FROM THE OFFICE OF PUBLIC AFFAIRS October 15, 2002PO-3531 Remarks by Kenneth W. Dam Deputy Secretary Department of the Treasury United States of America delivered to the Miami Herald’s Sixth Annual Conference on the Americas Miami Florida October 15, 2002 As we gather this morning, one-third of the people of We have a lot of work to do to realize President Bush’s vision of an American hemisphere where each and every human being has the opportunity to realize his or her full potential. I am here today to tell you about the concrete actions that President Bush and his economic team are taking to promote growth throughout the Economic Growth in the You can see this especially in Because our economies are tied together, economic growth in the We cut taxes at exactly the right time, providing important stimulus to the economy just as it was emerging from the economic slowdown we inherited. Our trade agenda is once again energized. Securing passage of Trade Promotion Authority from Congress for the first time in nearly a decade enabled us to renew the Andean Trade Preferences Act and will help us conclude a Free Trade Agreement with After the exposure of a few, but startling, corporate accounting scandals, President Bush acted decisively to restore investor confidence in our stock market. After our citizens were attacked and our economy threatened, President Bush led an international coalition to fight terrorism and protect our people and our economies. The President’s strong leadership is paying off. We have now completed a fourth consecutive quarter of growth. We believe that in the quarter just ended the Economic Growth in the Many countries, however, are not growing at their full potential. I’d like to talk about some of the economies in the region facing particular challenges. There is reason to be encouraged about As Secretary O’Neill has said, we want With economic uncertainty in the region, our assistance in helping meet sustainable economic objectives is more important than ever. Our top priority for the countries of the Hemisphere is to generate growth and raise productivity through macroeconomic stability, open markets and private sector initiatives. Sustained economic growth raises living standards and reinforces political and social stability. The key to sustained economic growth is increasing productivity. We know that productivity growth is hampered if a country’s most critical asset – its people – is unable to take advantage of technological progress. The higher income countries of the Nor can you ignore the fact that if people’s basic needs for food, shelter and clean water are not met, growth is severely curtailed. That is why Secretary O’Neill has made access to clean water a development priority. Governments can best foster growth by creating an attractive investment climate of economic and financial stability. Sound monetary policies, coupled with a stable exchange rate, disciplined fiscal policies and sustainable debt levels, inspire confidence in financial markets and encourage capital investment. Economic openness and competition spur the exchange of technology and ideas. Investing in health and education allows individuals to take advantage of new opportunities. Transparency within the public and private sectors, and enforcement of the rule of law are critical to business-led growth. These policies generate a sound investment climate, which paves the way for private sector led growth. President Bush is committed to supporting the poorest countries, and helping them climb out of debt. In July, World Bank donor countries agreed to deliver a significant portion of International Development Association resources -- 18-21% -- in the form of grants rather than loans. Grants avoid burdening needy countries with unnecessary debt. And will therefore be targeted towards HIV/AIDS programs, natural disaster reconstruction, and those countries that are debt vulnerable, facing post-conflict situations, or extremely poor. We also believe in helping countries that help themselves. In March, President Bush announced a new Compact for Development. The fundamental belief behind this compact is mutual accountability – a hard link between aid and policy performance. A key component of the Compact is the Millennium Challenge Account. This account increases aid to the poorest good performing countries over the next three years to $5 billion in 2006, which is roughly a 50% add-on to our current core assistance. This is new money that will supplement existing programs, not displace them. We will continue in addition a core assistance budget of $10-11 billion, to provide development and humanitarian assistance to a broader group of countries. The role of the private sector. Furthermore, we know that growth ultimately comes from investing in people and encouraging entrepreneurship in the private sector. Governments do not have all the answers. Countries, businesses and individuals must work together to identify the areas where progress is needed. A good example of how we countries, businesses and individuals can work together is the Partnership for Prosperity, launched by President Bush and President Fox in September of 2001. The Partnership brings the public and private sectors of both countries together to improve access to capital, share best practices and technical expertise, build capacity for future growth, and link institutions with shared goals. Through a series of conferences, round-table discussions, and technical missions, the Partnership has identified over 30 specific projects to build out these themes. Leadership for many of the projects resides completely in the hands of the private sector. To cite just one example, private sector experts in housing finance are working closely with Mexican authorities to help deepen the primary and secondary mortgage markets in The Partnership for Prosperity also includes several projects designed to lower the cost of remittances. Remittances are important not just to the Mexican economy, but to many economies in Latin American and the At least one study that shows that children whose families receive remittances stay in school longer than children of families who do not receive remittances. But you don’t need academic research to see that remittances make a difference. $23 billion is a lot of money put directly in the hands of people who need it most to spend as they see fit. Remittances are not free, however. It costs money to send money. A recent McKinsey article reports that the cost can be as much as 20%. An immigrant sending $250 home, therefore, can pay up to $50 in fees and exchange rate conversion costs. Reducing these fees by 50% can have a real world impact for people who depend on the remittances. Accordingly, a key component of the Partnership for Prosperity is to reduce the cost of sending money from the We seek to reduce the cost of remittances in three ways. First, we work to encourage competition and innovation. Increasingly, we see banks and credit unions offering competitive remittance products and we applaud them. Since President Bush and President Fox launched the Partnership for Prosperity, we have seen Citibank, Bank of America, Wells Fargo, and others launch new, low-priced ways to send money to Also, we try to protect competition and innovation from over-regulation. We have taken care, for example, to implement terrorist financing regulations such as customer identification requirements so as to allow financial services companies to continue providing services to immigrants and to offer additional options for sending money. Second, we work to increase financial education. Competition brings additional options. But options don’t matter if people don’t know about them. To increase financial literacy, Secretary O’Neill established the Treasury’s first Office of Financial Education, headed by Deputy Assistant Secretary Judy Chapa. The Treasurer of the Third, we are working to improve the systems through which remittances are made. The Federal Reserve Bank is working with As we reduce the costs, we increase the amount of money that gets home, increasing the amount of money available to finance the purchase of consumer durables, the construction and improvement of homes, and the expansion of small businesses. With more than $23 billion dollars in remittances flowing to
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