| | |  Business News | November 2008 
President Felipe Calderón Proposes Actions for Coping with World Crisis at G-20 Summit
 Presidencia de la República
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| | In dealing with a crisis of this scope, we cannot act alone, declares Mexican mandate. | | |
The agreements made by the leaders are an excellent starting point for dealing with the prevailing economic situation, he declared.
Washington D.C. - In order to cope with the situation of the global economy, at the G-20 Summit, President Felipe Calderón proposed containing the financial crisis, adopting contracyclical economic policies in a coordinated fashion, reforming national and international financial institutions and preventing the new era of protectionism.
During his participation in the Summit, he declared that the crisis did not originate in developing countries. On the contrary, he declared, the global economy’s dynamism has only been sustained by the vitality of emerging economies.
In a press statement at the end of the meeting, the President explained that the Declaration and Plan of Action signed by the G-20 leaders contain actions to stabilize financial markets and reactivate economic activity, in addition to establishing a reform plan to correct the financial systems and redefine the architecture of international financial organizations.
The Plan of Action, he explained, consists of approximately 50 measures that must be implemented over the next 100 days and in the medium term. He also declared that before April 30 2009, the G-20 leaders will meet up again to follow up the implementation of these agreements.
“We obviously cannot act in an isolated to deal with a crisis of this scope, which requires a firm, timely, global response, stated President Calderón.
He considered that these agreements, the Declaration and the Plan of Action are an excellent starting point, not only for coping with the prevailing economic situations but also for redesigning and transforming the international financial system in the medium and long term.
In this respect, President Felipe Calderón stated that “Many measures that developed countries are going to begin to take to force the capitalization of their banking system were implemented by Mexico in the past.”
He pointed out that in recent years, Mexico took solid preventive measures to capitalize banks, which averted a financial crisis and prevented the collapse of the world’s major corporations from affecting the Mexican system.
In this respect, he said, “Naturally, what some people call moving onto the Basle III stage, these preventive measures will be reviewed again, but the fact that there has not be a run on the financial system, the fact that credit has not come to an abrupt halt in Mexico, the fact that government has not had to intervene to use enormous sums of money to capitalize, as is being done in the United States, for example, means that these preventive measures had largely been implemented.”
Washington D.C. Press Statement by Mexican President Felipe Calderón
Good afternoon, members of the media.
I am going to give you a very brief summary of the results of the G-20 Meeting, but since I understand you did not have acces to the audio or video of the meting, I am going to repeat the speech I gave at one of the meetings. There were several speeches, copies of which will be handed out later.
I said:
Heads of State and Government.
Friends:
At the beginning of the 21st century, we are experiencing a global crisis and the only way to deal with it is through global solutions. There are three main causes of the crisis:
First. A long period of growing global economic imbalances that led to excess liquidity, a greater appetite for assets and increasingly great risk taking on the part of investors.
Second. Lax regulation and supervision of the financial system, based on the false premise of self-regulation.
And third. The limited capacity of international financial organizations to effective supervise the health of the world financial system.
It is important to stress that the crisis did not originate in developing countries. On the contrary, the dynamism of the global economy has been sustained by the vitality of the emerging economies.
It is crucial to implement determined, immediate actions to be able to break the negative spiral of uncertainty, and in this respect, Mexico proposes four main actions.
First. Containing the financial crisis.
Second. Adopting contracyclical economic policies in a coordinated fashion.
Third. Reforming national and international financial institutions.
And fourth. Preventing a new era of protectionism.
Regarding the first measure, I insist that we need to take measures that will guarantee the containment of the financial crisis and minimize its impact on the world economy, thereby preventing its spread.
Developed nations could develop the processes and measures implemented to stabilize their financial markets and prevent financial policies for harming other economies by awarding broad or indiscriminate government guarantees to all kinds of financial liabilities.
Second. All countries, particularly developed countries, must adopt wide-reaching fiscal policies in a coordinated fashion to obtain the best possible synergies. This would offset the fall in consumption and private investment that has recently been observed.
The best way to overcome the crisis is to maintain our economic growth. In Mexico, we are using all available instruments to implement contra-cyclical policies, at least in the fiscal and financial spheres.
We have used the Development Bank to offset the reduction of available external funds for our economy and we have provided sufficient liquidity for the financial system and the firms that require this.
We have boosted public spending, especially on infrastructure projects and reinforced the network of protection and social security to protect the income of the families with least from deteriorating and prevent poverty from increasing as a result of the crisis.
At the same time, we have maintained health public finances and a macroeconomic balance, as a result of the reforms of both the government employees' pension system and taxes.
