Friday, August 12, 2011

Mantega: 'The region's economy is in good shape, and what works well, doesn't change'

Interview by Pablo Jiménez -

translation by Melanie Henderson

Prior to the meeting between UNASUR economy ministers, Economy Minister, Amado Boudou and his Brazilian pair, Guido Mantega, met for dinner in Puerto Madero on Thursday night; subsequently serving as a small summit between the directors of the two most important economies of the region.

There, ministers were able to finalize guidelines for what was to be addressed by the UNASUR summit and to pave the way for setting measures to enable the bloc to avoid financial fluctuations, caused by a potential the international crisis.

Among the announcements made – as previously anticipated by Ambito Financiero- a boost of the anti-crisis fund (which exists incase of attacks against countries of the region), to increase from US$900 to almost 20 billion, as well as the application of entry restrictions on imports coming from south-east Asia.

In addition, the use of currencies besides the dollar in the region will be evaluated, alongside the promotion of business within the area.

Inbetween provoletas, asado and wine from Mendoza, both economy heads spoke exclusively with ambito.com about how the region is prepared to face the international financial and economic crises.

Furthermore, Boudou and Mantega highlighted the team work in place, between local economies as well as the politics of debt reduction, something key to being able to get through the international crisis.

Where does the region stand, facing the crisis?

Amado Boudou: A lot of work has been done in the region over recent years, including implementing new policies. The policies were aimed at development and infrastructure; two elements which had fallen behind in Argentina and other South American countries, as well as debt reduction.

With the growth of our countries, debt has been reduced and remained considerably low in terms of the GDP. What is happening in the world, as far as I am concerned, is basically an outright debt crisis. Today, the countries that are oversaturated in debt are the leading economies. This forces us to pay particular attention to the international status; making it more important for the economic ministers and the heads of South America’s Central Banks to meet here, in Buenos Aires.

Would you consider the region to be protected?

Guido Mantega: The region is better prepared than others, because we do not have debt problems and compensatory to that fact; we have more power than the more developed countries. That is the fundamental difference between us. We were able to come out of the 2008 crisis, because our tax accounts were in better condition, as well as our economic activity and commodities, which was important. Now it is the same.

The crisis will not hit as hard as it did in 2008, however we remain prepared, not only for a potential crisis, moreover, what to do to overcome a potential crisis. One of the most important things we can do is to cooperate and work together between nations of the region.

How would you evaluate the relationship with Brazil?

Amado Boudou: Brazil is the economic head of this region and for us it imperative for us to maintain them as our principal business partner. Fortunately, with the Kirchner’s, Lula, Dilma and Cristina, we have achieved a synchronicity between us. This year, when the cap on agriculture prices was being put forward at the G-20, we were able to stop ourselves and defend our producers, which worked out well. We are convinced we will achieve more local business, and be able to enforce measures which will reinforce the region.

Which measures are to be suggested in the UNASUR meeting in order to shield the area from the crisis?

Amado Boudou: What sets us apart from others is that we do not need to make any grand gestures; we need to further develop our policies, pay attention, and tread carefully.

What is the key to not being affected by the crisis?

Amado Boudou: A key point to avoid suffering the crisis is the continuation of commerce between countries within the region. I think that Argentina and Brazil’s experiences in the world of motor industry to be very important. These experiences could be imitated by other countries. Others include strengthening the local currency, looking for coordinative financial measures, be them from the reserves or from the Latin American Development Bank (CAF). Also, we have to work hard within the Inter-American Development Bank (IDB), because the capitalization we voted in last year has been left behind.

Guido Mantega: Amado (Boudou) brought about a very important example of the extensive business relationship between Argentina and Brazil, especially within the motor industry. Today we have additional industry, whereby we import, export - and this year we are going to reach a commercial flow of 40 billion dollars, which is not a small affair. We are growing, so what we need to do now obtain perfection within this growth.

How is perfection obtained?

Guido Mantega: We are part of a huge market that is very pungent. Demand increases and the public needs money to buy. In the US this does not occur, nor in the EU. We need to unite as nations and bring together other Latin American countries which are still left a little distant. We want those who want to form part of a large market, and for it to be with better integration.

We can overcome a crisis and have a different way of dealing with things, but we do need to perfect commercial agreements and bring in Peru, Colombia and Chile, who are a little distant, but want to work together to create a protective financial method, also because it is a period of volatility, and one of capital flows that come and go.

What will the methods be?

Guido Mantega: For example, such as those financial protection methods used by Asian countries. It’s true; we do have the IMF which today is thankfully more flexible, amongst others, to the work that Amado and I implement. We do need to have our own institutions and Latin American institutions in place, which would be able to meet the financial needs we have.

There are some institutions already in place, such as the Latin American Reserve Fund (FLAR), which could be backed, the CAF to finance different projects. We are increasing the CAF’s capital. Brazil has the Development Bank of Brazil (BNDES), which is financing some projects outside the country, projects of integration. I believe we are making good progress, as in recent years we have constructed results which, before, did not exist.

This progress was the creation of the governments in place over the past eight years. It is important that we continue moving in that direction. The regional economy is working well, and what works well does not change, and of that we should maintain.