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In an interview with France 24, the regional vice president of the International Finance Corporation, Alfonso García Mora, assured that the rise in interest rates that most of the world’s central banks have been applying to combat inflation is generating tension in the economies, but in turn, it is an opportunity for the private sector to undertake key projects that the public sector is unable to develop.
For months, the world’s economic authorities have been warning about the end of low interest rates. Not surprisingly, in less than a year, the United States Federal Reserve has brought its intervention rate from just over 0% to almost 5%. And there are no indications that a possible pause.
For the International Finance Corporation (IFC), this shift in monetary policy that seeks to combat inflation -and which has also been applied in Latin America- is generating tension in the economies, but at the same time it is an opportunity for the private sector to undertake key projects that the public sector is unable to develop.
Alfonso García Mora, vice president for Europe, Latin America and the Caribbean of the corporation, assured that “we had come from more than ten years with very low interest rates, we were bad used to it. We could have internalized that this was the normal situation and it wasn’t.”
A higher cost of financing generated “excessive indebtedness in some countries and in some sectors,” he added.
The situation, according to the executive, could represent an opportunity for the private sector: “with very high public deficit balances, it is very difficult for governments to carry out a large part of the investment projects that economies require and therefore need to that the private sector come in and help to co-finance a large part of these projects”.
The lessons of the pandemic
For the International Labor Organization, at the worst moment of the Covid-19 pandemic, Latin America and the Caribbean lost some 49 million jobs, most of which have already been recovered.
“We learned to work differently and be productive differently, and those are lessons. What you have to do is internalize these lessons”, expressed García Mora.
However, he stressed that “Latin America is still far from where it should be in terms of digitization. There is a high percentage of the population that still does not have access to broadband, that does not have access to digital media and that limits their ability to access education, financial services or health”.
