AT A CROSSROADS

Peru 2015 | DIPLOMACY | GUEST SPEAKER

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), on the challenges facing Latin America and how the IMF can help.

Christine Lagarde
BIOGRAPHY
Christine Lagarde graduated from law school at University Paris X and obtained a Master’s degree from the Political Science Institute in Aix en Provence. After being admitted as a lawyer to the Paris Bar, Lagarde joined the international law firm of Baker & McKenzie as an associate. A member of the Executive Committee of the Firm in 1995, Lagarde became the Chairman of the Global Executive Committee of Baker & McKenzie in 1999, and subsequently Chairman of the Global Strategic Committee in 2004. Lagarde joined the French government in June 2005 as Minister for Foreign Trade and in June 2007 she became the first woman to hold the post of Finance and Economy Minister of a G-7 country. In July 2011, Lagarde became the eleventh Managing Director of the IMF—the first woman to hold that position.

Latin America stands at an important crossroads. After a remarkable two decades of economic, political, and social renewal, the region today faces an extended slowdown in a global setting of mediocre growth. The immense potential of this diverse region has become tangible, but so too have the formidable challenges that lie before it, which is why the IMF/World Bank Annual Meetings in Lima later this year occur at an important moment.

The representatives of the IMF's 188 member nations traveling to Lima are well aware of the issues facing Latin America. Among the most pressing is the need to develop new growth drivers now that the boom in global commodity markets has receded. This challenge can and will be met. But selecting the right path to renewed growth and prosperity requires a harnessing of the collective will and creativity of the people, and of the policymakers who serve them.

At this critical juncture, it is therefore more important than ever to foster growth that is inclusive, balanced, and sustainable.

After decades of stagnation, Latin America's middle class has been growing in size and confidence, expanding by about 50% since 2003. Much of this can be attributed to a reduction in income inequality, through, among other means, rising minimum wages.

Unfortunately, despite this progress social indicators remain weaker and inequality higher than in comparable regions. And so with growth in the region slowing for a fifth consecutive year, there is a risk of losing some of the social gains achieved in recent years.

For example, the rising expectations of Latin America's middle class are bumping up against shortcomings in the provision of public services. While specific concerns may vary across countries, surveys show that many people share a general discontent over corruption and poor government accountability.

This is a loud and clear call for action, and many governments in the region are working hard to improve public services. They have launched initiatives to increase the quality and reach of public education, broaden the system of social protection, and expand equitably the public revenue base. All this and more is needed to create a more inclusive and stronger society.

Moreover, many countries need to significantly improve their infrastructure networks. High logistics and freight costs hinder Latin America's integration into global value chains. This underscores the need for more investment and greater regional collaboration in energy, transportation, and IT, in order to raise the economic prospects of the region.

And given the current challenges, Latin America certainly needs to increase economic and financial integration to lift the potential growth of the entire region.

This would boost regional trade, but there are a host of other issues that could also benefit from a greater willingness to reach across borders and to learn from each other. This is what we hope the October meetings will bring. Policymakers could cooperate more on topics such as labor, security, energy, the environment, and competition, to name a few.

The idea of cooperation and multilateralism is, of course, at the heart of the IMF's work. The fund was set up 70 years ago to help its members prevent economic and financial crises and to provide badly needed financing should they occur. The fund is also helping low-income and transitional countries gain a foothold in the global economy, and is working behind the scenes to build capacity and resilience through technical assistance. And we are always striving to provide timely and well-tailored policy advice and technical assistance to our members in this region.

The Lima Annual Meetings will provide a forum for global policymakers to speak with each other about such critical issues. They provide an opportunity of finding a strong and compelling voice to inspire the people of Latin America, and help unlock the potential of this immensely rich and diverse region. We at the IMF are looking forward to hosting and participating in this discussion.