"Strengthening the Economic and Cooperation Linkages
between Latin America & the Caribbean and Asia"
Speech by
Haruhiko Kuroda
President
Asian Development Bank
At the Inter-American Development Bank 50th Anniversary Special Event
9 November 2009
Tokyo, Japan
I. Introduction
Minister Zuluaga, Parliamentary Secretary Ogushi, Vice Minister Hur, President Moreno, distinguished guests, ladies and gentlemen,
On behalf of the Asian Development Bank, I would like to congratulate the Inter-American Development Bank (IDB) on its 50th anniversary. IDB, as the first regional development bank, should be praised for helping develop Latin America and the Caribbean over the past half century, resulting in reduced poverty throughout the region. I am honored to be here today at this seminar and to participate in the signing of the memorandum of understanding between our two institutions.
I will address three topics this afternoon. First, I will briefly examine the impact of the global recession on our respective regions. I will next discuss the importance of using this crisis to play a constructive role in reforming the global financial and institutional architecture. And finally, I will suggest ways our institutions can work together to strengthen and advance inter-regional cooperation for greater prosperity in our respective regions.
II. Impact of the Global Crisis
Latin America and Asia both learned the lessons well from the crises that struck our regions in the late 1990s. Financial systems were reformed and policy measures taken that, when the current global financial crisis hit, ensured sufficient fiscal space, currency reserves, and exchange rate flexibility to manage the crisis effectively.
Monetary and fiscal stimuli appear to have worked. While the IMF forecasts aggregate GDP in Latin America and the Caribbean to contract 2.5% this year from last year's 4.2% growth, economic expansion will return in 2010—with growth back up to 2.9%. We at ADB see developing Asia showing signs of a V-shaped recovery. GDP growth slowed from 6.1% last year to an estimated 3.9% in 2009. Our recently published Asian Development Outlook Update forecasts a return to 6.4% next year.
China has been a key element in the rapid recovery for both regions. Its massive stimulus package and various incentives have kept domestic demand strong and investment high, stimulating other emerging Asian economies as well. China's trade with Latin America has grown rapidly, particularly in commodities. In Brazil and Chile, for example, China has overtaken the US as the largest trading partner.
In stark contrast to the late 1990's, when the industrialized world continued to grow while Asia and Latin America suffered, today we are seeing emerging economies in both regions leading the world out of recession.
III. G20 and Reforming the Global Financial Architecture
Sixty years ago at Bretton Woods, our two regions had very little influence. Today, our regions hold nearly a half of the G20 membership—Argentina, Australia, Brazil, China, India, Indonesia, Japan, Korea, and Mexico—and account for a quarter of the global GDP. As the G20 is now the premier forum for global economic cooperation, both regions have the opportunity to play a constructive role in reshaping the global financial and institutional architecture.
Our institutions need to work together to ensure reforms include enhanced global regulatory standards, stronger cross-border supervision, increased market transparency, and more effective global mechanisms for crisis prevention and management. I should add that this includes enhanced capabilities of international financial institutions, such as the IMF, and regional development banks, like ADB and IDB. With the approval last April for a general capital increase, ADB has been given the wherewithal to better fulfill its role.
As our institutions move forward in addressing the problems of global financial stability and payments imbalances, we should think globally, but cooperate regionally—and inter-regionally—as best we can. Working in harmony with one another, our collective views can provide effective guidance in global forums as they tackle the challenges our regions face, particularly in promoting the shared views of emerging market economies. This also holds true for international financial institutions like ADB and IDB, and our own influence in regional forums that cross regional boundaries, such as the G20 and APEC.
IV. Advancing inter-regional cooperation
Beyond international forums, however, there is large potential for our regions to open up to one another. For example, while trade has grown rapidly from a small base since 2000, there is substantial room for improvement. There are at least five trade agreements operating across our regions: between Korea and Chile, Japan and Mexico, China and Chile, Japan and Chile, and, most recently, China and Peru. We should pursue these further and—in the absence of a successful Doha Round—seek ways to reduce barriers to inter-regional trade and investment. This will help our member countries link into global and increasingly regional production networks. As our regions work through this crisis, we must discourage the protectionist temptation and encourage member countries to keep markets open while continuing to expand cooperation inter-regionally.
The APEC Economic Leaders Meeting this coming weekend in Singapore focuses on "sustaining growth, connecting the region." This also means accelerating and deepening economic integration between and among APEC members. With Mexico, Chile, and Peru as APEC members, this provides a very good opportunity for our regions to work toward supporting multilateral trading systems, investment liberalization, and accelerating inter-regional economic integration.
This burgeoning relationship was the impetus that led to the Partnership Agreement between ADB and IDB under the Japan Program which was extended to the end of this year. At the IDB's 50th anniversary today, I look forward to signing the Memorandum of Understanding, which will carry our cooperation into the future.
V. Conclusion
In closing, this is a critical time for emerging economies to work together and have their voices heard in restructuring the global economic and institutional architecture. I am confident that we at ADB and IDB will play our part to ensure our regions continue on the path toward increased prosperity for all our people.
Thank you.
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