(Archived Content)
Calgary, Canada
As Prepared for Delivery
Good morning. On behalf of President Obama and Secretary Geithner, I would like to take this opportunity to thank Prime Minister Harper, his administration, and the people of Calgary for their hospitality. My team and I have very much appreciated the kindness and welcome received during our visit to the province of Alberta.
Presidente Moreno, estimados colegas, es un gran placer estar aquí nuevamente con ustedes.
Today I would like to highlight three important developments since we last met a year ago in Cancun:
- First, due to skillful policy management in this region, many countries have sustained a robust and rapid recovery from the global financial crisis;
- Second, President Obama and his Administration have launched a new, positive strategy of engagement with the region to expand the shared benefits of our already vibrant ties, as highlighted by the President’s visit to Brazil, Chile and El Salvador last week; and
- Third, in addition to continuing the great work done in the field, the IDB has achieved remarkable results in moving forward on core governance reforms. And we, the United States, are taking the requisite steps to meet our commitment to fulfill the IDB General Capital Increase.
Regional Economic Developments
Let me begin with the remarkable performance of Latin America and the Caribbean. With an average growth rate of six percent, this region has been an engine of the global economic recovery. Moreover, the outlook going forward is promising, thanks to the rise of a strong middle class, marked reductions in poverty, and innovative “multilatinas” that are expanding their reach across the globe. The robust performance of individual economies demonstrates the benefits of a strong policy framework, and we hope that this track record gives people in our hemisphere confidence that a brighter economic future is attainable.
The continuation of robust capital inflows, despite a shift in global risk appetites, is another testament to the region’s strong fundamentals. We recognize the macroeconomic and prudential policy challenges created by this abundance of capital. And we welcome the skillful policy management, including in the judicious use of macroprudential measures that has been employed to address the risk of currency volatility and to maintain lending standards.
We have further observed that the recovery in much of Latin America has been led by domestic demand, which contributes to our shared stake in balanced global growth. We are doing our part in the United States, with policies aimed at strengthening the U.S. recovery. Of course, policy decisions outside of our Hemisphere also matter greatly to sustaining this growth, which is why we continue to emphasize that balanced global recovery remains a shared responsibility.
Not every country in this Hemisphere has the resources, capital or domestic market to generate strong economic performance without external support. For these countries, the crisis hit even harder. And now, with food and fuel prices rising, the international institutions – particularly the Inter-American Development Bank (IDB) – will continue to be crucial partners in development, helping to ensure that all countries can achieve, and maintain, a sustainable path of economic development.
In particular, we still face a long road to recovery in Haiti. Following the devastating earthquake of over a year ago, Haiti’s economy has responded better than some had predicted and reconstruction efforts are beginning to bear fruit. However, the political and economic challenges faced by Haiti are great, and the international community must go the distance with Haiti’s leadership in support of sustained growth and poverty reduction. We commend and welcome the central role that the IDB is playing in that effort.
A New Policy of Engagement
Our own commitment to Haiti’s recovery and, indeed, to this region remains strong.
President Obama’s visit to South and Central America last week laid the foundation for a new era of partnerships within the Hemisphere. These partnerships are based on the principle that Latin America is more important to the prosperity and security of the United States than ever before, and the conviction that the region will only grow in importance to the United States, especially to our economy. Trade between the United States and Latin America has surged – the United States exports three times as much to Latin America as to China – and the United States is the largest investor in this region. It is clear that when Latin America prospers, the United States also prospers.
But continuing this successful trajectory requires three critical factors that the IDB is uniquely positioned to support:
- the first is greater integration, so that all countries can contribute to an interconnected, common regional market;
- the second is higher investment to finance higher value production and raise productivity, a key challenge for this region;
- and the third is ongoing, targeted and innovative poverty reduction strategies to build on the enormous progress that has already been achieved.
I would like to expand, in particular, on the importance of regional integration. Earlier this weekend, at the meeting of the finance ministers of the Western Hemisphere, we focused on enhanced integration as a solution to growth and job creation challenges in the region. The benefits of integration are exponential: reduced transport and logistics costs that increase the gains from trade, safer corridors for goods and people to travel throughout the region, and more transparent and efficient public sector entities that provide oversight to the integration process. Because of these benefits, we have encouraged ministers to make concrete progress on identifying key regional integration projects, and working through the policy and regulatory challenges involved in operationalizing these projects.
The United States is strongly committed to a robust regional integration agenda. Last Tuesday, while traveling in El Salvador, President Obama announced that the United States will contribute $5 million to the Crossroads Fund, a new multilateral trust fund to be housed at the IDB that will jumpstart key work to break down transport and logistics inefficiencies. We welcome the recent announcements by Canada and Mexico that they will join in the creation of this innovative regional integration fund.
