Experts call for new financing model in Caribbean

SANTIAGO, Chile (CMC) — The Economic Commission for Latin America and the Caribbean (ECLAC) says experts attending its 33rd Regional Seminar on Fiscal Policy have stressed the need to create a new financing model in the region.

ECLAC said the seminar, one of the main forums of reference for discussing issues related to the public finances of Latin American and Caribbean countries, concluded on Friday, with three webinars featuring prominent specialists who debated matters of financing for development, tax evasion and illicit flows, as well as climate finance.

ECLAC said the final day of the seminar — which has served for 33 years as a high-level, multilateral regional space for exchanging opinions about the region’s macroeconomic and fiscal policies and challenges — began with a webinar ‘Financing challenges for sustaining an expansive fiscal policy and expanding fiscal space for a transformative recovery in middle-income countries’, in which the speakers included Alicia Brcena, ECLAC’s executive secretary; Stephany Griffith-Jones of New York’s Columbia University; Mark Plant, co-director of development finance at the Center for Global Development; and Ottn Sols, representative director for Costa Rica before the Central American Bank for Economic Integration.

In her remarks, ECLAC said, Brcena spoke about the challenges for sustaining expansionary fiscal policy and expanding fiscal space emergencies, as well as for achieving a transformative recovery.

She indicated that the COVID-19 crisis has considerably widened Latin America and the Caribbean’s financing gap, adding that the region allocates more than half of its revenue from exports of goods and services (59 per cent) to debt service payments.

She, meanwhile, called for international financial institutions to increase the liquidity that regional countries need to meet their financing requirements.

“We urgently need a public and multilateral credit rating agency,” she said. “Middle-income countries should no longer be classified based on their GDP (gross domestic product) per capita. If they are not helped, there will be a very serious systemic crisis.

“We have talked about a new development model but we also need a new international financing model,” Brcena added. “The instruments available should be placed under the umbrella of a new international architecture. Initiatives to close the financing gap in Latin America and the Caribbean should form part of a broader reform of the global financial architecture,” she said.

ECLAC, she said, has proposed five policy measures to address the region’s liquidity needs and debt problems and to create a suitable framework for building forward better: expanding and redistributing liquidity from developed countries to developing countries; strengthening regional cooperation by increasing the lending capacity and responsiveness of regional, subregional and national financial institutions; carrying out an institutional reform of the multilateral debt architecture; expanding the set of innovative instruments aimed at increasing debt repayment capacity and averting excessive indebtedness; and integrating liquidity and debt reduction measures into a financing-for-development strategy geared towards building a better future.

After this initial event a webinar titled Ending tax evasion and illicit financial flows: a priority challenge for the region and the world, was held in which the participants were Brcena; Vera Songwe, executive secretary of the United Nations Economic Commission for Africa (ECA); Jos Antonio Ocampo, professor of professional practice in international and public affairs at Columbia University; and Richard Kozul-Wright, director of the Division of Globalization and Development Strategies at the United Nations Conference on Trade and Development.

There, the experts analysed the policy challenges related to ending tax evasion and illicit financial flows, along with the opportunities for redirecting those resources into sustainable development.

In a new presentation, Brcena underscored that the problems of tax evasion and illicit flows are interconnected and solving them is a policy imperative for the countries of Latin America and the Caribbean.

She also stressed that, given the persistence of the coronavirus pandemic and the fragility of the economic recovery process, expansionary fiscal policy should be maintained in 2021.

“To improve revenue it is indispensable that we eliminate evasion; establish multilateral agreements on corporate taxes; extend the scope of wealth and property taxes as well as taxes on the digital economy, those related to the environment and public health matters; and revise the royalties of extractive industries,” she Brcena.

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