At the Economic Commission for Latin America and the Caribbean (ECLAC), authorities and experts discussed the options for implementing active fiscal policies and countercyclical arrangements in the region to protect public investment, social progress and boost growth – particularly at a time of global uncertainty and a slowdown of growth and trade.
Finance Ministers, fiscal policymakers, officials from international agencies and academics from several countries are attending the XXVIII Regional Seminar on Fiscal Policy, which has been organized in Santiago, Chile, by ECLAC with the support of the International Monetary Fund (IMF), the World Bank, the Inter-American Development Bank (IDB) and the Organisation for Economic Co-operation and Development (OECD). It is also sponsored by the Spanish Development Agency (AECID).
The seminar was opened by Alicia Bárcena, Executive Secretary of ECLAC, and Rodrigo Valdés, Finance Minister of Chile. Ms. Bárcena stated that public finances in several of the region’s countries had experienced significant effects from the slowdown and worsening terms of trade, which had given rise to considerable fiscal adjustments.
Intelligent and selective fiscal adjustments should protect social programmes to combat poverty and encourage investment that boosts growth, according to Ms. Bárcena. She stated that, in a context of fiscal austerity and lower income from natural resources or commodities, it is essential to mobilize domestic resources and engage in tax reform. Fiscal policy should be working for inclusive growth and not just stability, particularly strengthening monitoring of tax evasion and progressive taxation.
Rodrigo Valdés declared that fiscal policy is a crucial part of economic policy, and that the region’s countries are finding it difficult to rise to new challenges resulting from falling raw material prices and the economic slowdown.
He said economic policy was being formulated with much uncertainty. In terms of the tax reform in Chile and other countries, he explained that the challenge was to fund ongoing expenditure with higher ongoing revenues – and that required structural change.
He went on to say that Chile increased its fiscal deficit because it had the means to do so, combined with low public borrowing. The country increased tax revenues thanks to fiscal reform, thereby partly offsetting the reduction in non-tax income.
Director of the Western Hemisphere Department of the International Monetary Fund (IMF), Alejandro Werner, said it was essential to rethink and reshape fiscal policy pillars in the region, as well as focusing on the effects of tax uncertainty on investment within countries. He said that moving towards simpler tax regimes would boost investment in the long term.
IDB Vice-President for Sectors and Knowledge, Santiago Levy, also highlighted the relevance of fiscal matters in all countries and agreed that the region was in the midst of complex times. He said that the traffic lights are on amber (or red in some countries), which means that rapid and decisive action is needed.
Head of the OECD Latin American and Caribbean Unit, Ángel Melguizo, emphasized that the region is in a complex social and political moment in time when institutions are weak and citizens are dissatisfied with public policy. He said that we need to reclaim fiscal policy as a development policy.
At the first day of the seminar, the ECLAC Executive Secretary presented the document Fiscal Panorama of Latin America and the Caribbean 2016, in which ECLAC calls for tax evasion and avoidance to be tackled, as well as calling for a rethink of fiscal policy in times of recession as tax revenues are the cornerstone of the basic financing of a modern State.
According to the presentation by Alicia Bárcena, the 2030 Agenda for Sustainable Development (which was adopted in September by United Nations Member States) demands a review of the role of fiscal policy in the region so that it serves sustainable and inclusive growth – rather than just stability. She also highlighted the need to form fiscal compacts with new coalitions between the State, market and society to establish a tax culture and improve the provision of public goods.
The first session of the seminar was also attended by the Minister of Planning of Costa Rica, Olga María Sánchez, Deputy Minister of Finances and Prices of Cuba, Meisi Bolaños, and Under-Secretary of the National Treasury of the Finance Ministry of Brazil, William Baghdassarian.
The fiscal seminar will be held until Thursday 17 March with presentations from authorities and experts on recent tax reforms, the quality of public finances and fiscal consolidation and decentralization.
