Opening speech at the X Ministerial Forum for Development in Latin America and the Caribbean: “Partnerships for the reduction of structural inequalities under the framework of the SDGs"
Opening speech at the X Ministerial Forum for Development in Latin America and the Caribbean
As prepared for delivery
Madam Vice President,
Members of delegations of Governments of Latin America and the Caribbean, Vice Presidents, Ministers, Vice Ministers
Members of the Government of Panama,
Representatives of diplomatic bodies accredited in the country,
Colleagues of the UN System,
Colleagues from the media, private sector, academia and friends
I am delighted to join you at this Tenth Ministerial Forum, focusing on partnerships to address inequalities, and to do so in collaboration with our colleagues from ECLAC.
Let me acknowledge the leadership of the Government of Panama, and the strong commitment to sustainable development that characterizes the Governments of Latin America and the Caribbean.
We are at the three-year mark of the adoption of the ambitious 2030 Agenda for Sustainable Development. Since 2015, and due to the great leadership of governments and people, significant progress has been made in translating the agenda into action. However, we are keenly aware that while great opportunities lie ahead, so do tremendous challenges.
A challenging Context: Recovering growth, but increased volatility
The United Nations estimates that last year the world economy expanded by over 3 per cent, the highest rate since 2011. This acceleration is the result of steady growth in developed economies, the end of recessions in several large developing economies, and stability in financial market conditions. World trade growth accelerated in 2017, reflecting a widespread revival of demand. In many parts of the world, the investment environment improved- an essential condition for the increase in investment needed to deliver rapid progress towards the SDGs. Global economic growth is expected to remain solid in 2018 and 2019.
However, whereas short-term prospects for the world economy, and for Latin America, have strengthened, medium-term risks have also increased. These include elevated levels of trade policy uncertainty; increased uncertainty regarding the pace of monetary policy adjustment in advanced economies; high and increasing levels of debt; elevated and rising valuations across a number of financial assets; and an undercurrent of geopolitical tensions with the potential to trigger regional and global consequences. Thus, growth is accompanied by higher volatility.
The Latin American region is not beyond those risks. The recent macroeconomic events in Argentina illustrate the complexity of the current context, including risks of contagion in emerging markets, from Turkey to the Southern Cone. The region as a whole is exposed to uncertainties in global trade and financial markets, a polarized electoral cycle and an uptick in social violence and population displacement.
Fortunately, We Have a Common Global Vision for 2030
Our point of departure for achieving the 2030 Agenda is fundamentally one of optimism. The agenda, one of the few politically legitimized narratives of global progress, is embraced by governments across the political spectrum. Think about where we were twenty years ago –in the aftermath of the Asian crisis-- and where we are today in terms of poverty and inequality reduction, environmental awareness, gender achievements and more broadly, social well-being. Particularly in Latin America and the Caribbean, economic growth, socially inclusive policies and demographic change all conspired to lift 72 million people out of poverty and over 94 million people into the middle classes during this period.
Thus, there are reasons to be optimistic. All the achievements mentioned above were not only the result of a positive macroeconomic cycle and the boom in commodities markets, but also the result of purposeful policy action and political consensus. Innovation by public and private actors, as well as higher private and social investment, should and will address the next challenges in the pursuit of sustainable development. Progress, we all know, will not be linear and, frequently, each additional unit of social, economic and environmental progress will be increasingly harder to achieve.
In order to succeed, concrete challenges must be identified and tackled
Indeed, difficult problems are still to be tackled. We have learned in the past decades that the most pressing development challenges have many dimensions. Gaps are not effectively addressed one by one, but rather by dealing with the underlying causes that result in overlapping deprivations for certain groups. We are also keenly aware that the gains from the economic growth experienced during that past decades have not been shared evenly within countries.
What are some of these structural challenges to be addressed in the pursuit of a successful sustainable development agenda? Allow me to mention a few examples:
1. Inequality weakens the inclusiveness of growth and reduces political legitimacy. At the global level, inequality has increased. The gap between the world’s richest and poorest people has been widening such that between 1980 and 2016, the top 1 per cent richest individuals saw twice as much growth in their incomes as the bottom 50 per cent. Indeed, as recent economic literature has shown, while economic growth has been good for the poor, it has been particularly good for the very rich.
But what about Latin America? Let us recall also that, in 1803, Alexandre von Humboldt defined Latin America as the land of inequalities in his classic Political Essays on the Kingdom of the New Spain, first translated into English in 1811. More than two centuries later, despite enormous social and economic progress, this characteristic still defines many aspects of the region’s economic and political dimensions, and prevents growth from benefitting those at the bottom.
