2009 Santiago Conference: Hemispheric Responses to Global Economic Instability

Keynote Speakers:

• Andrés Velasco, Minister of Finance, Chile
• Jim Flaherty, Minister of Finance, Canada
• Robert Zoellick, President, The World Bank
• José Arista Arbildo, Vice Minister of Finance, Peru
• Susan Segal, President and CEO, Americas Society/Council of the Americas

Panel: Investing in Chile and Latin America, Views from Business Leaders

• Luiz Marcelo Marrey Moncau, General Manager, Microsoft Chile
• Luis Montoya, President, Latin America Beverages, PepsiCo International
• Andrés Navarro, President and Founder, Sonda S.A.
• Harry “Red” Conger, President, Americas Division, Freeport McMoRan Copper & Gold Inc.

Summary

On July 2, public and private sector leaders gathered at AS/COA’s annual conference in Santiago to discuss hemispheric responses to the current global economic crisis. More than 300 guests listened to remarks by Andres Velasco, Jim Flaherty, and Robert Zoellick, who shared their perspectives on the global financial downturn. Organized in conjunction with Chile’s Ministry of Finance, the conference also examined Chile’s response to the global economic slump.

Minister Velasco: Chile’s Response to Global Financial Crisis

In his keynote speech, Finance Minister Andrés Velasco discussed the impact of the global economic crisis in Chile and the quick reaction by government officials. The downturn led to nearly a 15 percent drop in exports, low commodity prices, and credit at higher interest rates and with shorter repayment periods. Still, he said, the international community views Chile’s countercyclical policy and stimulus package—the world’s fifth largest—as an exemplary response. The country’s solid fiscal policy, low inflation, and a healthy financial system helped improve foreign investment in recent months. Yet, he admitted that "difficult times" will continue and that the Chilean economy will probably close the year with a slight contraction, despite a speedy recovery. "We will end the crisis in a very strong fiscal position," said Velasco, who forecasted a 2009 fiscal deficit close to 4 percent of GDP.

Panel: Investing in Chile and Latin America

Business representatives from PepsiCo, Microsoft, Freeport McMoRan, and Sonda S.A. gathered in a panel to discuss investment in Chile and the region from a local and international perspective. Contrary to past economic crises in the 1990s, the current economic meltdown has not originated in Latin America or other emerging markets, they said. Instead, it has its roots in the developed world, and in the United States in particular. The impact, however, has been felt globally.

Panelists agreed that Chile, along with other emerging countries, navigated through the crisis using a series of countercyclical policies and other measures. They asserted that, although flows have declined, markets indicate that countries such as Chile, Brazil, Colombia, and Peru could outperform many developed countries. Sonda’s Navarro favored the integration of economies and referred to cross investment as a pillar for Latin American businesses. Freeport McMoRan’s Red Conger, voiced his company’s long-term commitment to investing in Chile and Peru, but recommended waiting to see copper prices rise before further investing in the countries. “Right now we need to see more demand for our product,” said Conger. “We have a bright outlook for copper in general, but it’s longer term.”

Minister Flaherty: Canada and Hemispheric Integration

Canada’s Finance Minister Jim Flaherty outlined his country’s efforts to increase hemispheric integration. Flaherty cited his government’s initiatives to support multilateral institutions, including Ottawa’s proposal to boost the Inter-American Development Bank’s lending capacity by $4 billion—a 70 percent increase. Ottawa also plans to provide $10 billion to the International Monetary Fund for emergency access capital for emerging markets as well as debt relief for Latin American loans owed to Canada.

Flaherty also described how both Canada and Chile implemented countercyclical policies with success and promoted the maintenance of open markets by enacting free trade agreements. In his words, the Ottawa’s economy is strong: “[Canada’s] financial system was once dismissed as boring back when credit was flourishing. The global crisis has shown us that boring has its benefits… Canada has had no bank failures.” The minister concluded by asserting that Canada maintains a commitment to strengthening the global economy.

Vice Minister Arista: Countercyclical policies in Peru

Peru’s Vice Minister of Finance José Arista Arbildo discussed the strong economic health of his country and highlighted both Chile and Peru’s positive strategies in facing the global economic meltdown. He pointed out that Peru was the only country in the region that grew as much as 6.8 percent between 2002 and 2008 in year-on-year figures. The vice minister attributed this performance to private initiatives and savings from previous years. “We have a very good economic outlook for Peru in 2009,” he said. He noted that Peru’s main objectives include promoting new free trade agreements, strengthening the country’s integration with the world, and increasing fiscal stability and financial competitiveness.

World Bank President Robert Zoellick: “The U.S. remains unstable”

World Bank President Robert Zoellick began his speech with an analysis of unemployment worldwide and the post-crisis role of consumers. He stressed that the U.S. economy remains unstable because of the credit crunch, and proposed a boost to the banking system as was done in the 1980s, emphasizing the role of the private sector, and calling for cooperation with the public sector to solve current economic woes. Zoellick praised the economic measures taken by Chile’s political and monetary authorities.