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Wednesday, April 8, 2009

My Wish List - Summit Of The Americas

CIA political map of the Americas in an equal-...Image via Wikipedia

If you've followed this blog, you may know I rarely mention Jamaica. That's deliberate. So I'm not commenting on the budget or the Cabinet reshuffle.

However, I will comment on something that Jamaica is involved in - and that is a grouping of countries called the Americas. There are many commonalities - geography is an obvious one, dependence on tourism and remittances are others, for example. But there are many differences - language is one, cultures are another, for example.

There's a big meeting coming up next week - April 17-19 2009 - called the Summit of the Americas. There's a theme...but here's what I think they should get done if we are to accelerate this global recovery.

First, please do not spend the time blaming the US for this mess. They know, we know, the world knows..... Let's focus on solutions. We have no time to waste.

Second, please do not spend the time working on things that are really unlikely to happen. For example, lobbying for offshore banking after the G20 communique and declarations is really not the most productive use of time. Save that for another forum. Petition the G20 if you like. Take it up at the next IFI meeting. Anything, but right now at this time, this one is unlikely to go very far. France and Germany threatened no deal with the G20 over this issue (it was one of them).

Third, please focus on a few tangible quick wins. Yes, you can do like the G20 and pledge the world of cooperation, but come out with actual measures - and money and an implementation timetable - for real things to make real differences in the region

Fourth, here are three suggestions for tangible things that I think are win-win for everyone. And here's the best part, President Obama already said he's supportive of them. See his campaign document: A New Partnership For The Americas.

1) Find some way to get the remittance flows to return to at least the level it was before the collapse in September 2008 - even if it is a temporary measure. My two cents? To ease the tensions with Mexico, the US would benefit greatly from the stability that the remittance flows facilitate. This is a real problem with a practical solution. Come to the table with some measures to encourage remittance flows. For example, explore - just explore - facilitating the ease of transfer of funds between countries. And for example, facilitate and allow job programs that allow remittances to flow. Job creation for all people will generate much stability in the region and significantly reduce what the IFIs need to provide on a recurring basis. Translation - that $1T pledged by the G20 can stretch further.

Want to know what Obama's document said when he was Candidate Obama:

"Tap the Power of Remittances:
Obama will work with international organizations, particularly the Inter- American Development Bank, to leverage the financial resources immigrants send to native countries. At more than $50 billion a year, remittances dwarf U.S. foreign assistance. Obama will work to foster a new spirit of partnership and cooperation to maximize the impact of those remittances on social and economic development across the hemisphere." See that "tap the power", "maximize the impact of those remittances on social and economic development across the hemisphere"

2) Pull out all the stops for micro and small business development - special fund or funds, special loan programs, whatever it takes - all the bells and whistles. Job creation in their own counties solves a myriad of problems - poverty alleviation, social stability, crime reduction, growth, wealth creation so people can buy imports, etc. etc. etc. This is a win-win for everyone and with the exchange rates, a little hard currency from the larger developed members goes a long way.

Want to know what Obama's document said when he was candidate Obama:

"A Fund for Small and Medium Enterprises (SMEs): It is neither sustainable nor appropriate for donor countries to focus solely on reducing poverty in the developing world. The challenge is to build the capacity of communities and countries in the developing world to generate wealth on their own and in a way that is sustainable over time. Building on the growing evidence that microfinance is an effective tool to facilitate this growth, an Obama administration will provide initial capital for an SME Fund. Administered through the Overseas Private Investment Corporation, an independent U.S. government agency, the government will provide capital matched by a larger portion from the private sector. The SME Fund will be designed to provide seed capital and technical assistance to catalyze the establishment of job-creating small and medium enterprises, and to build the capacity of entrepreneurs to translate their ideas into viable businesses, including through the creation of regional “SME Universities” supported by America’s business schools." See that..." A Fund for Small and Medium Enterprises", "Building on the growing evidence that microfinance is an effective tool to facilitate this growth..", "seed capital"..... etc etc.

3) Use the brainpower in this region to pipe in and push for IMF reform. I doubt any other region has the depth of experience with IMF programs and its impact like the Americas. Use that experience to guide what "not to do". The IMF just got all the money from the G20 to try to fix the world. Everyone knows the IMF needs reform - including the IMF. Everyone knows the IMF needs to reform its "terms and conditions". In order for the IMF money to really work to fix this global economic mess we are in, the region needs to take an interest and active role in the reform.

