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Latin America makes efforts to tackle financial crisis
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16:53, April 01, 2009

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Latin America in recent days hosted two major events -- the 50th annual assembly of the Inter-American Development Bank (IDB) and the Progressive Governance Summit, both focused on the global financial crisis.

The IDB assembly, held in Medellin, Colombia, on March 29-30 and the Progressive Governance Summit, held on March 28 in the Chilean beach resort of Vina del Mar, discussed the impact of the crisis at home and in the rest of the world and ways to ease the turmoil.

The intensified regional and international efforts showed that inter-governmental cooperation was the best way to combat the deepening crisis.


IDB President Luis Alberto Moreno said the assembly opened a new era in the institution's history at a time when the crisis began to affect Latin America and the Caribbean.

The representatives from 48 countries agreed to immediately review the need for a general increase in the IDB's ordinary capital, in order to help the region adequately respond to the crisis and boost its economic and social development programs.

The countries in the region are suffering severely because of the crisis and are enduring lower economic growth, a reduction in exports, a drop in credit, unemployment and a substantial decrease in funds sent home from immigrants abroad.

During the assembly, economists proposed to raise the IDB's capital from its current 100 billion U.S. dollars to between 150 and 180 billion dollars.

The IDB will also boost the social and economic development of the region, and give concrete responses to the needs of the poorest countries through anti-crisis programs.

It was estimated that the region needs more than 20 billion dollars in credits this year, and a similar amount in 2010. In the past five years, the annual average need was 7 billion dollars. The IDB planned to give a record 18 billion dollars this year.


The Progressive Governance Summit, which involved state leaders from Latin America, Europe and the United States, focused on efforts to keep the economic crisis from becoming a social one.

The leaders urged a bigger role for governments in addressing the financial crisis by creating policies in an effort to keep the turmoil from turning into a social recession.

They also called for reforms in the regulation of domestic financial institutions and international coordination of the measures so that prosperity can be broadly shared.

The leaders also stressed the important role of international financial institutions in preventing disastrous economic consequences for emerging and developing countries.


Some Latin American countries recently have taken measures to deal with the global financial crisis.

In Brazil, the government announced a cut of 25 billion reais (10.8 billion dollars) in its 2009 federal budget but fully preserved the country's social and welfare programs.

The government also renewed a three-month-long tax cut plan for industrial products and extended it to the construction sector.

To compensate for the reduced tax collections, the government increased cigarettes levies by 20 to 25 percent.

In addition, a 34-billion-real (14.5 billion dollars) housing plan for lower-income families was started.

In Chile, the government announced measures focused on aiding small enterprises, easing access to bank credit and promoting competition in the financial sector.

The Mexican government announced in January a 54 billion dollar stimulus package, which included a freeze on fuel and natural gas prices, housing aid, strengthened unemployment insurance and additional construction projects.

A total of 800,000 houses will be built or remodeled, generating 2.5 million temporary jobs.

The measures also include 550 million dollars to help poverty-hit families improve their livelihoods and about 150 million dollars to support ailing industries, especially export-dependent companies.

In addition, the state-owned oil company Pemex announced a 19.4billion dollar investment in exploration and production.

To stop the sharp depreciation of the Mexican peso, the country's Central Bank auctions 100 million dollars each day.

Venezuela, meanwhile, on March 21 announced plans to raise taxes, issue more debt and lower its 2009 budget by 6.7 percent.

The government decided to issue more bonds to increase debt to 15.8 billion dollars from the original 5.58 billion dollars. It also increased the value-added tax from 9 percent to 12 percent.

Meanwhile, unnecessary government spending was banned, including the purchase of new cars, gifts and office decorations. Minimum salaries, however, were increased 20 percent.

In Ecuador, President Rafael Correa on Tuesday pledged reforms that will protect small businesses and promote employment.

Source: Xinhua

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