World Bank's Familiar says more political consensus needed to achieve prosperity

World Bank's Familiar says more political consensus needed to achieve prosperity

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As Vice-president for Latin America and the Caribbean, Jorge Familiar, a native of Mexico, was the World Bank’s point person for the region from 2014 until early 2019. The first Latin American to hold the position, he oversaw the institution’s relations with 31 nations before taking on his new role as vice president for finance. Here, he reflects on the region’s achievements when it comes to economic stability and quality of governance and what challenges remain.

When it comes to economic stability and governance, Latin America has made huge strides over the past 30 years. What have been the most important motivations?

I think there are two main factors that keep countries moving forward on their development path. The first is to bring people out of poverty and to improve living conditions. The second is precisely the recognition that frequent cyclical crises hurt development. Latin America learned its lesson from the economic crises of the 1980s and the 1990s and decided to strengthen institutions and improve macroeconomic management. Maybe years ago, there was a belief that doing that was sufficient. But now it’s broadly recognized that while macroeconomic stability is necessary for poverty reduction and development, countries need to do more.

In your opinion which countries are taking further steps to achieve more stability?

On the macroeconomic front, there have been improvements throughout the region. The Pacific Alliance countries have done very well. Brazil has done a lot. Now, we’re going through a period of adjustment to the external environment so countries have been facing fiscal deficits. While there have been enormous improvements, there are still lessons that we need to fully internalize. Countries need to save more in the good times because neither the good times or the bad times last forever.

Are there any countries that you believe have fallen behind when it comes to fiscal reform?

The whole region needs to step up and speed fiscal adjustment because the external environment is turning more complex. One important part of this fiscal adjustment is protecting the most vulnerable. This is an area where the region has changed dramatically over the past 30 years. The region has really moved ahead in social protection. They have mostly moved away from subsidies or reduced subsidies and established tax transfer programs that have played an important role in breaking the cycle of poverty. Seventy percent of poverty reduction is eliminated by growth, but the rest—30%—depends on social programs. This is very important at times when economies need to adjust. Better human capital will lead to more growth.

How would you assess the region’s success at combating corruption?

On transparency and accountability, there has been a dramatic change over the past 30 years. There has been a social transformation during the commodity super cycle. And the new Latin Americans who have seen their lives improve have zero tolerance for corruption and the misuse of scarce public funds.

The population needs access to information — any steps taken to simplify the interaction between citizens and the government. The less red tape and processes, the fewer chances for corruption. Then there is enforcement and rule of law. There is a silver lining to the corruption scandals in the region. The fact that these cases came to light and there are sanctions being imposed is positive. I do not think there were few corruption cases in the past. We saw less because fewer came to light.

What trends are you most encouraged about when you look at the next five of 10 years?

First, on productivity, I see a region that is laying the foundation to mobilize private sector resources for infrastructure investment. The other area where I see a lot of movement is on the human capital front. I see a very serious effort to improve the quality of education. We have 21st century kids that will face 21st century challenges and we’re educating them in a 19th century system. We really need to step up our game.

What are you most concerned about?

One of the concerns I have is the interaction between what’s necessary to reach economic and social prosperity and the ability to do it. That’s politics. The region needs more action and less discussion. What keeps me up at night are countries that know what they need to do, but don’t because they can’t reach the necessary political consensus.