Third, we have proposed a reform of national and international financial systems. Both developed and emerging countries must carefully review the regulation of financial systems. Discussion forums must be more inclusive, because they are almost exclusively dominated by developed nations.
That is why Mexico proposes including emerging countries as members of the Financial Stability Forum and eventually having the International Monetary Fund resume its leadership of this debate, in view of its universal membership.
It also proposes undertaking additional reforms of the governing boards of multilateral financial institutions, given the increasing importance of emerging nations in the global economy.
It also proposes reinforcing the International Monetary Fund to enable it to undertake an impartial review of the international financial system, in order to identify any systemic problem it may have in a timely fashion, not only in developing but also in developed countries.
We also propose greater effectiveness and flexibility in financial institutions, such as the World Bank or regional development banks, such as the Inter-American Bank, since there is an urgent need for greater speed and flexibility in providing loans for developing countries, due to the sudden reduction in the flow of private credits.
Fourth. Lastly, we must prevent the resurgence of protectionism at any cost. It is essential for our countries to promote confidence in the international commercial system and prevent tariff increases. It is also essential for us to promote the completion of the Doha Round Negotiations, within the framework of the World Trade Organization.
Ladies and Gentlemen:
The invisible hand failed and it is now up to the visible hand of the state to correct inequalities and imbalances and especially to reactivate the economy through contra-cyclical policies that will prevent recession.
This does not means that the market economy is dead or that the global economy is over. Now, more than ever, we need more market and more global economy, more trade and more global investment.
There is also obviously a global need for faster actions and more efficient regulation with better aligned economic incentives.
Coordinated actions must not only resolve technical needs to reactivate the economy but people must also see sufficiently clear leadership in their representatives to feel that their is a firm hand at the helm in the midst of the storm. This will enable countries and economic actors to recover their confidence in themselves and in the future because distrust is one of the main causes that has paralyzed our economies.
Restoring faith in the financial system and the capacity for response of governments and multinational institutions will reduce panic and enable us to return to the path of stability and growth.
What the world requires of its leaders at this moment is to make the leap from words to actions, which is why Mexico has embraced this effort and urges other countries to continue working to achieve a global response to a global crisis.
I will now move on to the summary of the declaration which was eventually negotiated, voted on and approved within the framework of this G-20 Summit.
It is worth noting that the meeting was convened in the midst of a severe global economic crisis, whose solution requires the coordinated action of all countries.
As leaders, we reflected on the causes that led to this situation and the immediate measures we are taking to cope with it.
Most of our discussions focused on the actions we must adopt to pull through this crisis. The declaration and plan of action that were approved include the following actions:
Firstly: Stabilize financial markets and reactivate economic activity, in addition to establishing a reform plan to correct financial systems and redefine the architecture of international financial organizations.
We decided to boost international coordination within the sphere of macroeconomic policies as a means of reversing the recessive trends of the world economy.
We also pointed out the important of offsetting the effects of the crisis on financial markets and the real economy of developed and emerging countries.
We therefore underlined the need to adopt special measures to enable the economies of emerging countries to continue to have access to the resources of international financing funds, to the extent that they need.
We decided to review the regulatory and monitoring framework governing financial institutions in order to make them more transparent and to strengthen accountability mechanisms to achieve greater control that will prevent future crises without reducing the dynamism of these markets.
A fundamental agreement I would like to stress is the commitment to reform the institutions that resulted from Bretton Woods, such as the Financial Stability Forum, so that they will adequately reflect the new realities of the world economy, particularly the specific importance of emerging countries such as Mexico.
We leaders acknowledged the fact that any solution to this crisis must be based on economic liberalization and free trade. We therefore agreed on a 12-month moratorium on the imposition of new barriers to trade and investment and pledged to redouble efforts to conclude the Doha Round negotiations before the end of the year.
Lastly, in order to achieve these goals, we adopted a plan of action consisting of approximately 50 key measures that must be implemented over the next few days and in the medium term.
In order to follow up the implementation of these agreements, we decided that the G-20 leaders must meet up again before April 30 2009.
As a final reflection on the Summit, I can say that it is quite clear that we cannot act in an isolated fashion in the face of a crisis of this size which requires a firm, timely, global response.
This juncture revealed the need to act in a coordinated fashion and showed the need for more determined, effective action on the part of the state, as we said at the meeting.
These agreements, the Declaration and the Plan of Action are, in my view, an excellent starting point, not only to cope with the prevailing economic situations but also to redesign and transform the international financial system in the medium and long term. |
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