:00:03. > :00:13.food. Those are the headlines. It is now
:00:13. > :00:17.
:00:17. > :00:21.This is Latin America's decade. So says the leader of one of the
:00:21. > :00:26.country's contributing to its impressive economic boom. But as
:00:26. > :00:36.the world slows, can grit be sustained? The region's politicians
:00:36. > :00:36.
:00:36. > :00:40.are divided. Enrique Garcia has been juggling the demands of
:00:40. > :00:44.protectionists and free-marketeers for 20 years. A veteran president
:00:44. > :00:48.of Latin America's Development Bank says that times have never been so
:00:48. > :00:58.good. But which side will he come down on to make the good times
:00:58. > :01:21.
:01:21. > :01:25.Enrique Garcia, welcome to HARDtalk. You are one of the longest serving
:01:25. > :01:29.figures on the continent. You used to think of Latin America as it is
:01:29. > :01:33.really does hang around for the long time. You have been there for
:01:33. > :01:43.more than 20 years. You are entering restaurant decade. What
:01:43. > :01:49.has changed? It is a great pleasure to be here. I do think Latin
:01:49. > :01:53.America has changed a lot. When I started this job, I was head of the
:01:53. > :02:02.Minister of economic cabinet of Bolivia. Latin America was
:02:02. > :02:10.different. In those days, we had to face the impact of macro-economic
:02:10. > :02:18.decline. Most countries were facing high deficits, debt issues,
:02:18. > :02:27.hyperinflation. Financial crisis in their systems. All of these things
:02:27. > :02:31.were in the late 80s. What happened was in the late 80s and 90s, Latin
:02:31. > :02:37.America, country by country, took a very courageous actions to take
:02:37. > :02:43.care of their problems. That is one of the factors that has influenced
:02:43. > :02:47.what has been happening in the last 20 years. Do you share the view of
:02:47. > :02:57.the Colombian President when he says that this is Latin America's
:02:57. > :02:57.
:02:57. > :03:06.decade? I share the view that this has been the best years in Mac --
:03:06. > :03:11.macro-economic terms. But we have to be careful. As I said before,
:03:11. > :03:15.the reason we are doing well is because of a good policy framework
:03:15. > :03:21.that has been managed by most countries in the region. Most
:03:21. > :03:30.countries? When you are talking about a region, you cannot say
:03:30. > :03:33.every country, but most countries. There are different opinions on
:03:34. > :03:38.outlooks and developing politics. He said that times have never been
:03:38. > :03:46.as good for South America as they have been now. Will that last, or
:03:46. > :03:53.is the picture beginning to change? Let me go back, the second factor
:03:53. > :04:03.in this positive trend in Latin America is China. Because of the
:04:03. > :04:03.
:04:03. > :04:08.dynamic growth, we have had a tremendous trade effect. If you put
:04:08. > :04:16.together a good policies on the one hand and the commodity boom, those
:04:16. > :04:22.are the factors. But can this last? The answer is, it depends. It all
:04:22. > :04:28.depends on what might and American leaders do in this exceptional
:04:28. > :04:31.period. That is a very interesting area, what the leaders do. We will
:04:31. > :04:38.come on to that. But let us look at some of the evidence that perhaps
:04:38. > :04:44.these good times are, if not stopping, at least slowing down. We
:04:44. > :04:54.saw factory output in Chile down 10% in a period of five months. We
:04:54. > :04:56.
:04:56. > :05:00.saw a trade surplus of 490 million turning into a deficit of 843
:05:00. > :05:05.million. The finance minister says him that he thinks because of
:05:05. > :05:11.slowing exports and demand in the rest of the world, his country will
:05:11. > :05:20.see its growth at about 4.8%. That picture is replicated in plenty of
:05:20. > :05:27.other countries. It begins to paint a picture that the region is
:05:27. > :05:34.suffering from lack of investment from the outside. You have a
:05:34. > :05:44.problem with Europe and United States over the years. It is
:05:44. > :05:45.
:05:45. > :05:49.difficult to be immune to that. But the region in general has been good.
:05:49. > :05:57.The gross rate has been lower than it has been in the past few years.
:05:57. > :06:06.Maybe 4%. Last year the average was about 3%. The impact of Brazil has
:06:06. > :06:13.been crucial. Brazil had a bad here last year. A 1% growth. Peru had
:06:13. > :06:23.10%. Panama over 6%. Several countries are doing well. Now, the
:06:23. > :06:26.
