Ministers of Finance of CELAC discuss a common agenda in response to the global economic crisis

Eighteen Ministers of Finance of the Community of Latin American and Caribbean States (CELAC) have agreed to move forward to a common regional agenda in response to the global economic crisis. The decision was made during a high-level face-to-face meeting held at the headquarters of the Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago, Chile, just over a week ago, a release from ECLAC states.

The meeting was organized by Saint Vincent and the Grenadines (SVG), as the Pro Tempore President of CELAC, with the support of ECLAC, in compliance with the mandate derived from the Buenos Aires Declaration issued by the 7th Summit of Heads of State and Government of the regional bloc held in January, 2023 in Argentina.

The meeting was inaugurated by José Manuel Salazar-Xirinachs, executive secretary of ECLAC, and Minister of Finance of SVG, Camillo Gonsalves.

During the meeting, the authorities analysed the current global and regional macroeconomic context, the regional fiscal situation, the fiscal implications of meeting investment needs for climate change adaptation and mitigation, and strengthening progress towards the Sustainable Development Goals (SDGs).

In his inaugural speech, José Manuel Salazar-Xirinachs emphasized the importance of organizing regional meetings of finance authorities with the support of ECLAC and the United Nations. These meetings aim to provide dialogue spaces that contribute to the development of common agendas to address the fluctuations of the global economy.

He further stated that the region is currently facing challenging global macroeconomic conditions, making it exceedingly difficult to conduct macroeconomic policy. The conflict between the Russian Federation and Ukraine has contributed to weakening global growth, causing increased volatility in international financial and commodity markets. This volatility has reinforced global inflationary pressures and prompted advanced economies’ central banks to swiftly and synchronizedly tighten monetary policies in 2022 to stabilize inflation expectations. Consequently, this has significantly reduced capital flows to emerging markets.

“This is the situation we are facing, worsened by external shocks and the lingering effects of the pandemic. In this context, macroeconomic policy must navigate a slowdown in economic growth and rising inflation, while simultaneously addressing the pressing need to revive economies, create high-quality jobs, and strengthen social policies,” he explained.

The executive secretary of ECLAC also highlighted that the average economic growth of the region during the 2014-2023 decade will be 0.8%, which is less than half the average growth experienced during the renowned “lost decade” of the 1980s (2.0%).

He emphasized that the current circumstances, characterized by significant needs and substantial constraints, necessitate two key actions. Firstly, there is a need to review fiscal covenants based on a framework of public finance sustainability. This framework should prioritize and combine increased revenues with a more effective use of resources on the expenditure side. Secondly, there is a need for reforms within the international financial system to facilitate the restructuring of external debt.

“We must not forget that the political feasibility of proposals to increase revenues depends on improving the quality, equity, and accessibility of public services,” he stressed.

Finally, the highest representative of the regional Commission urged the implementation of measures at the international level to work towards reducing the restrictions on growth and development that affect most Latin American and Caribbean countries due to the high servicing of public debt and its implications for fiscal space. This is an issue that is being promoted by the United Nations Secretary-General, António Guterres, through a series of initiatives in which ECLAC participates.

Minister Gonsalves called for the repositioning of CELAC as an active organization that addresses the challenges faced by the countries of Latin America and the Caribbean. He emphasized the importance of creating fiscal space for development in response to disasters, aiming to accelerate the achievement of transformative development goals.

The Minister pointed out that most Caribbean countries have not yet recovered their pre-pandemic production levels. He emphasized that the statement that this decade is more “lost” than the previous one is particularly true for the Caribbean states that are heavily reliant on tourism. Their production levels have not yet reached the levels recorded in 2019.

Gonsalves also stressed that the regional debt problems originate from external shocks rather than from macroeconomic management in the countries of the region.

Following the inauguration, José Manuel Salazar-Xirinachs, the executive secretary of ECLAC, presented the main findings of two ECLAC reports to the CELAC Finance authorities. These reports analyse the restrictions on growth and development stemming from public debt and its implications for fiscal space in the countries of the region. The reports also provide options to promote a fiscal policy that fosters growth, redistribution, and productive transformation.