Remarks at the Pathways High-Level Panel Discussion

Hillary Rodham Clinton
Secretary of State
Ministry of Foreign Affairs
Santo Domingo, Dominican Republic
October 5, 2011

Panel Speakers:
United Nations ECLAC Executive Secretary Alicia Barcena
Organization of American States Secretary General Jose Miguel Insulza
International Development Bank Vice President Steven Puig

Moderator: Juan Carlos Lopez, CNN

MR. LOPEZ: (Via interpreter) Good afternoon, my name is Juan Carlos Lopez from CNN en Espanol and it is an honor to join you in this meeting of Pathways to Prosperity. For this conversation, very distinguished guests to discuss the significance of this meeting and what we should expect from the future. I would like to begin by introducing our panel members. We are fine tuning the audio assistance, but if you could be seated, please, we will begin with our conversation.

They do not necessarily need to be introduced, but I’ll do it anyway. I have in my left the Honorable Hillary Clinton, Secretary of State – thank you very much, Madam Clinton, for joining us – and the Secretary General of the Organization of American States, Mr. Insulza, as well as Ms. Alicia Barcena, executive director for the Economic Mission for Latin America, and the Caribbean, and the vice president of the Inter-American Development Bank, Steven Puig. And he is the only Dominican who is a member of our panel.

Good afternoon. We are discussing about Pathways to Prosperity in the Americas. And the question is: What does this mean, and how does this translate to those who are seeking a better standard of living? I want to give each of you the opportunity to explain so that the people out there can understand the significance. We will have this 30-minute discussion. I will be asking questions in both Spanish and English. Our distinguished guests will respond. Our distinguished guest, Secretary Clinton, will respond in English. All the other speakers will respond in Spanish. And this will be a 30-minute conversation.

I’d like to begin by giving you the opportunity to discuss something that we’ve already mentioned: social inclusion. What does this mean? It has a very nice ring to it, but a lot of people will ask: What does this mean, especially to me? Honorable Secretary.

SECRETARY CLINTON: Well, Juan Carlos, what it means, for those of us gathered here for the Pathways to Prosperity is that we want to create more economic opportunity that is pervasive throughout every society, so that more people have a chance to start businesses, to enter the formal economy, to grow businesses, to have a chance to improve their incomes and their futures for themselves and their families. And as I said earlier, it’s exciting how much Latin America has grown in the last decade. That is the first and most important achievement. But the second, equally important achievement is to make sure as growth continues that it is broadly available to everyone willing to work for it.

MR. LOPEZ: Secretario.

MR. INSULZA: (Via interpreter) We still face issues. We are still not growing at the rate at – that we wish. But nothing that has to do with inclusion or any other thing will grow – will work without economic growth. You’ve experienced a very good, successful economic growth, very good development in terms of political development, but our becoming part of the global economy – and particularly, we have to overcome inequalities.

There are also other issues that deal with crime, very high crime rate. However, these inequities that go beyond the mere fact that some people make more money than others. Latin America has rates of inequalities that translate into all the areas of life – oil distribution, access to services, quality of education, and also the quality of their education and the discrimination of minorities such as indigenous minorities and others.

So the whole issue of inclusion boils down to overcoming this and overcoming inequalities, and the Honorable Secretary has very clearly stated it – create opportunities. It means the creation of opportunities, which is essential to our people. And that is why the issues addressed by Pathways to Prosperity are essential. In terms of education, issues pertaining to education, the whole issue of the development of the small and medium-sized enterprises – micro, small, and medium-sized. So enhancing that implies enhancing people, low-income people, providing much more jobs, much more permanent jobs, not necessarily a lot of small – which does not boil down exclusively to creation, because a lot of small enterprises are created and then disappear. We have to provide them access to markets, to education, training, and finances.

MR. LOPEZ: Secretario.

MS. BARCENA: (Via interpreter) Well, I think that our continent, our region, is not the poorest in the world, but it’s the most unequal region in the world. There are still 180 million Latin Americans and Caribbeans who are poor, and that hurts. Therefore, what we set forth is that the key to social inclusion is employment – employment with social protections, formal employment, decent employment. And that will be achieved only if there is productivity and prosperity.

