March 19, 2007
HP-324

Remarks by Treasury Secretary Henry M. Paulson, Jr., to the Governors of the Inter-American Development bank
Guatemala City, Guatemala

Guatemala City, Guatemala – Muy buenas tardes. Thank you, President Moreno, for your invitation to address the Governors of the IDB – and thank you to the people and government of Guatemala for hosting this event. One of my family's favorite vacations was to Tikal – and my daughter has very pleasant memories of her four months living with a family in Quetzaltenango where she learned to speak Spanish. 

The nations of Latin America and the Caribbean have the capacity to become engines of growth, opportunity, and poverty reduction for their own citizens and throughout the region. And the United States is committed to supporting the people of this region in achieving these goals. President Bush made it clear during his recent visit that the United States stands with those who seek greater opportunity and with those leaders who are delivering it.

In recent years, many governments have enacted pro-growth policies – shored up public finances, reduced debt, and opened markets – and your economies are responding. Yet many people in the region do not feel the benefits of this progress. It is my goal to work with the IDB and regional leaders to ensure that more people in the Americas share in the benefits created by economic growth and trade opportunities, to help every nation reduce poverty and build a strong middle class.   

Moving the poor into the middle class through a thriving private sector is vital to the region's success. This kind of economic mobility is one of the core strengths of the United States, and it is both urgently needed and possible to achieve throughout this hemisphere. Access to capital is essential to reducing poverty. Whether it's a loan to start a business, grow a business, or buy a house, access to capital helps people acquire assets that give them a foothold in the economy – personal wealth they can leverage into greater prosperity and economic security.

In order to help the IDB meet this challenge we support President's Moreno's efforts to restructure the Bank, including placing high-quality professionals in the most senior levels of management based on a more merit-based system.  To be effective, the IDB cannot be all things to all people. It must focus on the people who need help the most. We see three priorities for the Bank as it undergoes realignment under President Moreno's leadership: regional integration, increasing financing for small and medium enterprises, and promoting infrastructure development.

Our first priority is to work together to promote these goals for the region: more opportunity and more prosperity for all people. The best ideas will come from the people who live here and work here.  

Our second priority is to create an environment that nourishes the growth of small and medium-sized businesses, which is vital to reducing poverty and inequality, and creating jobs and opportunity. Small businesses are engines of job creation in any economy. Yet in this region, it is estimated that only 10 percent of small businesses have access to financing from the formal financial sector.  

As President Bush announced earlier this month, the United States is developing an initiative to help both local and U.S. banks increase their lending to small businesses in the region and to do it on a large scale. We are working through U.S. agencies such as the Overseas Private Investment Corporation to share risk with banks willing to lend to these clients. And the start of the second Multilateral Investment Fund provides an excellent opportunity to partner with the IDB to build banks' capacity to do this kind of lending profitably. 

Our third priority is developing the region's infrastructure, which will produce tangible benefits for the people of Latin America, whether a farmer looking to increase sales of his produce or a mother trying to get her children to schools and doctors. Greater private sector investment can quicken the pace and expand the scope of infrastructure development. We are working to catalyze private sector investment by establishing a fund to reduce the upfront costs of identifying attractive projects. 

These three priorities – enhanced regional cooperation, more financing for small enterprises, and better infrastructure – are keys to reducing poverty and expanding prosperity in Latin America. We are pleased to work with the IDB to advance these goals. 

We also welcome the IDB's commitment to contribute to the biofuels initiative launched by President Bush and President Lula. This initiative will help countries reduce their dependence on imported oil, create jobs, and improve economic growth. 

And we applaud the Governors' agreement to cancel $3.4 billion of outstanding loans for the five poorest countries in the region and extend the benefits of concessional finance to an additional five low-income countries. This will free up substantial resources that can be used to improve and expand access to health care and education. 

Finally, we support the addition of China as an IDB member which will strengthen the IDB and make it more representative and reflective of the global economy. 

I look forward to continuing our dialogue in the months ahead. And I am pleased to extend an invitation to the Governors and management of the Bank for the Annual Meeting the U.S. will host next year.

In the meantime, let us work together to make progress on the issues I discussed today – progress that will help us reduce poverty, extend access to capital, spread opportunity to more people in the region, and contribute to the development of a middle class that will lead the way to a prosperous future for Latin America.  Muchas gracias.