Editor’s Note: Economic conditions in emerging and developing countries are rapidly deteriorating and many are unable to implement recommended fiscal stimulus plans. Following the G-20 London Summit, Mauricio Cárdenas discusses the implications for Latin America and how multilateral development banks will play a role in economic recovery.
Q: Mexico announced that it will ask the IMF for $47bn under the recently created Flexible Credit Line. Should other Latin American countries do the same?
As the president of Banco de México said, “Better to be prepared for the worst”. The G-20 leaders support of Mexico’s decision is an indication that they want to encourage other countries to do the same. Under the current economic turmoil very few countries can say that there is no need for a precautionary line. That’s why I see other countries such as Colombia and Peru following the path of Mexico. Argentina needs the funds, but will probably not be offered the same fast-track treatment from the IMF. They have things to fix first.
Q: The leaders did not commit to a specific date to complete the Doha Round of trade negotiations. Will free trade be a casualty of the crisis?
There is a significant change in the treatment of the issue of Doha between the November summit and today. The main concern now is to contain protectionism, not really to advance free trade. Colombia and Panama are the countries that should be more worried, given their free trade agreements with the U.S. which are pending congressional ratification in Washington. There is no line in the communiqué suggesting that this should be done, which is unfortunate. Failure to ratify these agreements will undermine trust and credibility in the U.S. as a reliable partner.
Q: What else in the G-20 Statement is of immediate relevance for Latin America?
There is strong commitment to support the multilateral development banks which need to provide $100bn in additional credit lines. In some cases–such as the Inter-American Development Bank–this requires a capital extension. The G-20 declaration will make like easier for the IDB in the US Congress, where the additional capital injection is finally decided.
Q: What’s next?
The IMF will become the focal point, with almost one trillion dollars in new resources provided in part by the surplus economies, like China. New resources will come with reform, especially in terms of representation. Latin America’s voice should gain resonance, but the region needs to act cohesively to seize this opportunity.