Ilan Goldfajn, president of the IDB: “Society is increasingly impatient with inequalities”

At its annual summit, the Davos Forum analyzes the challenges of an increasingly fragmented and polarized world. Ilan Goldfajn, a 57-year-old Brazilian, president of the Inter-American Development Bank, points out in an interview in Switzerland a vision that he sees in the current circumstances as important challenges, but also opportunities. On the first front, he points out how “society is increasingly impatient with inequalities.” Secondly, the new geopolitical and economic environment represents a promising change for Latin America, which can be presented as part of the solution to global problems, whether as a supplier of essential resources for the green transition, as a food supplier, or as a headquarters. interesting in the reorganization of supply chains. “Before, Latin America needed the world. Now, the world also needs Latin America,” says Goldfajn, who was previously governor of the Central Bank of Brazil.

Ask. How do you see the Latin American economic situation and, especially, the sustainability of the debt in this period of high interest rates with uncertainties about the rate of decline?

Answer. I see a change, a possibility of a turning point in the relationship of Latin America and the Caribbean with the world. For many decades, the lens of Latin America was the lens of necessity. I need you to finance me, I need you to manage my debt, I need you to come invest here, I need you to help me. Latin America needed the world. But for the first time I believe that there is a slightly more symmetrical relationship. I think the world needs Latin America too, in this case. I say this because of the new geopolitics and the new global economy.

Q. How does this new environment drive that possibility of change?

R. I give you examples. We live in a world that increasingly needs clean energy and to advance in the energy transition. It is not something abstract, it is something very pragmatic. Europe needs to replace its energy matrix in the next 20 years. There are 20-year contracts that are being made between Germany and Chile, or between Germany and Uruguay. In another sense, a country like Brazil, whose energy matrix is ​​almost 90% clean, can export green energy. We are also in a world of food insecurity. South America is a great food exporter. Mexico benefits from a more fragmented world. If it does it well, if it takes advantage of the opportunity, Latin America can be configured as a solution to global problems. This has important economic consequences, because more investments are coming. In the last two, three years, Latin America is surprising and growing a little more. Not much more, but a little more. What's going on? It could be this new circumstance. And that is linked to the debt, because if that is true, we have a little more sustainability. Is that guaranteed? No. There are many things to do. We must have stability, regulation, rule of law. For example, now we have crime and security problems. It is something that is not compatible with a period of boom investment. It must be resolved. But I do see that there is an opportunity where the world is and where Latin America is.

Q. Argentina's new president is pushing plans for a draconian cut in spending and public services. Do you fear that this could cause strong social destabilization in a country with a large section of the population in a fragile situation?

R. For many years Argentina has been asked to have monetary stability, which means inflationary stability and this stability is related to fiscal stability. In some way it is said that economic stability has its source somewhat in the way the government and society organize themselves to finance their expenses and how they manage their deficits. In the case we are seeing today, there is a desire to get out of a strong deficit to have a surplus. So, let's say, it is a necessary condition that I believe must be supported. We at the IDB seek to support the government in making this adjustment as efficient as possible. That it be more progressive and not regressive, that provides protection for the population. That is important because the population has suffered a lot in recent years. With this inflation, poverty has increased and those who are least able to protect themselves end up suffering the impact. So, we have an opportunity here for a fiscal change, but we also have the challenge of making it sustainable and that is what we want to contribute to, protecting the social aspect, protecting the most vulnerable so that it is more sustainable.

Q. You are trying to carry out reforms at the IDB, achieve greater efficiency. How complicated is the task by having to develop it in a very polarized, turbulent political environment, with a strong ideological charge and suffering pragmatism?

R. I joined the IDB a little over a year ago and from the beginning I said that I sought to promote dialogue in a polarized world, a non-ideological vision, a vision that has the pragmatic objective of improving people's lives. What does it mean to improve people's lives? It means that we are more concerned with the end result of what we do. This is important because many times we focus on the means and not the results. For example, about how much we are lending. But in the end the important thing is to know if what we are doing has an impact. How many people have electricity? How many people have sanitation? How many people came out of poverty? This is a cultural change and it is much more difficult. Because you have to focus on several indicators, which is much more difficult than saying that you lent 20,000 million last year and 25,000 the next year. This occurs in a world in which I believe that more needs to be done, in which I believe that society is increasingly tired, impatient with inequalities, with poverty.

Q. The world has long witnessed requests for changes in the system of international financial institutions. There are many who criticize that the West prevents the change of an architecture that favors it and that does not correspond to modern times. Do you think the West is slowing down change in this area too much?

R. It seems to me that everyone is asking for changes from the richest countries, to the countries of the north, to the south. What you have to think about is how to coordinate so that the changes come out in a direction that benefits everyone. There are public goods that belong to everyone. Poverty, inequality, climate change, are issues of general interest in which we can find a bridge and common points. The problem is having the resources, that is where the difficulty lies. I don't see so much a contradiction between East and West, but rather a challenge between what everyone wants and what everyone can afford.

Q. He says he doesn't see a contradiction between East and West. And between North and South?

R. I believe that there are always phases of different visions and narratives. It is something that is not new. But I previously pointed out the common interest in these public goods, and it is on those that multilaterals should focus. We are not going to be in the world of divisions, where there is no consensus or where there are disputes, we will be active for dialogue, to generate public goods, which by their nature require a minimum of consensus.

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