Americas Quarterly - Spring 2009

AsK tHe eXPerts

SUSAN ANSWERS:

SUSAN SEGAL

is president and CEO of the Americas society and Council of the Americas.

The depth and breadth of the global economic and financial crisis seems to be finally clear—at least partially. While this crisis does not have its origin in Latin America, Asia or any other emerging market, the effects are being felt around the world. Growth rates in most countries are in negative territory, unemployment is increasing and world trade is plummeting. And there is no easy solution to the dilemma in which we find ourselves today. It is becoming clearer, however, that just as the U. S. led the world into this crisis, it will have a huge role in leading the world out of it.

Rebuilding confidence is a critical component of that process. That means we need global economic leadership that demonstrates a certain amount of consensus across multiple economic, financial and regulatory issues. It also requires our leaders to be aggressive, think big and not be afraid to act. Our only fear should be that we do not move quickly enough and with sufficient firepower to avoid ongoing declines or stagnation. The most devastated by such an abdication of responsibility would be the lost generation in Latin America and in many countries of the world that have suffered through so many crises before.

It also requires that countries do more than just talk about the need to avoid protectionism; they must enact policies that are consistent with that policy. Not just blatantly, but also subtly. And they need to act. This includes, but is not limited to, a real attempt to conclude the Doha round of trade talks. Doing so would generate new institutions and

norms that could avoid protectionism.

Insufficient credit, particularly to the private sector, is adding to the challenge. While there must be private sector lending, the multilateral development banks can do much more. Yes they need additional capital, but they can also use their capital to encourage incremental private lending.

During the debt crisis of the mid- 1980s and 1990s, the international financial institutions (IFIs) used their capital to leverage private capital through co-financing and guarantee programs. IFIs should not be immune to the challenge of being more innovative.

Times of crisis are also moments of
opportunity for additional reforms to
prepare countries to be more competi-
tive and to grow more
quickly after the reces-
sion. While most coun-
tries in Latin America
are performing better
on a relative basis—a
result of many of the
reforms undertaken
during previous crises—
there remain additional
reforms that would
make the economies
even more competi-

tive. And that doesn’t just apply to Latin America. It’s true for many countries around the world, as we undergo a structural change in our global economy.

Finally, I believe that innovation and entrepreneurship will constitute at least part of the engine that can move us forward and restore growth. This is an opportunity to create the environment to encourage entrepreneurship. There is nothing more upbeat and empowering that creating your own business and reaping the fruits for years to come.