LatAm, Caribbean countries call for new governance, rules for financing
May 29, 2020 |
Countries calling for change, COVID-19 related or not
If the COVID-19 pandemic has done nothing else, it has exposed the vulnerabilities and weaknesses of the global financial system and the mechanisms currently in place to help developing nations establish stronger economies, leaders from both rich and poor countries acknowledged in a United Nations-led forum on Thursday.
“We must create a revamped system of global financial and monetary governance that focuses on the most vulnerable,” Andrew Holness, prime minister of Jamaica said in the opening segment of the virtual event.
Convened by Holness, as well as Canadian Prime Minister Justin Trudeau and UN Secretary General António Guterres, the discussion focused on trying to find concrete financing solutions to the COVID-19 health and development emergency unleashed by the pandemic.
The leaders discussed how the need for a revamping of the system of global financial and monetary governance, as well as putting an end to opaque structures that facilitate tax evasion and illicit financial flows that rob resources from developing countries.
“The institutions created 75 years ago do not take into account the realities today,” said Prime Minister Mia Amor Mottley of Barbados.
In addition, the leaders, which also included heads of Latin American, Caribbean and international financial institutions, discussed changing financing rules to include middle-income debt alleviation, rules for access to financial resources, and concessional funding related to COVID-19 and beyond.
“The criteria and the definitions being used to determine access to goods and credit are not considering country needs,” Mottley said. Many middle-income countries in the Caribbean, which are suffering from a collapse in travel and tourism, are excluded from access to concessional funding, she said.
Holness called for greater collaboration from international partners to stem illicit financial flows. “Tax avoidance and evasion, transfer pricing, transnational crime and public corruption divert significant resources on revenues of developing countries,” he said.
The OECD’s secretary general Ángel Gurria, said that his institution was proposing a concerted push to revitalize the international tax agenda and to put an end to opaque fiduciary and corporate structures that rob resources from the developing world.
The terms of debt repayment after COVID-19 were also at the center of the discussion.
“After this giant effort to fight COVID-19, we need to transition towards fiscal and social sustainability in our countries, and this implies a medium-term consensus as to how to alleviate debt amortization for emerging economies,” said president Iván Duque of Colombia.
Carlos Alvarado Quesada, president of Costa Rica called for more flexible parameters for debt, for renegotiations of current debt, and for standard boiler plate conditions to be negotiated jointly in order to get better conditions “to all who need it, not only to those who came first.”
He also called for the issuance of additional SDRs, for the deferment of current payments, and for fixed rates at current rates. SDRs or Special Drawing Rights are units used by the International Monetary Fund that represent a claim to currency held by the institution’s member countries
Mottley called for more incorporating new clauses in debt instruments to help avoid a sovereign debt crises. For example, she said that when Barbados came out of a recent debt restructuring, the inclusion of natural disaster clauses will allow, in the future, for the country to suspend principal payments on debt and to capitalize interest during an emergency.
“These things are too simple, and we wonder why there has been no decisions made on it,” she said.