His Excellency Dr. Carlos Julio Emanuel
Minister of Economy and Finance

at the 
International Conference on Financing for Development

Monterrey, Mexico 
21st March 2002

Concern for the economic and social progress of our peoples has been on the United Nations agenda since its inception. The founders of the Organization understood that international peace and security depend to a large extent on poverty reduction, employment growth and a set of conditions that makes it possible to improve a populationís quality of life.

Despite these aims, economic history records a growing gulf between developed and developing countries. Not only have the policies of the industrialized countries and the multilateral financial agencies failed to bridge these differences, in some cases, they have helped, on the contrary, to intensify the frequent economic crises by ignoring the social costs stemming from the implementation of adjustment programmes. 

Ecuador is attending this Conference with the conviction that only a serious international effort can help make progress towards a world economic system based on equity. Failing that, the commitments that we may reach at this Conference will once again be no more than rhetorical utterances, which will not help to relieve the situation of millions of children, women and men around the world.

The level of external debt in many of our countries has reached unsustainable levels and become a factor that has slowed down development. Efforts to find a lasting solution to this problem have not been successful in that they have been driven and controlled by creditors, always in accordance with their interests, and have represented isolated ideas that have not tackled the underlying problems. This is the case with the Baker Plan, the Brady Plan and the Paris Club negotiations, which at the time of their presentation were seen as panaceas for resolving the problems of indebtedness of developing countries.

The economic history of the twentieth century shows that when there is political will, it is feasible to find lasting solutions to the problems of countries that at one time were highly indebted. The need for a global solution to current problems of financing and indebtedness should inspire the same creativity and imagination that gave birth to the Marshall Plan 50 years ago. It is important to remind this audience that the Marshall Plan proposed by the victorious countries of World War II proved to be an effective instrument, which was the reason for the recovery and development of post-war Europe. 

The best example is the London agreement signed on 27 February 1953, which enabled Germany once and for all to resolve its external debt problem thanks to the terms that it received from its creditors, which I shall succinctly outline. These included: An official discount form 50 to 75 per cent of its debt; a drastic reduction in interest rates, which was set between 0 and 5 per cent; a generous grace period for initial payments of interest and capital; the extension of deadlines for scheduled payments; and other excellent terms that were set at that time.

It is important to highlight that the ratio of Germanyís debt servicing to its exports peaked in 1959, and amounted to 4.2 per cent, which compares very favourably with what has been happening in Latin American countries. At the end of 2000, for example, Latin America had an external debt amounting to approximately $750 billion, the servicing of which cost $166 billion, which is to say 45 per cent of its total export earnings. In the case of Ecuador, external debt payments absorb more than 40 per cent of the Stateís annual budget and its exports. Let us compare that with the 4.2 per cent granted to Germany 50 years ago.

In short, we believe that just as a Marshall Plan was required after the triumph of freedom over totalitarianism, today, the same kind of imagination and creativity are required to triumph in the war against poverty. There is no doubt that the economic and social devastation that struggle against poverty has caused in the developing countries is much greater than the destruction inflicted on Europe in World War II. 

At the same time, notwithstanding the efforts of developing countries on the domestic level to reform and liberalize their economies, there is still a set of international asymmetries, which have made it impossible to make good use of the opportunities and advantages of broader and more competitive global markets. The developed countries, for their part, have preserved market protection and distortion structures through the application of subsidies and tariff and non-tariff barriers to significant products of importance to the region. This is precisely what the secretary general of the United Nations Conference on Trade and Development described as negative financing for development.

It is in this context that we make the following proposal, which consists in three basic elements of what would be a global scheme: Firstly, we propose the creation of an international compensatory fund to improve the debt-servicing profile of middle-income countries with debt problems. The fund would be set up through a special issue of special drawing rights, and would be used to reduce the payment of interest and capital by those countries.

Secondly, rather than international assistance, the developing countries, especially middle-income countries, require fairer international trade, which would seek to eliminate obstacles to trade, including tariff and non-tariff barriers and agricultural subsidies, permitting those countries to realize their competitive advantages. The developing countries, through a new trading round initiated in Doha, must be guaranteed access to the markets of developed countries. 

Thirdly, the relatively less developed countries require international assistance directed towards creating the economic, social and political conditions to overcome their serious problems of poverty. The developed countries have undertaken to devote 0.7 per cent of gross national product to this purpose, but they have not fulfilled this. Breaking this promise is unethical, and so an urgent rectification is required.

In conclusion, the resolutions that we reach at this Monterrey summit should be strictly applied in the immediate future. The United Nations, the World Trade Organization, the International Monetary Fund, the World Bank and other international agencies that are competent in the field should watch over the enforcement of these resolutions and report on the way in which they are being complied with.

To paraphrase Victor Hugo, there is nothing more powerful than an idea whose time has come. Therefore, the lasting solution to the problems of financing for development must be found now. Both the Heads of State and Government, particularly those of the developed countries, mindful of their responsibility towards future generations, have today a historic opportunity to undertake new and greater commitments to sustainable development, with a view to building a fairer and more equitable world for everyone.

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

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