Closure of the XXXV Regional Seminar on Fiscal Policy

Closing remarks by José Manuel Salazar-Xirinachs, Executive Secretary of ECLAC

XXXV Regional Seminar on Fiscal Policy

Wednesday May 17, 2023

It has been highly opportune to meet once again to exchange experiences on the management and challenges of fiscal policy in these complex times, within the framework of the space provided by this thirty-fifth (XXXV) Regional Seminar on Fiscal Policy

I reiterate our gratitude to our ally, the Spanish Cooperation, for its support of this seminar many years ago.

We also thank the international organizations that have collaborated with us now as on other occasions: the Inter-American Development Bank (IDB), the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF).

We start from recognizing several realities on which we have had a broad agreement:

• That the global and regional macroeconomic environment is complex and that this makes it difficult to conduct macroeconomic policy with delicate balances and decisions.
• That a majority of countries have seen their debt rise to high levels
• That the fiscal space is reduced, also in a majority of countries
• That financing costs have risen

And unfortunately, that these restrictions on growth and development are occurring in the context of not only a short-term economic slowdown, but also an endemic problem of mediocre growth in the region since at least 2014, which makes it difficult for us to finance so many needs and that therefore we must see the promotion of growth as an integral part of fiscal policies, not as an external datum.

At ECLAC, we have been advocating the promotion of a fiscal policy that helps boost growth and sustainable development in the region. This requires updating the fiscal pacts, based on a public finance sustainability framework focused simultaneously on strengthening revenues and a better use of resources on the spending side.

I would like to recap the main moments that we have had in this Seminar.

• On Monday afternoon we had a session of ministerial authorities in which the proposal for a regional platform for tax cooperation promoted by Colombia, Chile and Brazil was presented, with the support of ECLAC as the Technical Secretariat. It was very important to listen to the positions of the countries to strengthen the design of this platform. From ECLAC we will give all possible support to achieve its success.
• On Tuesday we started with the presentation of the report Public debt and restrictions for development in Latin America and the Caribbean, and we saw that the increase in debt service, especially due to the higher interest paid, forces countries to allocate more and more public resources to guarantee the sustainability of the debt, which implies sacrifices in public investment and social spending to the detriment of inclusive, sustained and sustainable growth. For this reason, from the United Nations and from ECLAC we are working on options to expand financing and transform the international architecture of sovereign debt, areas of the international agenda that are key to promoting inclusive and sustainable development and to be able to advance in the SDGs.
• In the session of international organizations, we analyzed different options that the countries of the region could consider to strengthen tax collection and the progressivity of the tax structure, as well as to improve the quality of public spending in order to improve its effectiveness.
• The importance of strengthening public revenues was evidenced both in the Fiscal Panorama of Latin America and the Caribbean 2023 and in the Tax Statistics in Latin America and the Caribbean 2023. In the corresponding session yesterday afternoon we saw that the average tax collection for the general government region, it recovered its pre-pandemic level in 2021, reaching 21.7% of GDP, but even so, the region is well below the OECD level of 34.1% of GDP.
• Yesterday afternoon, we also talked about new sources of sustainable and environmentally friendly financing, such as the bond markets linked to climate, social and governance (ESG) objectives. It became clear yesterday that it is fundamental that the debt management strategy comprehensively includes new sources of financing to face climate change and promote sustainable growth through thematic bonds (green/social/sustainable).
• This morning we have had excellent sessions on the topics of income and expenses.
• Regarding income, we had a very rich discussion on the need to consider personal income tax reforms, including a review of legal marginal rates, tax bases, the treatment of various types of income, as well as strengthening the taxation of people with high income and large assets. I really liked the excellent and very useful point made by Héctor Villarreal on the 6 basic discussions around the challenges and needs of public revenue in a long-term horizon.
• And in the last session, we have analyzed the importance of improvements on the side of public spending from a strategic perspective to improve its effectiveness in reducing social gaps in poverty, education, health, and to boost the growth of the economy. We hear about the large and very unfortunate gaps, such as those pointed out by Leonardo Garnier in education, such as the fact that the region invests one sixth per student of what the OECD countries invest.

In short, we have covered a lot of ground on issues that are key both for navigating the complexity of the short term and for fiscal policy to contribute to the necessary transformations in development models in the longer term, including both growth aspects and taking into account account demographic changes and the imperative need to promote inclusion and reduce inequality, so corrosive of social pacts.

So, I want to thank all the speakers who gave us such quality information and ideas in their interventions, the authorities and specialists who accompanied us, and in general all the participants in this Regional Seminar on Fiscal Policy who have contributed to enrich this dialogue.

This event would not be possible without the efforts of many ECLAC colleagues. In this sense, I want to thank the directors and directors who moderated the sessions, the Conference Unit, the technical team in charge of audio, Zoom and live transmission, as well as the team of interpreters and our Publications Division .

A very special thanks of course to all the colleagues in the Economic Development Division who coordinated the preparation of documents and organized this seminar, in particular its director, Daniel Titelman and his team consisting of Noel Pérez Benítez, Michael Hanni, Ivonne González, Sandra Galaz, Sol Etcheberry, Mariana González, Tania Ulloa and Patricia Weng.

Thank you very much to all of you.

We look forward to seeing you next year at the next Seminar.

And for those who travel we wish you a good return home.