throughout the Americas
Kenneth W. Dam
U.S. Department of the Treasury
Miami Herald's Sixth Annual Conference on the Americas
October 15, 2002
we gather this morning, one-third of the people of Latin America live on less
than two dollars a day. Major economies in the region face severe economic,
political, and security challenges.
have a lot of work to do to realize President Bush's vision of an American
hemisphere where each and every human being has the opportunity to realize his
or her full potential.
here today to tell you about the concrete actions that President Bush and his
economic team are taking to promote growth throughout the Americas and realize
in the United States
single most important thing the United States Government can do to promote
growth throughout the hemisphere is to ensure that the U.S. economy grows at its
our economies are tied together.
You can see this
especially in Florida.
In 2001, Florida's
international merchandise trade reached nearly $71 billion. That's 15% of
Florida's gross state product. Florida is the nation's third largest exporter of
high-tech products, many of which are exported to Latin America.
foreign firms are located in Florida.
In 1999 - the last year
for which figures are available – Florida attracted over $36 billion in foreign
investment. That foreign investment created more than 286,000 jobs.
Because our economies are tied together, economic growth in the United States is
important for the hemisphere as a whole. And it is clear that the U.S. economy
is now growing again, thanks to decisive leadership by President Bush.
cut taxes at exactly the right time, providing important stimulus to the economy
just as it was emerging from the economic slowdown we inherited.
Our trade agenda
is once again energized.
Securing passage of Trade
Promotion Authority from Congress for the first time in nearly a decade enabled
us to renew the Andean Trade Preferences Act and Hill help us conclude a Free
Trade Agreement with Chile, a Free Trade Area of the Americas, and a successful
round of negotiations in the WTO.
the exposure of a few, but startling, corporate accounting scandals, President
Bush acted decisively to restore investor confidence in our stock market.
our citizens were attacked and our economy threatened, President Bush led an
international coalition to fight terrorism and protect our people and our
strong leadership is paying off.
We have now completed a
fourth consecutive quarter of growth. We believe that in the quarter just ended
the U.S. economy probably grew at least three percent. We expect that growth to
continue next quarter. Five consecutive quarters of growth is good.
growth is good, but not good enough.
President Bush and his economic team will not be satisfied until every American
who wants a job has one.
in the Americas
leadership is paying off elsewhere in the Hemisphere.
El Salvador, which has
implemented key structural reforms to strengthen public banks, improve financial
supervision, and further expand the role of the private sector, is expected to
grow by 3% this year.
Chile, which ranks among the most open, competitive and economically stable
countries in the region, also is likely to grow by 3%.
however, are not growing at their full potential.
I'd like to talk about
some of the economies in the region facing particular challenges.
all know, Argentina has faced extreme economic hardship over the last year. This
Administration has backed four extensions this year on payments to the IMF
(totaling $4.9 billion).
is reason to be encouraged about Argentina, as recent reports indicate that
parts of Argentina's economy have stabilized and that conditions there may have
O'Neill has said, we want Argentina to succeed.
We are prepared to support
additional international financial assistance as soon as a sustainable economic
program is developed. The IMF and the Argentine Government have been working
towards an agreement, and we hope that an agreement may be reached soon.
supported the August decision to provide an expanded IMF lending package to
Brazil because of confidence in the current policy mix and the firm belief that
the short-term liquidity pressures facing Brazil can be alleviated through
continuity of such policies. To ensure that the large majority of IMF resources
are provided only if sound policies are observed, the program "backloads" the
funds. That is, Brazil will get the majority of the IMF loan only if it adheres
to sound policies such as maintaining fiscal prudence and taking concrete steps
to reform major impediments to growth such as the current tax code. Commitments
by the two major Presidential candidates reaffirming support for the program
have helped reduce the uncertainty going forward.
difficult economic conditions and security concerns.
President Uribe has a strong agenda, appropriately focused on economic reforms
to stimulate growth and create stability. We support these efforts. They deserve
the support of the internacional community.
United States also supported a $3.8 billion official sector package for Uruguay,
and drew on the U.S. Exchange Stabilization Fund to provide a short-term
bilateral bridge loan until IMF financing was put in place. The Government of
Uruguay's strategy to address its difficulties - particularly in the banking
sector - and its commitment to implement that strategy convinced the official
community to support
the package. The
results are encouraging.
We have since seen
increased stability in the financial system and continued strong performance by
the Uruguayan authorities. Uruguay still faces a difficult regional economic
environment, but its leaders have shown a commitment to necessary reforms and
long-term economic goals. Uruguay merits international support.
economic uncertainty in the region, our assistance in helping meet sustainable
economic objectives is more important than ever.
top priority for the countries of the Hemisphere is to generate growth and raise
productivity through macroeconomic stability, open markets and private sector
initiatives. Sustained economic growth raises living standards and reinforces
political and social stability.
The key to
sustained economic growth is increasing productivity.
know that productivity growth is hampered if a country's most critical asset -
its people - is unable to take advantage of technological progress. The higher
income countries of the Western Hemisphere region have demonstrated their
capacity to compete at the most sophisticated technological level. This is
especially true in places where people have good access to education and are
therefore capable of leveraging this technology. Chile and Uruguay have been
particularly successful in this regard.
can you ignore the fact that if people's basic needs for food, shelter and clean
water are not met, growth is severely curtailed.
is why Secretary O'Neill has made access to clean water a development priority.
Governments can best foster growth by creating an attractive investment climate
of economic and financial stability. Sound monetary policies, coupled with a
stable exchange rate, disciplined fiscal policies and sustainable debt levels
inspire confidence in financial markets and encourage capital investment.