Inter-American Development Bank
The IDB is uniquely positioned to support the three critical factors—integration, productivity and poverty reduction— necessary to support the lasting transformation of the Americas and the Caribbean to a region comprised of stable countries with a growing middle class. New capital from the IDB’s shareholders will ensure that the Bank remains a key partner in this transformation.
When we met last year, we asked a lot of each other and of the IDB. As shareholders, we committed to provide new capital that would enable the Bank to continue vital development work in the Western Hemisphere. And, we asked the IDB to enact, and promptly implement, a complex and demanding reform agenda to improve its effectiveness, both in operational terms and with regard to developmental impact.
Much has transpired since we last met, and I would like to take this opportunity to thank President Moreno, Executive Vice-President Katzman, bank management and staff, the IDB’s Executive Directors, as well as my fellow Governors, for their cooperation and collaboration in advancing this ambitious agenda. We set an aggressive schedule for ourselves, and I believe that we should be proud of what we have accomplished through our combined efforts. I am confident that these reforms will fundamentally strengthen both the management and impact of this organization.
I would like to highlight three reforms in particular that I consider transformative aspects of the IDB’s Better Bank Agenda.
- First, the new Income Management Model (IMM) has been implemented. This model adds a new discipline to the Bank’s fiscal operations and preserves the financial soundness of the Bank. The IMM allows for minimum transfers of $200 million annually to a grant facility for Haiti, providing desperately needed resources to one of our regional peers in need of greater assistance.
- Second, the new and improved development effectiveness matrix was adopted last month. The implementation of this reform allows us to better assess a project’s developmental impact, thus making the Bank more accountable and results-oriented, while enhancing the quality of our loan portfolio. This makes the IDB a stronger institution in terms of achieving our desired developmental objectives, while providing more transparency to shareholders, civil society and the general public.
- Third, the promotion of greater transparency and accountability has been improved through revisions to the Independent Consultation and Investigation Mechanism (ICIM). By means of this new channel of feedback, affected communities have a voice to express concerns about project execution and design. By creating a formal mechanism to listen to those most affected by IDB projects and programs, this innovation is making the Bank a more customer-service oriented institution. We are pleased to know that this process is operational, and that the ICIM is already responding to several cases that have been filed.
Improving the Bank’s effectiveness is only one part of the strategy that we endorsed last year. We also committed to provide a General Capital Increase, or GCI – the first such increase in 16 years.
We recognize the essential and unique role played by the IDB and other multilateral development banks in enhancing global security, promoting economic growth, combating the effects of climate change, enhancing food security, and responding to other crisis and emergency situations. Together, by combining our resources, we are able to achieve better results and higher returns than any one of our nations could on our own. The level of unparalleled return allows for the most effective leveraging of all of our limited resources-- a major consideration for many of us during this time of budgetary challenges.
For these reasons, we consider our commitments to the multilateral development banks to be a key Administration priority. As part of our normal budget cycle, Treasury submitted our budget request for fiscal year 2012 this past February. This budget included a request for the full amount needed to fulfill our first contribution to the General Capital Increase (GCI).
In multiple appearances before our congress, Secretary Geithner has emphasized the importance of moving forward on the GCI. In his congressional testimony, Secretary Geithner presented a compelling and detailed case for the GCI, noting that development assistance is a vital avenue to strengthen security and expand economic growth opportunities in emerging markets.
In addition, I, and members of my team, have engaged members of Congress and their staff at all levels, to share with them the vital contributions that the IDB makes to the region. In these discussions, we also underscore the vital link between the region’s development and opportunities for investment, export growth and job creation in the United States. Our efforts remain on track, and Treasury will continue to act as a strong and vocal advocate of the GCI.
Finally, I want to say just a few words about the work that remains to be done. We look forward to the dissemination of the IDB’s methodology for macroeconomic sustainability analysis, which is slated for April 2011. Developing a methodology to minimize the risk of lending in unsustainable economic climate is not an easy task, but it is a vital one.
In addition, we are closely monitoring progress on the revision of the IDB’s response to the report by the Independent Advisory Group on Sustainability. This report contains a number of recommendations on how to strengthen implementation of the IDB’s environmental and social safeguards, and more broadly on how to promote sustainable development. We are aware that an action plan, based on the report’s recommendations, will be released publicly in the upcoming months. We are pleased that the IDB has established a working group to consider the recommendations and look forward to strategic implementation of these items.
Colleagues, let me conclude by affirming that a strong and dynamic region requires an equally strong and dynamic multilateral development bank. We welcome the many positive developments over the last year that point to the continued success of the IDB in supporting this region’s growth and recovery.
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