Luis Alberto Moreno
President, Inter-American Development Bank
You say in your book we could be amidst the decade of Latin America, how so?
Latin America basically went through all the financial crises that other parts of the world have been suffering recently and we learned the lessons, and those lessons were, you need macro-economic stability, that's the reason Latin America was capable of basically navigating with success through the financial crisis. So in essence we were able to demonstrate we have more resilient economies and at the same time, this is a young continent, we have what we call a "demographic bonus", 27 years old on average but more importantly with a lot of the raw materials, with the commodities that the world will continue to need in the years to come. Commodities that we have been able to introduce huge amounts of technology to, to increase significantly, for instance agricultural production, or mining for that matter, so when you look at these products they're the basis under which I believe we can continue to grow. I mean definitely we have a lot of challenges given that we are still middle-income countries.
Let's talk about those challenges. Even with all those pros going for you, even Latin America can't be immune to global changes, for example, the possibility of monetary tightening in the US, the slowdown in China. In fact I have a graph for you, this is data compiled by the IMF. After an impressive rebound in growth right after the financial crisis, we're already seeing a deceleration in the region. In fact the trend is expected to continue this year. So, how do you assess these risks, and what are you planning to do about it?
Certainly we're at a difficult moment. I think most of those risks are the result of the factors that you mentioned, and as such we're in a transition, a transition in which Latin America used to have a lot of tailwind in its sails, that came from the low cost of money, high Chinese demand, and Asian demand in general, and good prices for commodities, that's all changing. What does that mean for countries? Well it's different from country to country, we are a very heterogeneous region, however that does not mean that we cannot weather this. And this is going to depend largely on some of the structural reforms that we need to do - Japan has been undergoing some very deep reforms, and the success of Abenomics is largely going to be on those structural changes - that is equally true for Latin America, but more importantly, trade. This is a region by comparison to Asia that trades very little within itself. We only trade about 20 percent of our total production within Latin American countries, take that to Asia and it's almost 48 percent and compare that to Europe at almost 65 percent. So that's where the opportunity lies but that means we've got to enter increasingly into the so-called lower value chains, and this is a great opportunity for Japan.
Tell us about how Asia and Latin America can work together to benefit each. Because Asia's also a fast growing region.
No question, and I think there's a lot of areas where we can learn from each other. Take the case of transport and logistics. This is the one area where we have huge costs, which in essence become taxes to our exporters, because of the heavy costs of transportation. That means that we have to do massive investments in infrastructure, ports, airports, roads, rehabilitating the river systems. You've seen rail, the way Asia has done, Japan is a great example of that. We're actually here in a major business summit where we want to bring mid-sized companies from Latin America to trade with those of Japan and find ways to connect those possibilities. The other area of course, around this is, how do we continue to massively invest in this regard, coupled with the fact that we need to do more in innovation, and that's a big lesson that we need to get from Asia. On the other hand, if you look at Asia, towards Latin America, we've done a lot in moving people out of poverty - millions of Latin Americans in the last decade, moved out of poverty. This worked with very good programs, that were focused on the poorest. I think that's an interesting lesson for some of the Asian countries. And equally, we are the most urbanized region of the emerging world. Eighty percent of Latin Americans live in cities. Again, this is a process, you take China, you take India, and other countries in ASEAN that are largely going through a process of massive urbanization.