:06:26. > :06:31.future. Unless we move from a more dynamic transformation that takes
:06:31. > :06:38.away the region from the high dependence on commodities, unless
:06:38. > :06:46.we do that, probably the cycles could last two years, three years,
:06:46. > :06:53.ten years. But cycles are cycles. We need to take advantage of these
:06:53. > :07:01.good macro-economic platforms to mix and structural reforms. --
:07:01. > :07:06.makes some. Educational institutions, things like that.
:07:06. > :07:11.Regional growth of about 4%. That is not good enough. Let me tell you
:07:11. > :07:19.a thing. 6% growth is what we need in the region to match developed
:07:19. > :07:28.countries. I absolutely. A howl will you deal with that? We made a
:07:28. > :07:35.study on Latin America in 2040. If Latin America was to catch up, at
:07:35. > :07:39.the same time to do it in a sustainable manner we can solve
:07:39. > :07:45.poverty and inequality. But we cannot be satisfied with gross
:07:45. > :07:52.rates below 6%. To do that to me to do many things. You need more
:07:52. > :08:02.investment. You cannot just invest 20% of GDP. You need to invest at
:08:02. > :08:04.
:08:04. > :08:12.least 27%. You need to improve productivity. You have to have
:08:12. > :08:17.policies that will make growth not only dependent on commodities but
:08:17. > :08:21.having a productive transformation. This is very difficult. It depends
:08:21. > :08:26.on your investors. On a country like China. You have taught in
:08:27. > :08:33.recent interviews about a sand approach to the Investment of
:08:33. > :08:39.countries like China. What you mean about that? China has been a
:08:39. > :08:45.positive thing for Latin America because it has permitted us to
:08:45. > :08:53.defend ourselves from the crisis. At the same time, we have to have a
:08:53. > :09:00.more symbiotic relationship. They have a resource based activity set.
:09:00. > :09:03.What we would like to see is more investment in other areas. You told
:09:03. > :09:07.the Financial Times just a few months ago that the Chinese
:09:07. > :09:12.investment sections where they have a competitive advantage, they are
:09:12. > :09:22.present in many sectors, is the best way to be pursued by Latin
:09:22. > :09:22.
:09:22. > :09:28.America as a good partner. Everybody is happy. They are
:09:28. > :09:32.investing in oil and things like that. Not sufficiently in areas
:09:32. > :09:37.that are more related to the internal economy. Why should a
:09:37. > :09:43.country like China want to invest in that way? All it will do is
:09:43. > :09:53.create a new competitor. No. That is the trick. Look at Latin America
:09:53. > :09:54.
:09:54. > :10:01.as a market. Latin America is a huge market. If you combine open
:10:01. > :10:09.economies for more open trade, you have Investment for it technology
:10:09. > :10:14.things. Four Chinese investment, you have a Latin American market.
:10:14. > :10:21.Many countries that have free trade agreements with United States, that
:10:21. > :10:29.is another market. I go to China quite a lot. You go there are now
:10:29. > :10:36.more than you do perhaps previously? In the past two years I
:10:36. > :10:42.went perhaps more times to Beijing then to New York. Why? There is
:10:42. > :10:47.more potential. In the discussions with the Chinese, this issue is
:10:47. > :10:51.well understood. We have to work on that. What is good for China is
:10:51. > :10:56.good for Latin America is good for the world. Still not an even
:10:56. > :11:01.relationship. 60% of Chinese relationship -- investment in
:11:01. > :11:11.Brazil. Where about the other countries? Brazil is an attractive
:11:11. > :11:13.
:11:13. > :11:18.market. That is the reason. But you should not rely exclusively on
:11:18. > :11:23.Chinese investment. What is important for Latin America is to
:11:23. > :11:28.be positive about the importance of foreign investment. Foreign
:11:28. > :11:35.investment, not only because of the funds and resources, but as one of
:11:35. > :11:41.the issues in Latin America is the savings ratio. Latin America says
:11:41. > :11:49.approximately 20% of GDP. If you want to invest 27%, that is a 7%
:11:49. > :11:54.gap. So Latin America has to invest in itself. You have a 7% gap
:11:54. > :11:59.between what to save internally and two minutes. A but it has got to
:11:59. > :12:06.come from Latin America, because countries like China are now
:12:06. > :12:16.struggling. They are thinking twice about some of these investments.
:12:16. > :12:17.
:12:17. > :12:23.$13 billion trade surplus in 2011. That drops to �19.4 billion --
:12:23. > :12:27.�19.4 billion. When China sneezes, Latin America catches a cold. You
:12:27. > :12:37.cannot depend on money from the outside to sustain economic growth.
:12:37. > :12:39.
