The relationship between democratic governability, equity and economicgrowth, and, in turn, between these dimensions and financing for development is arousingincreasing interest. The Consensus of Monterrey, the best developed version of theinternational consensus in this area, stressed the responsibility of each country toguarantee suitable conditions for financing development, but also stressed the essentialrole of international cooperation.

International cooperation is a vital support mechanism for nationalefforts and a tool for compensating the imbalances caused by factors exogenous to nationaldecisions. In relation to democratic governability, it ranges over at least fiveclosely-related areas, providing: support for building democratic institutions; financingfor integrated development strategies, complementing national resources; concessionalfinancing, with clearly defined objectives; a contribution to managing economic cycles andeffective anti-cyclical macroeconomic policies; and support for overcoming problems ofhigh indebtedness.

Within this framework, significant support programmes for consolidatingdemocratic institutions are being run by the IDB and other multilateral banks, providingfinancing for processes such as judicial reform, parliamentary modernizations, strongersupervisory bodies and improved record-keeping on individuals. In relation to integrateddevelopment strategies, the multilateral bodies must take into account the complementarynature of their financing, which must thus be subject to the political processes andsocial participation mechanisms of the beneficiary countries.

With regard to concessional financing, and in line with the commitmentsmade at Monterrey, the trend in official development aid over the past 15 years must bereversed. In Latin America, the consolidation of medium income democracies continues toneed support and international cooperation given their

vulnerability, particularly to financial crises and destabilizing capitalmovements, and it is essential that this be recognized.

The experience of pronounced financial cycles underlines the importance ofthe mechanisms created by the multilateral financial organizations to compensate for theeffects of sharp shifts in the capital account and the contagiousness of financial crises.The international financial bodies should not only promote the design of anticyclicalmacroeconomic policies but also provide financing for such purposes. One of the most vitalpolitical decisions the Group of Rio should take is to give firm support to consolidatingthe existing subregional multilateral development banks, and the Latin American ReserveFund (Fondo Latinoamericano de Reservas).

To reduce the risks of external financing, debt issues can usefully beencouraged to include contingency clauses linked to cyclical movements of GDP and/orcommodity prices or terms of trade.

The multilateral institutions must be asked, finally, to continue seekingviable solutions to the problems of high indebtedness. Such solutions must go beyond thecollective action clauses that Latin American countries have begun to use in new bondissues, and specifically should seek to resolve satisfactorily the problem of high risksovereign debt. In the case of collective action clauses, it is essential that these beuniversally adopted and that the Group of Seven countries employ them in all debt issues,to avoid the mechanism being transformed into a new form of discrimination againstdeveloping countries in the private capital markets.