Press Release No. 07/200

Press Release: Statement by IMF Managing Director Rodrigo de Rato at the Conclusion of a Regional Seminar in Latin America on "Macroeconomic Policies and Social Equity"

September 20, 2007

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Lima, Peru, following a regional seminar on "Macroeconomic Policies and Social Equity":

"Let me begin by thanking the President Alan Garcia and his government for hosting this conference and welcoming us to their country. I also appreciate the close collaboration that the staff of the Fund have enjoyed with my colleague, Jose Luis Machinea, and his team at CEPAL.

"In my view, the regional seminar was very successful. It offered an excellent opportunity for a frank dialogue with key regional policy makers and parliamentarians on improving the design of macroeconomic policies to promote greater social equity, while preserving stability.

"The context for the conference is clear. In recent years, Latin America has done very well in raising growth, entrenching macroeconomic stability, building resilience to external shocks (such as the recent market turbulence), and reducing poverty. However, poverty and inequality levels are still high relative to the region's per capita income, and bringing them further down constitutes the stark challenge for the region. The regional seminar focused on how to adapt macroeconomic policies, in particular, to accomplish this, better spread the benefits of growth to all segments of society and, thereby, entrench a virtuous cycle of rising growth and improving living standards.

"There was consensus among the participants in the seminar on several important issues:

"First, fiscal policies can be tailored so that they can better to support growth and reduce poverty and equity through a more progressive tax system and a shift in the composition of spending in favor of well-targeted social programs, such as conditional cash transfer programs, education, and high-quality investment in infrastructure.

"Second, access to financial services can be broadened in several ways—low inflation, effective supervision and strong creditor rights can lower the spread between lending and deposit interest rates; reforms, such as allowing more flexible rules on collateral, can help lower borrowing costs for small and medium sized enterprises and can encourage the expansion of microfinance.

"Third, the quality of institutions in the region has improved a lot over the past decade, although there is room for more progress to strengthen the rule of law and the effectiveness of government institutions and continue to combat corruption.

"In all of these areas, participants emphasized that both parliamentarians and government ministers shared the goals of promoting growth and equity and pointed to the value of a candid and flexible dialogue on these issues as a way to open the door to agreement on effective compromises."