José Manuel Salazar-Xirinachs (69, San José) is the new Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC). He was Regional Director of the International Labor Organization (ILO) until 2018 and held the position of Costa Rica’s Ministry of Foreign Trade in the 1990s. On Monday in Buenos Aires he will attend the most important biennial meeting of the UN office he chairs, where he will present a development proposal based on pillars such as productivity, an active climate agenda and the fight against inequality. In this interview with EL PAÍS, the first he has given since taking office on September 1, he assures that inflation will start to fall “sometime in 2023”. He also says ECLAC is not fundamentally opposed to extractivism as a source of resources: “The message is: ‘Let’s keep going, but let’s do it well’.
Questions; How does ECLAC see the Latin American economy doing?
Answer: We say that there is a cascade of crises. Already experiencing a slow-motion crisis with the lowest growth in its history since 2014, Latin America is about to close a lost decade. Then the pandemic hit us and of course the inflationary pressure from the war in Ukraine. And then we have the education, health, jobs and climate crisis, which is long-term. The reading is that there has hardly been a situation as complex as it is now, and that is quite a stress test for governments and societies.
P What is ECLAC’s message in this scenario?
R That this is not a time for gradual change, but for change that is as transformative as possible. Because reality demands it and because there are very badly affected sections of the population with high levels of unemployment and poverty. We’re not telling governments what to do, we’re telling them the dilemmas they face. We must understand that this is an extremely difficult situation and that an even more complex year 2023 lies ahead. It’s time to work on the gaps that have worsened and worsened.
P What are the key issues that the region needs to address?
R The first has to do with productivity and productive development, where governments can do more. The second is inequality, which has increased with the pandemic and is at the heart of the social pact. Countries with lower inequality grow faster. Third, social policies to move towards welfare states. We haven’t finished building them yet, they’re cut off.
P There is an old debate about the role of states in the region on this point. Countries like Argentina with free health and education services face chronic tax cuts. Those who, like Chile, keep their accounts in order thanks to a subsidiarity state have high rates of social conflict. Where is the balance point?
R They are political dilemmas. We talk about universalizing coverage rights, but that costs GDP points, and then the finance minister asks where they come from. The pandemic, by exacerbating all social situations, has created a conversation that can be positive. There is now an acknowledgment of the priorities and at the same time that the tax burden is low. We must seek the resources that circumstances require without destroying growth. One of the ways to get out of the budget gap is growth. One recommendation is to strive for economic reactivation and to complement this with tax reform.
P Is the climate issue on the list of priorities?
R The issue of climate change, mitigation and adaptation is a huge agenda that ECLAC is promoting. Investments are required because these things cannot be solved without investments. Another key issue is migration, as many countries are not creating the jobs they need and this is an exclusion factor. Another classic ECLAC topic is economic integration. If we previously talked about integration in terms of trade in goods, we now need to talk about trade in services.
P Back to the climate agenda: does ECLAC advocate a gradual departure from the extractivist model, as defended by the new governments of Chile and Colombia, for example?
R ECLAC has always said that production needs to be diversified, and that means building new growth engines and no longer depending on the extractive industries. But that doesn’t mean closing them, we have to keep growing in that area too. It’s not bad, although there is a paradigm shift in terms of environmental sustainability, with opportunities for cleaner mining that introduce circular economy principles. The message is: “Let’s move on, but let’s do it right”.
P How does ECLAC view the problem of inflation?
R There are signs that it will start to decline sometime in 2023. Much of this inflation was a supply shock and disruption to value chains. If there is no black swan, we will at least hit the inflation ceiling. With what, and the central banks and the Federal Reserve are already observing that [de EE UU], should this escalation in monetary policy rates come to an end. It won’t happen between now and Christmas, but it will happen between first and second semester.
P Anti-inflationary policies also tend to be recessionary…
R That was a good part of the conversation this year. The central banks’ argument that there is still plenty of liquidity and that inflation expectations need to be anchored is all correct. But the question is when should we stop. Our growth forecast for 2023 is lower than for 2022. Latin America will grow by 3.2% this year and by 1.4% next year. Our trading partners will also grow less: the United States will grow by only 1.2% next year; the eurozone will increase from 3.1% this year to 0.9% in 2023.
ECLAC Executive Secretary Jose Manuel Salazar-Xirinachs poses at the Commission’s offices in Buenos Aires, October 22, 2022. Silvina Frydlewsky (Silvina Frydlewsky)
P. ECLAC has bucked the general trend, particularly in the 1990s when its development discourse clashed with the ultra-liberal premises of the Washington Consensus. In the early 2000s, however, it seemed to go with the trend. Where are they?
R I would say the world is now getting closer to what ECLAC said, such as B. the importance of a broader welfare state, a big environmental boost, and more productive development to grow more. The pandemic has got everyone talking about it. A very important issue is the quality of institutions, because without good institutions, countries are unable to make good public policies.
P Are you optimistic about the future of Latin America?
R Part of my excitement about this position at Cepal is that I think it can have a very positive impact on this crisis. I believe many countries will improve.