2. As countries achieve important social gains, extreme poverty becomes more difficult to tackle. Globally, extreme poverty stands at 783 million –including 28 million people living with less than $1.90/day in the region. According to recent estimates, by 2030 close to 140 nations could have eradicated extreme poverty, and only 8 countries in Latin America and the Caribbean would remain above the 3% extreme poverty threshold. Such optimistic scenario, however, assumes that policies are continuously effective and does not consider the degree of non-linearity and complexity involved in the new generation of anti-poverty strategies.
3. Technological advancement in this fourth industrial revolution changes the nature of labor markets in ways that demand innovative policy responses. We are in the early years of a fourth industrial revolution, which is impacting societies in ways that we do not fully grasp. The truth is we still do not know what a mature information economy looks like— and it will be some time before we do. In the meantime, countries will need to prepare for the transformative impact of automation, artificial intelligence and the new digital economies of tomorrow.
4. The dynamics of a changing climate require simultaneously a move towards low-carbon societies and adaptation to an inevitably warmer and more stressed climate. Latin America and the Caribbean has witness first-hand how hurricanes and earthquakes set economies and societies back, with thousands of families forced to re-build their lives after every event. The latest data speaks for itself: in 2017 the hurricane season in the Caribbean was the costliest in decades; over 40 million people were affected by floods in South Asia; and drought drove nearly 900,000 people from their homes in Somalia. Meanwhile, also in 2017, global energy demand grew by 2.1 percent, and carbon emissions rose for the first time since 2014. The resilience agenda is no longer an add-on to the development agenda. It is a full-fledged dimension of any viable development agenda for the future.
5. Horizontal inequalities have negative economic impact and weaken the social fabric. As an important example, the most recent Gender Gap report presented at the World Economic Forum, estimates it would take 217 years to close the gender gap around the world at the current rate of progress. In Latin and the Caribbean, the speed at which the gap narrows will depend on improving economic autonomy for women and enhancing female labor force participation, which will also feedback into higher economic productivity and growth. Additionally, gender policies must ensure equal political representation and stopping violence against women.
6. Distributional tensions, exclusion, and weak rule of law have increased the level of potential and actual violence in society. The nature of conflict over recent years has laid bare the development dimensions of conflict and fragility. Globally, the number of forcibly displaced people jumped from 42.7 million in 2007 to 68.5 million by the end of 2017. This is the highest rate of displacement since the Second World War. About 58% are internally displaced, the remaining 42% are either refugees or asylum seekers escaping violence.
These challenges are all inter-connected. They move like a jigsaw puzzle. And they are one of the driving forces that led to the SDG and Paris Climate Change Agreements. While hard and complex, the achievement of the 2030 Agenda is within our reach.
Innovative Policy must be built on Two Main Principles: Leaving no one behind and tackling exclusion
Patterns of exclusion are at the core of vicious cycles of ineffective policies and poor economic and social outcomes. Exclusion is the mechanism through which the links between an individual and the rest of society are weakened, and their access resources and their capabilities are thwarted.
Inequality, in its multiple facets, is indeed one manifestation of exclusion. When processes systematically leave people out –politically, economically, socially, it results in the unequal accumulation of income and assets, unequal access to labour markets, and an uneven response of the political system to those at the bottom of the socioeconomic ladder.
In the past decades Latin America and the Caribbean has been successful in reducing inequality, particularly income inequality, which decreased at almost one percentage point per year between 2003 and 2010. This was particularly impressive in a period in which income inequality increased in almost every other region of the world. This decline is partly explained by improvements in labour income, access to social protection and a demographic dividend from more youth joining the labour force.
However, after 2010 inequality reduction stagnated in the region. Increases in educational attainment have failed to translate into improved productivity and better wages. More investment in social protection programmes helped those which it targeted to rise above the poverty line, and stay there, but did little to improve the lives of other marginalized groups. Systemic discrimination continued to prevent too many from participating in society in a meaningful way.
Entrenched inequalities will not be reduced unless purposely tackled. A continued reduction of inequality in the region is going to require us to look deeper into the societal norms and mechanisms that result in exclusionary processes. To realize our commitment to leave no one behind, we need to assist governments precisely in understanding the processes that hamper access to certain rights, resources and capabilities as well as how certain policies or interventions could modify these processes.
