Remarks by Angel Gurría, OECD Secretary-General, Paris, France, 20 May, 2014
Ladies and Gentlemen,
It is a great pleasure to open the second ‘Europe - Latin America Economic Forum’. I would like to thank Alicia Barcena for being here with us. I also thank Pierre-Yves Geoffard, Director of the Paris School of Economics, for the support in organising this Forum. And I thank all of you for participating in this event.
This is a very timely meeting, given that both regions are facing complex, and in some cases similar, policy challenges. We are talking about two very different regions, in historic, economic and social terms, but both regions are in great need of structural reforms and they can learn a lot from one another. So let me briefly provide the OECD’s perspective on some of the trends that are shaping the future of these regions as well as the constructive dialogue Europe and Latin America can engage in.
Divergent trends between Latin America and Europe
Globalisation, and the new global scenario that unfolds with it, is creating profound changes in both Latin America and Europe. In Latin America, activity has slowed but we have witnessed a long period of sustained economic growth. It has lifted over 60 million people out of poverty between 2002 and 2013 . The economic transformation that has fuelled growth has also supported the development of an emerging middle class and increased demand for jobs and better public services.
Europe, on the other hand, is only now gradually returning to growth, following 6 years of crisis. But the legacies of the crisis – slow growth, high unemployment and low trust - are still very much present. Euro area unemployment remains high at almost 12% while youth unemployment is at a record 24% and surpasses 50% in Spain and Greece. According to the latest Eurobarometer Survey, only 23% of Europeans trust national governments today.
Different regions, common challenges
Despite their different levels of development and their current divergent trends, Europe and Latin America are facing similar economic challenges. I am talking about the need to enhance their competitiveness, create more equal opportunities and more inclusive growth in the face of ‘shifting wealth’. The dynamic rise of China and other emerging economies in Southeast Asia is transforming global trade and investment patterns. Both Europe and Latin America must consider their role in global trade as the “map of manufacturing” shifts.
The crisis has left a number of European countries with the need to resolve severe macroeconomic and financial imbalances. This is an experience that remains very much ingrained in Latin America’s memory after the volatile decades of the 80s and 90s.
Countries like Brazil and Mexico, have extensive experience in forging innovative debt restructuring schemes, which can cast some light on the situation of some Mediterranean economies. Countries like Chile and Peru were committed to explore innovative paths in the development of fiscal rules and improve the balance between growth and macroeconomic stability. These experiences can offer a great deal of insight and guidance to European countries currently facing similar challenges.
Conversely, Europe’s regional integration experience can offer valuable guidance to Latin American economies now that multilateral initiatives such as the Pacific Alliance are starting to gain ground. In addition, regional and bilateral accords are also benefiting from a renewed impetus with the development of ‘mega-agreements’ such as the Trans-Pacific Partnership and the European Union-North America agreement.
Fiscal reform is a further common challenge. Overall, Latin America has increased its capacity to tax incomes and economic activity. Tax-to-GDP ratio has consistently increased in Latin America, from 13% in 1990 to 20% today , reducing the gap vis-à-vis euro area levels (which are around 30% of GDP). Yet, this figure remains low, reducing Latin American states’ capacity to improve public services.
On the other hand, Europe faces the challenge of finding an adequate balance between fiscal consolidation and policies which foster sustainable and inclusive growth, which is also one of the big challenges in Latin America.
What do we mean by Inclusive Growth? Well, basically that economic growth should deliver better living standards for all, and that increased prosperity must imply better social outcomes and greater well-being. A substantial commitment to social inclusion is imperative to achieving sustainable economic growth in the 21st century.
With the right tools and policies, we can make it happen. The OECD’s Inclusive Growth Initiative takes up the challenge. It aims to enhance policy makers’ understanding of the adverse effects of rising inequality on growth, and turn inclusiveness into a driver of stronger economic performance. We stand ready to help both regions face this challenge.
Last but not least, climate change is a common threat to us all. This alarming reality should compel us to work together, to share best practices and put forward targeted policy options to ensure the creation of sustainable and green growth. Europe possesses the potential to innovate; while Latin America has the responsibility to preserve one of the most ecologically diverse regions on the planet for the sake of us all.
Deepening the dialogue between Europe and Latin America
Fostering greater policy dialogue between the two regions remains paramount. The OECD – through its Committees, Policy Dialogue Networks, Global Fora and Regional Fora and Regional Initiatives – remains fully committed to facilitating exchanges and enriching the policy experiences of these two regions.
We are therefore very glad to host this second Europe-Latin America Economic Forum which this year addresses key issues for both regions such as: Global Economic Shocks; Labour Market Dynamics; Regional Integration and Inclusive Growth, among others.
Our discussions here today and tomorrow will help us deepen our understanding of how both regions are learning to cope with this volatile external context in several economic domains, from the macroeconomic management to productive development policies and regional integration schemes. It will also provide an ideal opportunity to further consolidate the preparations of the upcoming EU-ECLAC summit which will take place next year in Brussels.
The International Economic Forum on Latin America, whose 6th edition will take place in Paris on the 30 of June, will also be an important opportunity to promote this dialogue. Jointly organised by OECD, IADB and the Ministry of Finance of France, this year’s Forum will focus on logistics and infrastructure as pillars of regional integration and global trade opportunities.
Here once again, the synergies for mutual learning will help both regions engage with one another to move forward with structural reforms.
Ladies and Gentlemen:
In today’s globalised and increasingly interconnected world, the common challenges and threats we face demand common solutions. Deeper and more strategic cooperation between Europe and Latin America will not only help the two regions inspire and learn from one another, it will also pave the way forward for more sustainable, inclusive and resilient economies.
The OECD stands ready to work with you in the development of “Better Policies for Better Lives”. I wish you very fruitful discussions and look forward to your conclusions.