THE SEARCH FOR COHERENCE
Finance for development is not an abstract, technical matter. It can make life better or miserable for millions of persons in the world, as we can all see in the tragedy unfolding in Argentina before our very eyes and which should not leave us indifferent. This is why this Conference should focus above all things on coherence and about finding better ways of dealing with the increasing frequency, intensity and destructive power of financial and monetary crises, showing that this is a systemic problem that can only be solved through coherence among trade, finance, and monetary policies, coherence between short-term and long-term policy objectives, coherence between the national and international, the regional and the interregional, the governmental and the intergovernmental spheres.
But the coherence between national and international responsibilities should have precedence. The extension of political self-determination to most of the peoples of the developing world was one of the most important early successes of the United Nations. With the acquisition of political sovereignty these new nation-States also took on a more onerous responsibility for domestic economic security. Our Consensus Declaration reiterates this fact. While it is true that some developing countries have made great strides in creating an environment suitable for participation in world trade and finance, much still remains to be done to meet the minimum requirements for economic security.
This search for coherence began at the Bretton Woods Conference. What we should have learned over fifty years later is that financing development is too complex to be reduced to a one-size-fits-all solution. What we have learned is that the only effective policy actions are those that are mutually reinforcing and that involve all national and international actors.
Monterrey has already achieved a major result by placing the issue of financing for development at the top of the international agenda. Our Consensus indicates broadly what developed and developing countries must do. The main challenge now is to find a truly coherent, consistent approach – which, it has been said, means acting “in conformity with circumstances”, particularly where domestic and international policies are concerned.
How can we formulate mutually supportive policies to be undertaken both by national authorities and by the international community? We face an impossible task – that of foreseeing future challenges and avoiding reliance on the validity of a single idea. The dramatic events in Argentina demonstrate the fragility of solutions that once looked like panaceas. The Argentine experience also shows that stable monetary policies are just one element required to ensure growth and development. In particular, preventing “moral hazard” cannot be invoked to justify actions that are totally unjustifiable from an ethical point of view, such as the temptation to punish an entire people -- honest and poor women, men, children -- for misguided monetary policies and macroeconomic mismanagement encouraged or tolerated by a significant part of the international financial community for many years. Even in the absence of any regional contagion, at least so that the increased risk of a fast disappearing market for investments in Argentina and other emerging countries may have similar consequences on development prospects.
This brings me back to the urgent need for coherence between trade, debt and finance that is at the heart of UNCTAD’s mandate within the UN system. Coherent multilateral actions must be implemented jointly by the international financial institutions and the WTO. Many developing countries have stressed the need for compatibility between financial and trade policies linked to multilateral loans. Unilateral trade liberalization measures contained in structural adjustment programmes often involve commitments that go beyond the WTO disciplines and deprive developing countries of the means to gain concessions on market access in subsequent trade negotiations. In the absence of corresponding liberalisation in industrial countries’ markets for agricultural, textiles and sensitive products, unilateral measures will only aggravate existing trade and current account defiicts.
Another element of the relationship between trade and financing for development is the continuing reliance of many developing countries on primary commodities as their main source of export earnings. I refer here not only to the fluctuations in demand for these products, but to the still unresolved problem of the impact of declining international prices, In this context, the use of agricultural subsidies and domestic support measures by industrialized nations represents a major distortion in the financing of development that continues to increase and exacerbates the negative effects of shrinking ODA. Similar reasoning can be applied to barriers to market access for developing countries' exports of goods and services.
On the side of finance it is imperative to significantly increase the size of ODA flows. This is especially important for the least developed countries, most of which do not have access to international financial markets and do not even constitute a systemic risk as they are totally marginalised from the system. Appropriate policies are important, not only to help attract private flows to a greater number of developing countries, but also to maximize their contribution to building the export supply capacity to generate the earnings necessary to keep external imbalances at manageable levels.
The contribution that can be made by regional and subregional institutions to the work of global institutions should not be forgotten. Innovative mechanisms for monetary and financial cooperation in Asia, Latin America and Africa can significantly increase global coherence and facilitate the integration of the developing countries into the global financial system.
The Conference on Financing for Development should be considered as the beginning of an orderly process based on a solid and balanced agenda. UNCTAD, as the focal point within the United Nations for the coordination of trade and development issues, and for the integrated treatment of finance, technology, investment and sustainable development is, needless to say, ready to contribute to the follow-up and implementation of decisions agreed upon at Monterrey this week.
Fair and adequate financing for development is, in the last instance,
an ethical challenge. It is the only way to overcome the built-in dangers
posed by massive poverty and to avoid the repetition of unnecessary tragedies
such the one that is now imposing so much suffering on the great people
Statements at the Conference