CEO, CAF, LATIN AMERICAN DEVELOPMENT BANK
2009 FINANCIER OF THE YEAR
“The CAF couldn’t remain as an institution of five Andean countries. It needed regional expansion. It wasn’t easy to convince the partner countries that opening it up to the others was something positive for the region and for them.” But Enrique García, president of the Latin American Development Bank since 1991, made it happen.
The bank now has 18 shareholder nations and $26.8 billion in assets, which compares nicely with the $10.4 billion it had in 2006. In addition, it has been able to maintain the character of a regional institution and to keep majority control with the region’s countries. The easy way would have been to give up control to the countries of the first world, which would have enabled it to make investment grade quickly. “Luckily, it was the right decision. We achieved investment grade in 1993 and since then, we have had 14 upgrades in our credit rating, until we reached AA-,” he explained.
In personal terms, the decision to take control of what at the time was the Corporación Andina de Fomento (CAF) had the risks that confront anyone who leads a small organization. But García already had a history of taking on complex challenges, like leaving a comfortable position at the Inter-American Development Bank to accept the post of minister of the economic team of Bolivia at the end of the 1980s. “It was a left-right coalition government, and I wasn’t a member of any of the coalition parties. The situation in the country was so delicate that it required drastic measures,” he said.
By sheer determination, he was able to make headway with some strong measures. He raised the price of fuels the day after he took office as minister, and convinced the president and the rest of the team who didn’t share his ideology of the need for the adjustments. “The results quickly re-established macroeconomic equilibrium and enabled us to reopen relations with international organizations,” he recalled.
That attitude made it easier to take on the CAF, and that’s how he became a permanent observer of Latin America. “We’ve been through a very deep economic, financial and social change. Twenty years ago Latin America was a very vulnerable region, with countries just emerging from severe adjustments. Today we see a region that has ridden out the crisis of 2008 and the current ones. It hasn’t been part of the problem, but part of the solution during this time of crisis of the central economies,” he said.
The big lessons the region learned in the 1980s are being put into practice on other countries of the world – for example, in external debt management, unemployment and fiscal adjustments, he said. “Today we have good macroeconomic management. It has enabled us to reduce poverty. It’s a very different region.”
He thinks that now the region’s main challenge is to make the structural changes that will enable it to develop a growth model that’s less dependent on commodities. It must be based, he said, on dynamic sectors that generate added value, and that will invest more and better, and on strengthening institutions and taking measures that make growth compatible with conservation of the environment. “It’s a big challenge. Sometimes the success of the last few years in economic stabilization, growth and poverty reduction makes us complacent. That’s the fundamental risk.”
The cycle of favorable commodity prices is ending, and so García is proposing to double infrastructure investment, improve education so that it can meet 21st century’s needs, strengthen institutions, and adjust the region’s economies to a much more open world.
He thinks that up until now the region hasn’t been taking enough advantage of the bonanza to make microeconomic reforms to bring about higher productivity, “in order to be able to grow faster, with a more inclusive model,” he said. But it also appears to him that there’s one other bit of unfinished business: “The most serious of all is the inequality. Latin America is the world’s most unequal region,” he said emphatically.
That’s how Enrique García, the Bolivian who in 20 years was able to transform a small Andean financial entity into a bank that will finance Latin America’s future development, views the region.
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