Our continent, our region, has made great headway in the last decade – even before, in the ’90s and the recent decade. Why? Because we turned into a region with macroeconomic discipline and progressive policies. What did the governments do? Well, they did a great deal to create social assistance programs at the beginning, and then with conditioned cash transfers to poor families. And these have had a significant impact. Through these programs, a number of Latin Americans came out of poverty.

I will share a datum with you. When the last decade came to a good close in the ’80s in Latin America, 50 percent of the people were poor. Now, 30 percent are poor, at least $180 million. So how do we achieve a hundred – social inclusion? Therein lies the rub, so to speak. So how do we articulate to those that make more with those that make less, those that have a higher income with those that have a lower income? That is the issue at the heart of inclusion. It’s not just fighting against extreme poverty, but we need to link large companies with small and medium-sized enterprises. We can’t have those divergences, those inequalities that divide us that so conflicted between us. Everyday citizens need to see that this society promises social mobility, that the fact that they do create a small and medium enterprise can link them to large enterprises, with exports, with modernity.

And I think that message needs to be conveyed to young people. Nowadays, I believe that the greatest problem in Latin America lies with the young population. Unemployment in Latin America is at 7.3 percent. It’s not that bad. It’s better even than before the crisis. But youth unemployment is double that, 15 percent. And we have those – the young people that don’t study, don’t work – there are 19 million youths that do not work or study. And they should be our target for greater social inclusion.

MR. PUIG: (Via interpreter) Yes, Juan Carlos. When we think about inclusion, we have in our minds 70 percent of Latin American population that makes less than $10 (U.S.) per day. Not only them, but we also think about women and other minorities that must be included in our social processes and our economic processes. When we talk about inclusion per se, we talk about issues that are similar to the ones raised by the Secretary – access to knowledge, funding, and essential services. And when they translate those issues to the very concrete level of – it boils down to access to health, education, water, power, electrical power, sanitation.

And we’re also thinking about the issues raised by Alicia, this linkage, this articulation between the large corporations, the large business people and the smaller entrepreneurs. In our case, we’ve developed a team that works exclusively with these groups. And this team has focused on identifying platforms, which is what we call them, with inclusion to third parties. It may be business or government activities.

And if you allow me to give you a short example, because I believe that with examples we understand everything much better, one of the first projects that we implemented was in the north of Mexico, where we found a number of municipalities that had no paved streets, and these neighborhoods that had developed very informally. So the municipality had no resources to build their roads. So we partnered with a private company – in this case, it was CEMEX -- to build those roads. And finally, what we did was we set up some 36,000 microcredits for people living on the fringes of these streets to enjoy these new streets. And for a very pleasant surprise, the experience of the repayment, the collection of that microcredit, fortunately it was in very good – even within the standards that we had foreseen, and that has a – that also is involved in the reduction of weeds that induces ailments – respiratory ailments abound among the people living in those areas – enhance access to services and the education of their people.

MR. LOPEZ: (Via interpreter) Secretary – I was going to ask the question in English, but she is receiving the interpretation. This meeting is – the whole idea is not only to share experiences and repeat stories, but also to take great measures. You talked about the $5 million (U.S.) that have already been invested, and you also talked about the $17.5 million that will be invested in the future. How do you see the desire, the appetite, in the U.S. Congress to support these initiatives when today, for example, President Obama passed a law to fund a government until the 18th of November, and you are talking about cuts, budgetary cuts? Do you see that within Congress there is an interest to support these measures in the future?

SECRETARY CLINTON: Well, I think there is because we are bound so closely with Latin America. We are bound by ties of history and culture and family and commerce. And it matters greatly to the United States what happens here, and vice versa. So what we are doing is making the case that our investments in Pathways to Prosperity projects are going to pay off.