:12:39. > :12:43.Definitely. Leaders get this. You have to raise your savings. If you
:12:43. > :12:52.compare the savings of Latin America with Europe and the US, it
:12:52. > :12:58.is OK. If you compare it to Asia, it is a terrible. It is impossible
:12:58. > :13:04.to raise it from 20 to 30%. You have to have additional funding
:13:04. > :13:10.coming from the outside world. What are the main forms of internal --
:13:10. > :13:18.external financing? The main one is investing in products. Not only
:13:18. > :13:23.because of the resources, but because of the markets. Is it a
:13:23. > :13:29.problem that whatever the economic arguments to be making at the Bank
:13:29. > :13:33.to deal with the fact that China pushes 10% of its investment in
:13:33. > :13:36.infrastructure but Latin America does less than 3%, having to invest
:13:36. > :13:46.some of your projects itself through the bank that the politics
:13:46. > :13:53.
:13:53. > :13:58.Rafael Correa says Ecuador is no longer for sale. What do you say
:13:58. > :14:07.when you hear a thing like that? their politics much more than I do.
:14:07. > :14:14.Right now, we have a political campaign. Elections next week.
:14:14. > :14:18.Obviously he is a good economist and he knows very well that we need
:14:18. > :14:22.external change. We are the main force of multilateral funding.
:14:22. > :14:27.is not just Rafael Correa. In Venezuela, which is where your bank
:14:27. > :14:32.is based, we have the government rating PepsiCo and confiscating
:14:32. > :14:37.8,000 tonnes of sugar, denouncing hoarders and speculators. We have
:14:37. > :14:40.Argentina accused by the IMF of fiddling its inflation statistics.
:14:40. > :14:48.Some of the Government's in your region are very sceptical about the
:14:48. > :14:54.benefits coming from countries. How do you deal with that? You have to
:14:54. > :14:59.look at the region. 35 countries. Occasionally, it happens here in
:14:59. > :15:04.Europe and in other parts of the world that there are problems. But
:15:04. > :15:14.you have to be pragmatic. At the end of the day in a globalised
:15:14. > :15:15.
:15:15. > :15:18.world economy, you have to build in a realistic way. It is important to
:15:18. > :15:22.have a combination of government action in the market on the one
:15:22. > :15:30.hand, internal savings and external savings on the other. Of course,
:15:30. > :15:34.some countries for nationalistic reasons consider that certain areas
:15:34. > :15:39.should not be in the hands of the private sector. We respect that.
:15:39. > :15:44.But the important condition is that they manage these industries in a
:15:44. > :15:48.professional way. Does Latin American need free trade? Of course
:15:48. > :15:55.you have to be very careful about trade issues. One of the mistakes
:15:55. > :15:59.that occurs is a those who deal with economic policy in general,
:15:59. > :16:04.monitoring fiscal policy, they just do that. Those who deal with train
:16:04. > :16:08.talk about trade. You have to talk about all those things. Trade is
:16:08. > :16:13.very important. When you go to Beijing and you are there making
:16:13. > :16:17.the case for investment in Latin America and they turn around and
:16:17. > :16:23.say, that is very interesting but Argentina has just seized control
:16:23. > :16:27.of an oil company, has imposed restriction on imports, Brazil has
:16:27. > :16:30.raised import duties on 100 different products including
:16:30. > :16:35.anything from steel to part of milk. Your message is one thing but the
:16:35. > :16:39.message they get from countries they want to invest in is very
:16:39. > :16:45.different. No. You should go country-by-country. But they cannot
:16:45. > :16:50.invest on that basis. It is not the other -- let us look the other way
:16:50. > :16:59.round. Is there a symmetry in trade relations in the world? Do you
:16:59. > :17:03.think Europe provides free trade absolutely Crescent --? Doesn't
:17:03. > :17:08.Europe subsidise agricultural problems? This is why we have not
:17:08. > :17:15.seen the long vaunted free trade deal between the EU and Latin
:17:15. > :17:20.America? The big issue in the world is precisely to manage issues of
:17:20. > :17:24.treat and monetary policies. Of course it would be the best deal of
:17:24. > :17:30.the world to have more open economies but in a so much that way.
:17:30. > :17:37.You cannot ask all of the developing countries to be open and
:17:37. > :17:42.to have... When you see a country like Brazil seeing its growth rate
:17:42. > :17:52.slowed 2.9 % in 2012, is there any connection in your mind between
:17:52. > :17:54.
:17:54. > :18:03.that and its trade policies? -- 0.9%. Of course. Brazil is almost a
:18:03. > :18:07.Continent it is so large. Medium- size and small countries cannot be
:18:07. > :18:13.protectionist if they want to survive in the future. That is a
:18:13. > :18:20.clear picture. And that is happening in the Pacific Rim. We
:18:20. > :18:26.have Chile, Colombia, Peru, Mexico. This new the Civic Alliance?
