A transformative recovery in the wake of the COVID-19 pandemic requires a global covenant with full inclusion of middle-incomes countries since they are key actors of global development, Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), indicated today during the High-level Meeting on Middle-Income Countries, convened in New York by the President of the 75th session of the United Nations General Assembly, Volkan Bozkir.
The meeting, focused on the theme of “Fine-tuning the development system approach to address the needs of Middle-Income Countries,” was inaugurated by Volkan Bozkir; António Guterres, the UN Secretary-General; and Munir Akram, President of that organization’s Economic and Social Council (ECOSOC). A stocktaking segment was subsequently held with Lysa John, Secretary General of CIVICUS, moderating and which featured the following keynote speakers: Alicia Bárcena, Executive Secretary of ECLAC; Elliot Harris, Assistant Secretary-General for Economic Development at the UN Department of Economic and Social Affairs (DESA); and Ana Patricia Muñoz of the Southern Voice Network, and Executive Director of Grupo FARO.
In her presentation, ECLAC’s Executive Secretary indicated that per capita GDP should not be the single criteria for defining development levels and needs, and it cannot be used to exclude Middle-Income Countries (MICs) from concessional finance and trade preferences. In this sense, she stressed that Small Island Developing States (SIDS) are particularly vulnerable. “COVID does not distinguish between income levels, and nor should cooperation to overcome this crisis be guided by GDP criteria,” she emphasized.
Alicia Bárcena noted that MICs are key actors of global development since they account for more than 75% of the world’s population and around one third of global GDP. These countries – in which 62% of people live in poverty – attract 45% of investment, account for 30% of global exports, and are key actors in the implementation of the 2030 Agenda and its Sustainable Development Goals (SDGs). In addition, they represent 96% of the public debt of developing countries (excluding China and India), meaning that debt distress and potential default in middle-income countries could have significant repercussions in global financial markets.
She also explained that the economic and social impact of COVID-19 has significantly widened these countries’ financing gap. In that vein, she warned that Latin America and the Caribbean is the most indebted region in the developing world and has the highest debt service (equivalent to 59% of its exports of goods and services).
ECLAC’s highest authority affirmed that the capacity to mobilize external resources is limited and is not linked to per capita GDP, and that Official Development Assistance (ODA) is still important for many middle-income countries: for example, it represented 34% of the financial flows received by the Caribbean in 2019.
She also warned that illicit financial flows are at the root of many of the problems linked to mobilizing domestic resources. According to ECLAC’s calculations, Latin America and the Caribbean loses an estimated US$ 85 billion per year in outflows from the region, because of illicit financial flows arising from trade misinvoicing.
Alicia Bárcena stressed that cooperation and financing initiatives must include MICs, which comprise a great diversity of countries with dissimilar capacities and needs. She indicated that some key areas for achieving more inclusive cooperation and reducing structural gaps and asymmetries are: equitable access to vaccines, both for Least Developed Countries (LDCs) as well as MICs; multilateral financing and debt relief measures, which should be commensurate with the needs of all developing countries, including MICs; and enabling green industrialization through access to technology, investment and infrastructure.
“A transformative recovery requires a global covenant that is fully inclusive of MICs,” she underscored. “We need cooperation and strategic partnerships to achieve this.”
She explained that this goal can be achieved by putting the “graduations” of countries on hold and retaining ODA; adopting multidimensional approaches and new tools to classify levels of development in line with the 2030 Agenda for Sustainable Development; ensuring access to concessional development financing for MICs, especially for the smallest economies; extending the scope of special and differential treatment provisions availed through the multilateral trading system to MICs; supporting MICs in their industrialization process and diversification of their economies through concessional access to technologies; and implementing a new multilateral mechanism for debt restructuring and debt relief, along with an intergovernmental platform for tax issues.