IDB President Luis Alberto Moreno on the Summit of the Americas and Hemispheric Integration

Speakers:

• Luis Alberto Moreno, President, Inter-American Development Bank
• Susan Segal, President and CEO, Americas Society/Council of the Americas (interviewer)

AS/COA President Susan Segal interviewed Luis Alberto Moreno, president of the Inter-American Development Bank, to open the 45th Conference on the Americas. Moreno, a former ambassador of Colombia to the U.S., opened by giving his assessment of the recent 7th Summit of the Americas in Panama City. “This is a new chapter in the relations of the Americas,” he said, noting that there was a markedly different tone from previous summits. He credited U.S. President Barack Obama for “taking something that seemed impossible”—the opening of relations between the U.S. and Cuba—and seeing it through.

The IDB head said remarked that the U.S. economy still is the main engine for growth in the global economy. He also noted that, as countries work to integrate global supply chains, he hopes that instead of it being about “Made in Mexico” or “Made in Peru,” countries will instead be able to say “Made in the Americas.”

Still, the biggest challenge for policymakers in Latin America, Moreno said, is economic in nature, noting that growth in the hemisphere has been dropping for each of the last four years. The key to addressing this slowdown, Moreno said, will be through structural reforms. But, “these are reforms that don’t pay immediately,” he said, stressing that growth over time can be exponential. If we look back 20 years to when the first Summit of the Americas was held, he added, we would not have imagined the developments in digital and social capital. He forecast that, as we envision the next 20 years, “what you’ll see is an explosion of innovation” unlike any ever seen, particularly in individuals’ capacity to increase their personal productivity. “The notion of the digital divide is going to disappear,” he said, especially with increased internet access across the continent as the “highway” for such development. He noted that the biggest gap for companies currently is in information and technology managers.

Moreno said that he expects smartphones, and especially app development, will play a big role in growth and innovation in the region. He noted that smartphone penetration in the region has risen from 30 to 52 percent in just the last three years, and that, by the next Summit, he expects it to be 70 percent.

He also underscored the importance of mentoring entrepreneurs. “A sense of cooperation allows people to learn,” he said. He highlighted a program in Peru in which the IDB partnered with Goldman Sachs to work with more than 700 local women to gain access to bank financing, as well as the IDB’s Ciudad Mujer program in El Salvador, which acts as a one-stop-shop for women looking for everything from refuge from domestic violence to microfinancing to start their own business. “We all know the data,” he said, regarding the positive effects of women’s financial inclusion, “This is something we’ve got to be ahead of all the time.”

Looking beyond the hemisphere, the growth of investment from China in the region shouldn’t be a surprise, Moreno said, considering the rate of real-wage growth in Asia. But, he noted, countries still have to have a physical presence in manufacturing to be able to be a part of the global supply chain, which is what Asian companies are currently looking to do.

On the question of how to encourage private investment in Latin America, Moreno said that integration is the missing link. “No matter how many trade agreements come through, it’s the integration of mid-sized companies,” such as Mexican firms buying mid-sized U.S. firms, “that is really going to drive growth,” he said.

Responding to a question from the ambassador from Trinidad and Tobago to the U.S. on energy and climate change, Moreno said that, in the next 20 years, Latin America will need to increase its energy production by 40 percent, to an estimated cost of $300 million—about half of which will be infrastructure build-out. The typical home in the Caribbean, he said, pays about four times as much for energy as a home in the United States, and about half of hotels’ expenses in the region are energy-related. One major issue, he said, is that about 2 percent of these countries’ GDP is paid out just on subsidies for energy. Right now, these countries might be benefitting from lower oil prices, but “it’s not going to stay that way forever.”