forum 2021.
“This is urgent. The small island developing states (SIDS) of the Caribbean and the small countries of Central America face a very complex situation,”she said, noting that a moratorium on debt payment could benefit the Caribbean countries.
“Profound changes and new forms of cooperation with middle-income countries are needed, which recognise the multi-dimensionality of development and avoid approaches based solely on per capita income.
“Changes in the international financial architecture must include a multilateral sovereign debt restructuring mechanism to address commitments with private creditors, hand in hand with the creation of a multilateral agency that acts as a counterweight to the current oligopoly of risk ratings”— Alicia Barcena, executive secretary, Economic Commission for Latin America and the Caribbean
“We must also move towards more progressive taxation, just as the United States is doing. Orthodoxy is being questioned and it is necessary to go in that direction, as well as to combat tax evasion and avoidance and illicit financial flows. But for that we need a multilateral architecture, we cannot do it alone,” she said.
Regarding investment, Barcena emphasised the need to close the investment gap.
“Our investment rate is 17 per cent, but in Europe it is 26 per cent and in Asia-Pacific and emerging economies 33 per cent. We have to increase investment, public and private,” she explained, noting that the economic infrastructure gap in Latin America and the Caribbean represents six per cent of gross domestic product.
According to her, developing countries and especially middle-income countries — which include most of the region — need a boost in liquidity and actively participate in debt relief initiatives, but as a result of the novel coronavirus pandemic, will no longer have higher levels of investment or the levels of activity before the crisis.