CHILE

Statement

by

His Excellency Mr. Ricardo Lagos
President of the Republic of Chile

at the 
International Conference on Financing for Development

Monterrey, Mexico 
22nd March 2002



I wish to begin by congratulating the President of Mexico for having convened this Conference. The Monterrey Conference in and of itself is a success, because it lays down a new scenario for addressing the difficult task of setting up just and well-balanced structures for financing the development of the poorest countries in order to promote domestic reforms, which are absolutely necessary to ensure financing, and to have the best possible trade with the best possible access. This forum is designed to flag problems. It is a good step forward towards finding solutions.

Since we have very little time I wish to focus on four essential topics that seem to me essential. The first is that the world has changed much over the past 50 years. Accordingly, financial assistance as we understood it fifty years ago is quite different from what is necessary now. Of course, the 0.7 per cent of gross national product to support development holds. 

But let me flag four essential facts. First of all, this assistance will go to the poorest countries and that is how it should continue to be. Secondly, we should have a set of rules to ensure access to that assistance in an equitable and transparent way. Thirdly, it should not be tied to conditions by donor countries, which is something we consider to be fundamental. It is good that at this meeting we have listened to the President speaking on behalf of the European Union to increase assistance until 2006 in order to reach 0.39 per cent. That is an initial step. 

Another point relates to a larger number of developing countries that are seeking not only financing, but also access to markets. A recent study has shown us that if trade barriers were lifted, the developing countries would be able to generate $130 billion in profits, more than twice the $50 billion that had been proposed for the Millennium Summit. This is the magnitude of the transfer that we are speaking of, and this relates to market access.

In Doha, there was great success and in good time. But let me say that we have difficult tasks ahead of us, first of all because one third of the anti-dumping measures that were adopted in 1995 and 2001 were traced to three developed countries. I know that it is hard. But we have to work so that we can address this thorny issue. 

I think that it is also important to understand that one possible cause of increased volatility in the price of exports over recent years, which are essential for our trade, are protectionist measures practiced by developed countries, which make the market only send surplus to the world markets. The result is a high degree of volatility in commodity prices. Trading only surplus, because of protectionist measures makes it very difficult for there to be proper access to markets.

Another point is something that did not exist 50 years ago access to private financing. Let us be clear here. Private financing is just as important as public financing. The higher-level developing countries and medium-income countries have access to private finance now, but capital flows to our countries are very cyclical. Capital is injected when there is world abundance and withdrawn when the world economy shrinks.

Let me very sincere here. In a country such as Chile access to international markets is essential. We have private finance sources within the context of infrastructure. We are getting private financing with regard to education, health and our prison system. But the private international resources are essential. There are just as important as official development assistance. 

What can we do to ensure that these resources that are directed towards emerging markets do not perform in a cyclical fashion, as they have to date? Countries have successful economies. They get capital. Precisely, for that reason, the country grows even more. But there are international difficulties that arise, and the capital migrates. This is a core issue if we want to be able to have serious discussions of financing for development. 

How can there be financing for development with regard to international capital flows, which are essential for development, but must perform somewhat better than they have in the recent past? We know that we have heard about various initiatives from this rostrum, for example a tax that would make it possible for the transfer of private capital to be of a different nature. This is a factor that we consider to be at the core of our discussion here. I would like to have our future tasks include that topic.

Finally, I would like to flag two factors that I deem to be essential. This concerns the special drawing rights. Special drawing rights are a way to create money at the international level through the International Monetary Fund. Special drawing rights go hand-in-hand with the contributions that each country makes to the Fund. I think that we should be making headway so that those special drawing rights and those created resources that do not imply transfer from one country to another could be devoted to financing the public good. How can we make intellectual property rights for the laboratories that are working against AIDS and other diseases be reconciled with the need to have access to generic material in our own laboratories. The special drawing rights could pay for patents so that certain countries would be able to deal with such situations. We are looking at the entire set of public goods and patents that could be financed in this way. I think that this also deserves future discussion.

My second and last point is that special drawing rights will make it possible for us find the machinery to deal with crises that we are accustomed to facing as they have occurred over recent years. The world has been very concerned about the situation in Mexico in 1995, and I intend no disrespect when I say this. It was worried about the situation in Russia in 1998. In Brazil, it was 1999. In Turkey it was 2000. In Argentina, it was 2001. What does all of this tell us? It means that we have to find new ways and means that will make it possible for the financial system to able to take steps such as last-minute loans with clear rules and specific modalities. We are not just wasting resources when the tasks are not properly performed. There has to be an institution that is well prepared to deal with such crises. Otherwise, damage will be done to that transfer of 0.7 percent. Tariff barriers will arise, whether they be for environmental reasons or labour reasons. The flows will become restricted. So financing for development itself will be adversely affected when such crises arise. Such crises must therefore be dealt with by appropriate institutions.

My last point relates to our own responsibilities within our own countries. Here, we are talking about financing development. We have come here to say that we want more, so we can have more development. That is fine and it is high time, but the essential element to develop and progress depends upon what we do domestically. We cannot increase domestic savings and have proper microeconomic policies and the rule of law unless we sit down at home and address this question. So that we can speak out in international forums, we have to be aware of the fact that inside our countries, at home, we are doing the best with the most. The problem is when we do our best and find that the international community is not well prepared. 

As we said yesterday, the Monterrey spirit is the launching of a course of action so that we can do what the United Nations did 50 years ago in Bretton Woods. Discussion of the international financial architecture and the rules of trade belong to each and every Member of the United Nations, and we all must deal with these questions collectively. That is the meaning of the spirit of Monterrey. Let me once again congratulate Members for having convened this Conference.


* The text of this statement has been transcribed from audio recordings as the original was not submitted to the Secretariat.

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