:18:26. > :18:31.why? Because all of them have something in common. So they need
:18:31. > :18:35.to wake up to it? They should wake up but it is not that easy because
:18:35. > :18:40.we have to address issues of imbalances between economies. But
:18:40. > :18:45.let me put it this way. Trade is one element but you have to go one
:18:45. > :18:50.step further. You have to be competitive. You have to be
:18:50. > :18:54.productive. In order to sell in an open market, you have to have the
:18:54. > :18:59.products that will be competitive. Could it be that leaders like
:18:59. > :19:03.Rafael Correa error in Ecuador, Cristina Kirchner, Hugo Chavez, I'm
:19:04. > :19:09.really just reflecting the feeling of many people that free trade will
:19:09. > :19:15.not deliver for them and it is better to take the money from
:19:15. > :19:20.tariffs and spend it on social welfare? In Ecuador, the population
:19:20. > :19:27.in poverty since 2000 has dropped dramatically because of the money
:19:27. > :19:33.from protectionism. I return to what I said before. Let us not try
:19:33. > :19:38.to talk about Latin America. By the same token, if you go to Peru, if
:19:38. > :19:43.you go to Chile, several other countries, they are working in a
:19:43. > :19:49.different spectrum. One export business seems to be depressingly
:19:49. > :19:55.resilient and that his narcotics. How is it that responding to that
:19:55. > :19:59.challenge? That is one of the serious issues that affects many
:19:59. > :20:03.countries in Latin America. But it is very important that several
:20:03. > :20:13.governments have taken a very strong position on that and today,
:20:13. > :20:15.
:20:15. > :20:18.in fact, thanks to the discussions at the summit of the Americans --
:20:18. > :20:23.summit of the Americas, President Santos put that issue on the table.
:20:23. > :20:26.They did not resolve that issue but right now, they are under the
:20:26. > :20:30.umbrella of the O E s and we are supporting that. They are making
:20:30. > :20:34.very serious recommendations to see how to deal with that. It is not an
:20:34. > :20:38.easy task but there are some extraordinary statistics. The UN
:20:38. > :20:45.estimates the annual profit of the cocaine industry is $85 billion.
:20:45. > :20:49.That is six times what Coca-Cola makes. Of course. One of the
:20:50. > :20:56.messages that I want to leave here is that we have to have symmetry in
:20:56. > :21:03.the relationship. There is a government responsibility on that.
:21:03. > :21:09.It is obvious that farmers in Peru and Bolivia, if they have to grow
:21:09. > :21:18.coca and make 100 times more money than Machell Cox, he will do that.
:21:18. > :21:24.You are saying to change demand. the chain of production... People
:21:24. > :21:28.intervened. And then where can you sell the cocaine? Cell in the US,
:21:28. > :21:34.Europe. Curb demand. What about the debate in Latin America over issues
:21:34. > :21:39.like regulation? Is it popular to regulate the drugs trade? In a
:21:39. > :21:44.similar way to how people regularly to alcohol? That is one issue that
:21:44. > :21:51.is being discussed. There are two positions. What is yours. I believe
:21:51. > :21:59.you have to be careful. The policies of the past were not
:21:59. > :22:02.working well. Colombia did a great job in fighting that but then the
:22:02. > :22:06.drug traffickers were to Peru and Bolivia and the market in the
:22:07. > :22:11.United States, that is also important. Curve the demand first?
:22:11. > :22:16.You have to work in an integrated fashion. We are looking forward to
:22:16. > :22:21.these recommendations. Indeed. But if the US cannot demand, if the
:22:21. > :22:25.efforts were made more effective to reduce demand in the US and Europe,
:22:25. > :22:30.although demand in Latin America has also been growing. Such are the
:22:30. > :22:37.prices of economic growth and a growing middle class. But if you
:22:37. > :22:41.did that, can you conceive of a situation of the decriminalisation
:22:41. > :22:45.of drugs instead of governments worrying about stopping trucks.
:22:45. > :22:50.Instead of arguing about drugs, they can actually make some money
:22:50. > :22:56.off it. Take the drug money and spend it on social welfare and
:22:56. > :23:01.benefits? No. The is like Robin Hood. There are ethical principles
:23:01. > :23:07.involved. You have got to be very careful. We do this with alcohol.
:23:07. > :23:11.Yes but it is not the same. There are limits. This is a very
:23:11. > :23:18.complicated issue and it has economic, political, social and
:23:18. > :23:25.ethical dimensions. I will advocate a balance on those issues. In my
:23:25. > :23:30.opinion, the ethical factors are at very crucial. Not just about
:23:30. > :23:35.economics? Not economics. Ethical values are very important in life.