The good news is that we have learnt from a decade of work on gender quotas in parliament, from recognizing the collective rights of indigenous peoples and afro-descendants, and from confronting group-based discrimination with anti-discrimination laws and policies that exclusions can soften. We have learnt that laws and policies are only as good as the incentives and institutions behind them. Effective institutions are required to enable the policy process that can lead to inclusion.
• For a very relevant example of addressing exclusions and advancing focalized public policies, let me briefly acknowledge the Indigenous Peoples’ Development Plan established by the Government of Panama. Considering the multidimensional nature of complex problems, this plan defines three axes for action: a Political/Judicial pillar that aims at strengthening traditional structures and authorities by consolidating dialogues between State institutions and society; an Economic pillar seeking to boost social and economic indicators while ensuring environmental protection; and a Social Pillar to improve the well-being and living conditions of indigenous people through improve education, culture, health, living standards and infrastructure in indigenous territories, according to each territory’s plan.
• In a similar line of work, we are currently supporting the Government of Guatemala to define participatory early warning systems with indigenous populations living in the surroundings of Fuego Volcano. Its recent eruption on June 3rd, 2018, left 1.7 million affected people, 12 thousand evacuated, 4 thousand accommodated in 17 temporary shelters, 113 deceased, 332 missing, and 29 badly injured.
We must also look at the large development challenges in the region and tap the opportunities within them to build inclusive societies. The fourth industrial revolution, for example, has the potential to enable extraordinary innovation for sustainable development. It could lead towards greener economies that help raise productivity and move the region towards middle income societies, without the burden to the environment that usually accompanies these transitions. If accompanied by well designed, flexible and coherent social protection systems, it can also help transition workers from low productivity to higher productivity employment, while protecting those at risk – for instance, lower-skilled workers likely to be displaced by automation, part-time and self-employed workers without access to formal social security, and older workers and retirees without access to savings or pensions.
Some example where we are building on the opportunities provided by technology and the fourth industrial revolution in Latin America and the Caribbean include:
• Commodity platforms that bring together and coordinate actions of commodity stakeholders- including small producers, buyers, distributors, retailers and exporters- behind a common vision of productivity and sustainability. Green commodity platforms in the region include the pineapple sector in Costa Rica, soy and beef production in Paraguay, coffee in Peru, cacao in the Dominican Republic among others. Ecuador, for example, is designing a blockchain model that promotes the inclusion of small farmers in cocoa and tea value chains, by making their activities visible and revealing the location, possession and condition of an asset at any point in time.
• Innovative training centers that boosting women’s labour participation by training vulnerable women in IT professions, equipping them with critical life skills, and placing them in leading tech jobs across industries.
• Printing 3D prosthetics of hands and forearmes in Honduras with biomechanic devices that facilitate the autonomy and labour participation of returned migrants with mutilations and other young people with disabilities.
Governments, societies and the United Nations need to come together to achieve the 2030 Agenda
The 2030 Agenda provides a comprehensive framework to address some of the most difficult challenges faced by countries today. None of these can be addressed on a piecemeal basis. Governments need to partner with civil society, academia, the private sector, and the United Nations to develop a common offer to achieve their national objectives. A whole of society approach enables countries to tackle the most pressing challenges -financing, climate change and exclusions- by providing the foundation for consensus and the means for inclusive participation.
The region, for example, is at the forefront of innovating for equal and efficient access to justice.
• Argentina is working with vulnerable populations to improve access to justice. In their pilot, "Deaf Without Violence", they are working to ensure that deaf women victims of gender-based violence, as well as for their daughters and sons, have immediate access to health services and to judicial mechanisms. They are also working with elderly populations to co-designing mechanisms that facilitate reporting of violence and abuse.
• In Brazil, where the average time to reach sentencing is up to 11 months in the Superior Court of Justice, we are testing a prototype on the use of Artificial Intelligence to resolve the first phase of the appeals process. This innovation results in cost reduction, increased efficiency and increasing the procedural processing speed and the consequent reduction of the congestion rate and transforming through technological education offered by court professionals.
Financing is perhaps one of the most pressing areas where partnerships are necessary. Countries are committed to the implementation of the 2030 Agenda and the SDGs, but are requesting support to put in place the appropriate financing frameworks to deliver. This implies mobilizing more domestic resources, advancing progressive fiscal policies, expanding international concessional public finance, and creating incentives and policies that align private investment decisions with the SDGs. They are also interested in exploring innovative new financing modalities.
It is encouraging to see a rise in impact investing and other sustainable and ‘ethical’ finance initiatives. Global green bonds saw a record US$163 billion issued in 2017, with more growth expected. People in the private sector and the investor world are beginning to look at the SDGs as a real opportunity. There is an opportunity to both grow the value of assets under ESG standards, while moving these assets from a do-no harm approach to a positive engagement approach.