Want to know what Obama's document said as Candidate Obama:

"Lead Efforts to Reform the IMF and the World Bank: The International Monetary Fund (IMF) and the World Bank have contributed in important ways to an era of tremendous openness and global growth since 1945, but both institutions face crises of governance and are in need of modernization and reform. Its limits were apparent during Argentina’s economic struggles in the late 1990s and early part of this decade. As president, Barack Obama will lead an effort in the G-8 to achieve a new consensus on the missions of the IMF and the World Bank, while at the same time securing necessary changes in how both institutions are governed
to reflect the increasing influence of middle-income countries." See that..."both institutions face crisis of governance and are in need of modernization of reform" etc. etc.

Let me be clear - if President Obama and the Americas are willing to make sweeping changes on Cuba, support for education, and cooperation for crime and security, and debt relief and energy measures etc. etc. - all those things in that document - I would be the happiest person on earth. But I live in the real world, and we have been talking about some of these things for a long time. Most of these are difficult to get agreement on; and even more difficult to get a realistic implementable plan for.

FURTHER, if we do not get an urgent recovery in remittances, get some serious urgent dedicated and sustainable funding and focus on micro-enterprises and small businesses, and urgently reform the IFIs to ensure that we can access the funds in ways that do not cause severe social dislocation, then frankly, none of these other things are likely to happen in an sustainable manner.

So, I am going to lower my own expectations and limit my wish list to what I have listed above.

I personally would be satisfied if the members could come out of this Summit with at least tangible, realistic, practical and implementable programs for whatever the leaders decide. And seriously, we need it like....yesterday!

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Thursday, April 2, 2009

So Now What G20?

G20 Demo London 034 G20 Summit, London, G20 Lo...Image by zongo69 via Flickr

Let's give credit where credit is due. The G20 met and agreed. The alternative - not meeting, or meeting and not agreeing - is too horrible to contemplate. So let's give thanks for what we have.

Surprisingly, they have said a lot. Really, I've had some experience with communiques and they are usually very vague because its the only way to get all the countries to agree. And how much is a lot? Well, 1 statement and 2 appendices with details. Shocker! Here are the links and they are well worth reading. And if you have followed this for years like me, some of this stuff will make your eyes open very wide because I never thought I'd see this day. So:

All in all, a good start. Seriously. Lots of recognition of problems, lots of promises of things to be done, some specificity, commitments to fight poverty, create and save jobs etc. Sounds - I repeat, sounds - perfect. BUT, see that image of the standoff. Let's not think we have now magically gotten order from the disorder. Evidently they "know" and that's a lot. But the test is really the collective "will". Because nothing has actually happened yet other than the agreement. People have to do things now - things have to happen, money has to flow, rules have to be made and enforced. We needed the agreement ages ago; and now that we have it, we need the action eons before that. There is no time to waste!

What's the bottom line?
  • The IMF gets a ton of money to try to save the world. Other institutions too but the IMF gets the bulk of it. Question though? Access, access, access? Terms and conditions? The terms and conditions contributed to this mess and can contribute to instability. The IMF is famous for "structural adjustment" which you might as well call "social pain". Social pain right now is NOT helpful. Unemployment is rising, incomes are falling and savings are lost. People do not need to be "adjusted" right about now. So this money can be really helpful, only if it can be accessed and it is made available in a way that helps.
  • If the financial sector was a wild animal, the leaders want it tamed. So countries have "agreed" to lots of sweeping measures - oversight for credit ratings agencies (that alone can save the world if done properly), supervision for some - yes, unfortunately some - hedge funds, restrictions for tax havens, accounting reform, a body that warns us if this is going to happen again, measures for executive compensation.....read the separate declaration because it's pretty good "whats". You know where this can all fall down - HOW? Yes, how do you enforce these things? And yes, how do you prevent domestic legislation for overruling or ignoring this - please note the US Congress relaxed mark to market accounting the DAY these lovely agreements were released? And yes, how do you ensure that the intent of all these measures results in a functional financial system? Because frankly, there are easier ways - people may not like them but banking will work again. I have already noted a number of qualifying statements which are just big loopholes if you ask me. But as I said, getting 20 countries to agree does require some vagueness. Leaders should be reminded that whatever they say and agree to, the genius and will of the "engineers" must never be underestimated. They will engineer ways around whatever they do not want to do and they are not concerned with the matters that keep world leaders up at night like avoiding social unrest, preventing poverty etc. So, I take these documents as good intentions on the parts of leaders. And I wait in breathless anticipation for the details. And I hope that people are really realistic in making up those details, and that domestic legislatures are supportive of the intentions that their leaders have committed to. This is NOT a political football - the financial system must work, or we - the whole world - are in big trouble.
The documents are worth reading....but the action steps are really what I am waiting for. The proof of the pudding is in the eating. Nice looking pudding.....but we haven't tasted it yet. The G20 had a great talk...but now it's time to have an even better walk.

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Reasoning The Reasons by Deika Morrison is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.