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Angel Gurría, Secrétaire général de l'OCDE

12th International Economic Forum on Latin America and the Caribbean: Rethinking the social contract in times of COVID-19, 15 December 2020

 

Remarks by Angel Gurría,

Secretary-General, OECD

Paris, France, 15 December 2020

President Alvarado, Mauricio Claver-Carone, Rémy Rioux, friends:

It is a pleasure to welcome you to this twelfth International Economic Forum on Latin America and the Caribbean, which this year focuses on “Rethinking the social contract in times of COVID-19". Allow me to warmly thank President Alvarado, for being with us today, and for his participation in yesterday’s celebration of the 60th anniversary of the OECD.

This edition of the forum coincides with the 60th anniversary of the OECD, which we commemorated yesterday. An OECD that is proud to have three Latin American members (Mexico, Chile and Colombia) - soon to be four with Costa Rica - and 14 Latin American countries that are members of the Development Centre. In addition, there are three Latin American countries (Argentina, Brazil and Peru) among the six that have applied to join the Organisation. I would also like to thank our co-organisers, the Inter-American Development Bank and the Agence Française de Développement, for their cooperation in preparing this important forum.

Latin America and the Caribbean is facing an unprecedented social and economic crisis. It is the emerging and developing region that has been most affected by COVID-19 , with an asymmetric impact that is hurting the most vulnerable groups in particular.

The pandemic hit the region at a time when it was already facing major challenges, as the so-called "structural development traps", causing persistent socio-economic gaps, low growth potential and growing social discontent. The COVID-19 crisis has highlighted the urgent need to create a new development model in the region, a more inclusive and sustainable economic model based on a new social contract.

As indicated in our "Latin American Economic Outlook 2020" (LEO) report, prepared with ECLAC, the European Commission and CAF, the current situation presents a unique window of opportunity to move forward in the political processes needed to build a new social contract.

Allow me to elaborate on four key pillars on which the new social contract must be built.

First, public participation. A new social contract requires strong consensus between states, their citizens and non-state actors to define a comprehensive, coherent and coordinated development strategy. We must ensure that all voices are heard and taken into consideration.

Second, social protection. Social protection mechanisms in the region are insufficient. Nearly 40% of workers are not protected by any social assistance or protection scheme. This is largely due to the high rate of labour informality, which concerns almost 60% of workers. While several countries in the region have put in place temporary measures to expand their social protection systems, a new social contract has to promote innovative policies to close gaps in social coverage, protect the most vulnerable population, reduce inequalities, and improve the quality of basic services.

Third, a new production strategy. The pandemic has underlined the importance of building more productive and resilient economies. Over the past decades, the region has been unable to close in on the income levels of the more advanced economies. In 2019, average labour productivity in Latin America and the Caribbean represented only 40 per cent of the OECD average. That is why greater and better collaboration is needed between the state, the private sector and civil society in adopting measures to stimulate productive transformation and strengthen regional integration, participation in value chains and the ability to attract sustainable investments.

Fourth, a new fiscal agreement. Most countries in the region entered the COVID-19 crisis with limited fiscal space . It is essential to move towards a progressive, fair and sustainable fiscal agreement, as well as towards greater efficiency in public spending, fighting tax evasion and expanding the tax base, when the economic cycle allows. Furthermore, public debt management is a key factor that requires coordinated action at the international level.

The crisis has also reminded us that we live in an interconnected world, a world in which only coordinated responses can be effective. So now, more than ever, is the time to assert multilateralism as a core value for the post-pandemic world.

Dear friends,

Pablo Neruda said that, “there are wounds that open our eyes instead of opening our skin”. COVID-19 has ravaged our region, but it has also opened our eyes. It has shown us that we are very vulnerable and that we can no longer delay the structural reforms we need to build a more resilient, inclusive and sustainable Latin America.

The OECD and its Development Centre are committed to helping the region's governments rethink the social contract and move towards a new development model that allows for sustainable and inclusive recovery. I am pleased to announce that the 2021 edition of the "Latin American Economic Outlook" will be devoted entirely to this theme.

You can count on the OECD.

Thank you.

 

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