However, investing with environmental and social factors in mind is still too marginal. As recommended by the Financing for Development: Progress and Prospects 2018 Report, it is critical that the incentives of both public and private actors are aligned with long-term sustainable development. Without a long-term investment horizon, certain risks, such as those from climate change, will not be incorporated into decision-making.
Also, there is a need for integrated national financing strategies that provide long-term vision beyond short-term political cycles to inform policies, plans and project pipelines.
Public, private and blended finance are all important for SDG investments. However, national policy priorities, as well as specific country and project characteristics, should determine which financing model is best suited for specific investments, and which actors are best positioned to manage risks and provide services equitably and cost-effectively.
UNDP is engaging with companies and the financial industry to support the proactive engagement of private capital for the SDGs and to invest in high impact areas. To facilitate this, UNDP is testing ideas and has established impact investment platforms and promoted Islamic finance for measurable environmental and social results.
As climate change risks will continue to grow in 2018 and beyond, partnerships around more ambitious climate action are also urgently needed. We have a number of successful examples to build on. For instance, together with development partners, regional organizations, and the private sector, we have been working to make our development support better risk-informed, in line with the 2030 Agenda, the UN Plan of Action on Disaster Risk Reduction and Resilience, and the World Humanitarian Summit Commitments to Action.
Analysis has shown that annual investments of $6 billion in disaster risk reduction could generate benefits of up to $360 billion.
Finally, to properly address exclusions and inequalities, we need to first know who and where those people further left behind are.
In this context, and with new and disaggregated data being critical to SDG achievement, we need to embrace the data revolution and partnerships with big and intelligent data. With today’s fast technological progress and vast amount of data that typically characterize it, the data revolution can certainly help us plug data gaps.
There are many examples in the region of using data in creative ways:
• Georeferenced management information systems in the region, for example, are allowing for flexible and rapid responses of social protection systems to address the needs of specific populations. Honduras, through the CENISS , is using a multi-level geo-reference and frequently updated panel of data, that covers over 4 million people, to coordinate interventions and ensure maximum impact of social policies. The Dominican Republic runs a similar unique registry of beneficiaries, SIUBEN. Through this tool, they have developed a multidimensional vulnerability index that helps households prepare for and cope with the effects of natural phenomena.
• Open Government Practices in Mexico are improving the quality of public policies, strengthening local opportunities for dialogue and co-creation of solutions to the principal challenges of communities. It is also helping boost skills and empower local citizens—especially young women and men—to become tech-savvy, especially for open government and sustainable development purposes, through a fellowship training programme.
The use of data and technology for finance, the “fintech” revolution, unleashes private sector investments in a country’s sustainable development path. The disruption in practices in banking, investment and insurance by the use of data to attend underserved population is offering new ways to democratize and make affordable the participation into the financial system, including those excluded in remote and rural areas. The Inter-American Development Bank (IDB) has identified 703 fintech startups in Latin America. They have mobilized over US$186 million in venture capital.
Examples in the region include:
• Cumplo, a Chilean crowdlending online platform that applies up to 15 per cent less than the prevailing interest rates of banks with a portfolio valued at around US$200 million.
• Ualá is an Argentinian mobile-based banking service, offering a prepaid MasterCard to clients without a bank account.
• In the Caribbean, Grenada is developing a ‘BlueNet’ crowdfunding platform to crowdsource finance for small businesses that have a ‘blue economy’ dimension.
• And in Haiti, we are helping structure a Development Impact Bond to eliminate cholera transmissions, while attracting investments to the country and enforcing rigorous mechanisms of accountability.
Concluding message of optimism and call for innovation and partnerships.
To conclude, I would like to reiterate three key ideas:
First, despite challenges to the global economy, there are reasons to be optimistic- the world stands behind the ambitious 2030 Agenda, and is finding innovative ways to implement policies towards sustainable development.
Second, progress towards sustainable development will require policies that purposely endeavor to leave no one behind. Latin America can jump towards sustainable development if exclusionary processes that leave people out are addressed.
Finally, let me close by reinforcing that the achievement of the SDGs is ultimately about learning to manage complexity against a backdrop of a rapidly changing development context. The region is already leading in finding innovative solutions to some of the most pressing development challenges. Let’s not shy away from continuing to innovate. I encourage you to use this forum to incubate partnerships and ideas that can have a real impact in improving the lives of the most vulnerable populations in the region.