Economic openness and competition spur the exchange of technology and ideas.
health and education
allows individuals to take advantage of new opportunities. Transparency within
the public and private sectors, and enforcement of the rule of law are critical
to business-led growth.
policies generate a sound investment climate, which paves the way for private
sector led growth.
President Bush is committed to supporting the poorest countries, and helping
them climb out of debt. In July, World Bank donor countries agreed to deliver a
significant portion of International Development Association resources -- 18-21%
-- in the form of grants rather than loans. Grants avoid burdening needy
countries with necessary debt and will therefore be targeted towards HIV/AIDS
programs, natural disaster reconstruction, and those countries that are debt
vulnerable, facing post-conflict situations, or extremely poor.
We also believe
in helping countries that help themselves.
In March, President Bush
announced a new Compact for Development. The fundamental belief behind this
compact is mutual accountability – a hard link between aid and policy
performance. A key component of the Compact is the Millennium Challenge Account.
This account increases aid to the poorest well-performing countries over the
next three years
billion in 2006, which is roughly a 50% add-on to our current core assistance.
This is new money that will supplement existing programs, not displace them. We
will continue, in addition, a core assistance budget of $10-11 billion to
provide development and humanitarian assistance to a broader group of countries.
The Role of the
Furthermore, we know that growth ultimately comes from investing in people and
encouraging entrepreneurship in the private sector. Governments do not have all
Countries, businesses and individuals must work together to identify the areas
where progress is needed.
good example of how we countries, businesses and individuals can work together
is the Partnership for Prosperity, launched by President Bush and President Fox
in September of 2001. The Partnership brings the public and private sectors of
both countries together to improve access to capital, share best practices and
technical expertise, build capacity for future growth, and link institutions
with shared goals.
Through a series of conferences, round-table discussions, and technical
missions, the Partnership has identified over 30 specific projects to build out
Leadership for many of the projects resides completely in the hands of the
private sector. To cite just one example, private sector experts in housing
working closely with Mexican authorities to help deepen the primary and
secondary mortgage markets in Mexico. This will make it easier and cheaper for
Mexicans to buy new homes, and also making it possible for Mexicans to take full
advantage of the investment they already have in existing housing stock.
Partnership for Prosperity also includes several projects designed to lower the
cost of remittances. Remittances are important not just to the Mexican economy,
but to many economies in Latin American and the Caribbean. According to the
Inter-American Development Bank, in 2001, people living in the United States
sent $23 billion of hard-earned wages home to family and friends in Latin
America and the
least one study shows that children whose families receive remittances stay in
school longer than children of families who do not receive remittances.
you don't need academic research to see that remittances make a difference. $23
billion is a lot of money put directly in the hands of people who need it most
to spend as they see fit.
not free, however. It costs money to send money.
A recent McKinsey article
reports that the cost can be as much as 20%. An immigrant sending $250 home,
therefore, can pay up to $50 in fees and exchange rate conversion costs.
Reducing these fees by 50% can have a real world impact for people who depend on
Accordingly, a key component of the Partnership for Prosperity is to reduce the
cost of sending money from the United States to Mexico. Much of this work will
immediately benefit other countries in Latin America as well. Other aspects of
the work can be replicated elsewhere if they are successful in Mexico. The
United States' Executive Director of the Inter-American Development Bank, José
Fourquet, coordinates the United States' efforts concerning this aspect of the
Partnership for Prosperity.
We seek to
reduce the cost of remittances in three ways.
First, we work
to encourage competition and innovation.
Increasingly, we see banks
and credit unions offering competitive remittance products and we applaud them.
Since President Bush and President Fox launched the Partnership for Prosperity,
we have seen Citibank, Bank of America, Wells Fargo, and others launch new,
low-priced ways to send money to Mexico.
we try to protect competition and innovation from over-regulation. We have taken
care, for example, to implement terrorist financing regulations such as customer
identification requirements so as to allow financial services companies to
continue providing services to immigrants and to offer additional options for
Second, we work
to increase financial education.
additional options. But options don't matter if people don't know about them. To
increase financial literacy, Secretary O'Neill established the Treasury's first
Office of Financial Education, headed by Deputy Assistant Secretary Judy Chapa.
The Treasurer of the United States, Rosario Marin, also works tirelessly to
promote financial literacy. Through our First Accounts pilot program, we
provided funds to financial institutions and community based organizations that
provide education and services to people who do not have bank accounts. To take
just one example, Treasury has provided over $1.8 million in grants from both
First Accounts and our Community Development Financial Institutions Fund to the
Latino Community Credit Union in North Carolina, which has one of the United
States' fastest growing Latino communities.
Third, we are working to improve the systems through which remittances are made.
Federal Reserve Bank is working with Mexico to allow money to be transferred
through the Automated Clearing House system - a system we use here in the United
States. When completed next year, this project will reduce the cost of sending
money to Mexico to $1 or less per transfer. We are working with financial
institutions to ensure that those cost savings are passed on to consumers. If
successful, this project can be replicated elsewhere in Latin America.
reduce the costs, we increase the amount of money that gets home, increasing the
amount of money available to finance the purchase of consumer durables, the
construction and improvement of homes, and the expansion of small businesses.
With more than $23 billion dollars in remittances flowing to Latin America and
the Caribbean each year, these projects can make result in hundreds of millions
more finding their way to those economies.
promoting these policies, we must remind ourselves that there is no "quick fix"
for economic growth. Good results require a patient and sustained commitment
over a long period. I look forwarding to working with you as we promote growth
throughout the Americas and create the opportunity for every citizen of the
Americas to realize his or her full potential. Thank you.
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October 21, 2002