Even as the economic implications of the Covid-19 pandemic lay bare the extent of the economic crisis that it is likely to leave behind for Latin America and the Caribbean (LAC), the Economic Commission for Latin America is mounting a lobby for an extensive reform of the international financial system designed to address the challenges associated with the debt burden and the various other economic deformities that the pandemic is likely to leave behind.
Addressing the recent Inter-American Dialogue Conference Call on the Coronavirus and its consequences for Latin America and the Caribbean, ECLAC Executive Secretary Alicia Bárcena asserted that the prevailing international financial system may well be no longer sufficiently robust to cope with the magnitude of the hemisphere’s economic woes.
So significant has the extent of the hemisphere’s debt problems become, Bárcena says, that it now has to assign 59 per cent of its exports of goods and services to the servicing of its external debt.
Asserting that the prevailing international financial system was no longer adequate to cope with the extent of the region’s crisis, Bárcena says that among the new issues needed to be addressed are the redistribution of Special Drawing Rights of the International Monetary Fund from developed countries to developing countries, and new initiatives from the multilateral organisations.
“Changes in the international financial architecture must include a multilateral sovereign debt restructuring mechanism to address commitments with private creditors, hand in hand with the creation of a multilateral agency that acts as a counterweight to the current oligopoly of risk ratings,” Bárcena contends.
Alluding to the “very complex situation” confronting the small island developing states (SIDS) in the region and the smaller countries of Central America, Bárcena said that a moratorium on debt payment could benefit the Caribbean countries.
“Profound changes and new forms of cooperation with middle-income countries are needed, which recognise the multi-dimensionality of development and avoid approaches based solely on per capita income,” the ECLAC Executive Secretary added.
And according to Bárcena, “We must also move towards more progressive taxation, just as the United States is doing. Orthodoxy is being questioned and it is necessary to go in that direction, as well as to combat tax evasion and avoidance and illicit financial flows. But for that we need a multilateral architecture, we cannot do it alone.”
