MODERNIZING THE MASSES

Ecuador 2012 | ECONOMY | INTERVIEW

TBY talks to Enrique García, Executive President of the Development Bank of Latin America (CAF), on the importance of diversifying for Latin American economies and the promotion of a stock-market culture.

Enrique García
BIOGRAPHY
Enrique García has been President of the Development Bank of Latin America (CAF) since 1991. He has also served as Bolivia’s Minister of Planning and Coordination and Head of the Economic and Social Cabinet between 1989 and 1991. He currently holds the positions of Vice-President of Canning House and is a member of the Board of the Directors at the Inter-American Dialogue. He graduated with a Master’s in Economy and Finance from Saint Louis University, Missouri, and received a Doctorate from American University in Washington D.C.

What should be the role of multilateral organisms such as CAF?

At a time in which the global economy is going through a period of uncertainty, Latin America still shows good results in terms of growth and macroeconomic stability, despite the external vulnerabilities of the European crisis, the slow US recovery, and the deceleration in China. This is due to a combination of factors, both external and internal, and the sensible macroeconomic policies implemented in most Latin American countries. This situation suggests large challenges for the region that require the construction of integral agendas that include four crucial issues simultaneously: macroeconomic stability, microeconomic efficiency, social equity, and environmental balance. The region must reach growth rates higher than the current ones, for which an accelerated productive transformation process, higher levels of investment, and more solid institutionalism are essential.

What are the essential elements that both Ecuador and Latin America need for development in the medium and long term?

Among the challenges that the region will face in this new situation, it is vital to give up the concentration of raw material exports and diversify the economy. This demands that the region doesn't fall into a contented mode and focuses on an ambitious agenda to overcome the structural weaknesses that it still faces. Particularly important is the productive transformation that is going on through sustained increases in productivity and profits. In this direction, a fundamental challenge is the addition of value to the natural advantages that the region possesses through technological development and human capital training. Another no less important challenge is the adaptation and development of infrastructure for regional integration, in order to boost the advantages that growing commerce with Asia is offering. For that, the challenge is to channel resources by increasing savings and domestic investment, and strategic incentives in foreign investment. To achieve these objectives, the region must keep working on improving the business environment for the private sector and the quality of their institutions. Although the reduction of poverty is one of the biggest accomplishments that Latin America has achieved in the past years, and a product of favorable economic performance, there are still important issues, mainly in terms of income distribution. In that sense it is indispensable to work on a wide and innovative social agenda that helps in reducing the high inequality levels that can still be found in the region.

What strategies do you plan to implement in 2012 to promote productive activity and SME support in Ecuador?

The CAF's contribution to SMEs is through projects that help promote the development and competitiveness of the sector and at the same time promote export diversification and generate employment—both direct and indirect—in rural communities that are below the region's poverty line. An example of this in Ecuador is the promotion of the Program of Local Productive Crowds, the objective of which is the creation of competitive advantages for the development of SMEs in the productive sectors of Cuenca. This will strengthen the electric appliance and wooden furniture industries, which draw together a significant amount of developing companies, through articulating work between national and local government, the entrepreneurial sector, and the academic sector of the city.

How does CAF plan to facilitate the development of the stock market in Ecuador?

The CAF support policy for stock market development is framed by regional integration and market efficiency, through supporting its country members in the design of public policies, its formalization and implementation. CAF, together with Quito's Stock Market, and with the institutional sponsorship of the Financial Analysis Unit, recently presented the documents generated in the framework of the project for the modernization of stock markets: Module: Asset Laundering Prevention. To conduct this study, prominent national and foreign consultants were selected to carry out research about the laws in different markets and the practices and reports demanded by financial intelligence entities. On this basis, two documents were elaborated as references in the prevention of asset laundering for the stock market. Additionally, CAF has promoted other projects in Ecuador to modernize the stock market such as the creation of the Corporate Governance Academic Unit, with the objective of deepening the stock market development through the implementation of processes and mechanisms that improve efficiency and effectiveness as well as generate investor trust. The program has also allowed the creation of an academic network of corporate governance and the promotion of a stock market culture.