Latin America and the Caribbean

Improving Social Cohesion in Latin America: Making the Most of Globalisation

 

Remarks by Angel Gurría, OECD Secretary-General, delivered at a Euro-Latin American seminar on Economics, Social Cohesion and the Environment.

Bibliothèque Nationale de France, Paris 
Lundi 6 octobre

Good morning Ladies and Gentlemen:

It is a great honor to participate in this Euro-Latin American seminar on Economics, Social Cohesion and the Environment. And in particular in this table on Social Cohesion, one of the greatest challenges of all Latin American countries.

In these uncertain times when the wave of financial markets turbulence threatens to become a tsunami, it is essential to keep our focus on long term structural challenges. Social cohesion, this multifaceted concept coined by Émile Durkheim at the end of the 19th century, has become a key ingredient for human progress.

As we experience every day in OECD, the only way to shape the cornerstone of social cohesion is through multilateral dialogue. There is a lot we can learn from each other.

Globalisation is being blamed as a source of disparities; both within and among countries. At OECD we are trying to identify and measure the objective causes of inequality and its impact on social cohesion.

However, one thing is certain. In spite of its many benefits, globalisation has not produced a level playing field. While the global economy has created immense wealth and opportunities, it has also created and deepened inequalities.

There are many cases where disparities have become extreme. This is the case of Latin America, the region with the greatest inequalities in the world, which are damaging the potential for development of a large number of nations.

During the past decade, Latin America has experienced a remarkable economic growth. According to ECLAC, the region’s GDP grew by 5.7% during 2007. In spite of the current global slowdown, it is expected to grow by 4.7% in 2008. This is the sixth consecutive year of solid growth; the strongest regional economic expansion in the last 40 years. 

As a result, countries like Argentina, Brazil, Chile, Colombia and Mexico have experienced a fall in their poverty rates. The number of poor people in Central America has also dropped. According to the World Bank, there has also been a slight decline in average inequality in the region; especially in Brazil and to a lesser extent in Mexico.

However, there are still nearly 200 million people living in poverty in Latin America, according to figures from ECLAC.  360 million people have a purchasing power of less than 300 dollars a month.  Progress in reverting these trends has been slow. The richest are getting richer and this wealth is not trickling down.

In Latin America, the richest 10% of the population benefits from 41% of total income while the poorest 10% gets just 1% of such income. This unbalanced panorama has been fertile ground for the rise of insecurity and organised crime to unprecedented levels.

Figures released recently reveal that in the course of this decade approximately 1.2 million people have been killed in Latin America and the Caribbean as a result of crime.  This speaks loudly about the lack of social cohesion in the region.

Social cohesion is about empowering people with the necessary tools to make the most of globalisation. Not everyone is equally prepared to reap the benefits of an increasingly interdependent and competitive global economy and this inevitably promotes income inequality. This is a task for governments, for better institutions and more effective policies.

Improvements in three crucial policy areas can make a solid contribution to social cohesion and to reduce disparities.

1. The first crucial area is fiscal policy.

OECD’s Latin American Outlook 2009, which we will launch this coming 28th of October at the Ibero-American Summit of San Salvador, analyses why fiscal systems have been doing a poor job reducing inequality in the region.

And it sends a clear message: Latin American governments have to move beyond the use of fiscal policy solely for macroeconomic stabilisation and begin to maximise its potential to promote social inclusion. Fiscal policy can be a powerful tool to combat poverty.

We already know that more money is needed for Latin American governments to meet the region’s development objectives, but how that money is raised and spent matters even more. The challenge is certainly about mobilising resources, but it is also about redistributing opportunities.

Well-administered fiscal policy can be the basis of a renewed social contract between Latin Americans and their governments. One key element is the need to deliver better and fairer public goods and services, and how success in this area can contribute to democratic consolidation. I strongly recommend you to read the OECD’s 2009 Latin American Economic Outlook, which will be available in a few weeks.

 

2. The second crucial policy area is education.

Education is the catalyst of human progress. Providing our people with the best possible education is the most effective way to improve social cohesion and reduce inequalities. This area has been the Achilles’ heel of Latin American countries for many years.

To adapt to a fast changing world and better compete in a knowledge economy, it is crucial for Latin American governments to know how good their education systems are at producing world-class learners, to share policy experiences and to learn from today’s best performing education systems.

OECD is already helping several Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Panamá and Uruguay) to measure, compare and improve the quality of their educational systems through our well established Programme for International Student Assessment (PISA).

And we are not only helping to identify the strengths and weaknesses of their educational systems. We have gone one step further, to be help to design, promote and implement the necessary educational reforms.

The case of the recently approved Alliance for Quality Education in Mexico was a pioneering experience where OECD worked closely with the Mexican Government to launch, on a solid basis, this historical reform.


3. And the third crucial policy area is regional development policy.
Connecting all regions of a country to global trade and investment flows with competitive infrastructure and high quality public services is fundamental to reduce inequalities and improve social cohesion. One of the main competitive disadvantages of Latin America is poor transport and communications networks.

Programs like Chile Emprende, Mexico’s Micro Regiones, the Plan Puebla-Panamá or the Initiative for Integration of Regional Infrastructure in South America (the IIRSA), are helping correct these imbalances. More than half the population of Chile, for example, still lives in regions with a lower level of GDP per capita than the national average; while in Mexico, the share is even higher (60%); both significantly above the OECD average (42%). 

The experience of the European Union can help Latin America to design territorial development policies that promote a more effective regional and sub-regional integration.

OECD is working with several Latin American governments, through our territorial reviews and Latin American Outlooks, to improve regional cohesion. But it can also become an ideal forum to share the European experiences with our Latin American partners.

Ladies and gentlemen:

Improving social cohesion in an increasingly interdependent world is not only an intelligent way forward; it is the only way forward. The current financial crisis and its huge social and economic costs have been a painful reminder of the vulnerabilities of a globalised economy.

Helping Latin America improve its social cohesion to make the most of globalisation is a noble but also a smart undertaking. A prosperous and stable Latin America can make a unique contribution to the overall prosperity and stability of the global economy.

I want to congratulate le Ministère des Affaires Étrangères et Européennes, the Inter-American Development Bank and l’Institut des Amériques for the organisation and successful conduction of this very important event.

Thank you very much.

 

 

 

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