In this wonderful book that Alicia has helped to bring to publication, from the UN, the IDB, and the OAS, and each of the organizations up here, there are best practices. We know what can work. So we’re not just going to the Congress and saying we would like to invest in a better economy for Latin America, so just give us the money. We’re going and saying we know what works. We want to partner with the OAS, with the UN, with the IDB and others in order to translate that into tangible progress. So I think there’s a great deal of interest and commitment from our Congress to support that kind of investment.

MR. LOPEZ: (Via interpreter) Secretary, you represent the OAS, the members of which are all in this hemisphere, with the exception of Cuba. In this meeting, we have half of the region. Are there initiatives that are moving forward consistently?

MR. INSULZA: (Via interpreter) Well, I think that one of the initiatives that is being discussed here, I’m not going to say that it’s being implemented in all, but in most of the countries of the region. For example, the Secretary has just mentioned microfunding. Microcredit as something that has disseminated consistently. I would like to see more targeted policy to better include the private banking sector into microcredit, microfinancing, which is still focused on the public sector. But let me tell you that the countries that I’m familiar with all throughout, microcredit has grown 10, 20-fold.

Conditional transfers also – it’s another example in Mexico, we have a program supported by – that was – it was replicated in Brazil and Chile. Today the whole issue of these conditional transfers we see all throughout the region because, as the Secretary has indicated, when there are good practices, these good practices are disseminated. And when there are ways to leave poverty behind, well, people follow them, and take them beyond many ideas and many proposals, other different proposals. So I do believe that we can do much more. Our network for social inclusion would have to be further expanded and further strengthened. But we have made great headway, and particularly in this learning process among each other.

MR. LOPEZ: (Via interpreter) This started in 2008. The United States has played an important role, as other members have. Is Latin America clear on what it represents to the U.S. economy? And is the U.S. clear on what the Latin American economy represents to the economy of the U.S.?

MS. BARCENA: (Via interpreter.) That’s an excellent question. I just gave Secretary Clinton a document that we prepared when President Obama came to Chile, where he delivered a very important speech, and we presented a series data that are very significant on the relationship between the U.S. and Latin America. A datum: 19 percent of imports to Latin America and the Caribbean are coming from the United States. We are a purchaser of goods and services from the United States more important than China. Therefore the United States must take us more into consideration.

And it’s a very powerful argument to present before the Congress so that they are aware of the fact that we are valuable partners to the United States because we are a stable region, a region that’s growing, a region that is democratic and that has a deep, abiding commitment to democracy. And I want to say that for us, the United States, in particular for the Caribbean, Central America, and Mexico, is fundamentally our first trade partner. The U.S. is the first trade partner of Latin America. The second is Europe, but Europe is being replaced by China.

Now, I want to connect the dots. I want to connect three dots in particular in this – on this issue of Pathways to Prosperity. Why is this initiative invaluable? Well, because we’re talking about trade. That’s fair and well. You have interregional commerce. We know that the interregional trade of most significance throughout the entire hemisphere takes place in Central America. And who trades with Central America? SMEs. Those are the enterprises that are getting involved in trade with greater added value – textile companies, manufacturing companies, chemical companies. That is what’s most important.

Truth be told, each country by itself won’t be able to pull ahead, and Central America and Mexico have a very important trade partner in the United States. The Caribbean does as well. And here in this document, we are portraying 60 successful experiences, one of which is called STEP Caribbean. This is a tourism initiative that was undertaken by all Caribbean countries whereby they have partnered in engineering training for hotel entrepreneurs so that visitors don’t go to a single country, so that they go to the entire region as a whole. Now this STEP Caribbean has been transferred to Central America and it’s going to be replicated in South America.

There are a number of experiences. Many are reflected here in this document. Many are not. But there has been work that has taken place over the course of the last 10 years, and even more, that what’s important is the ability to replicate these experiences. This STEP Caribbean is important because it can be replicated. There are others that are interesting.

Somebody mentioned a center in Texas. There is a center called SDC, the Small and Medium Enterprise Development Center, and this is a center that congregates 1,100 smaller centers. El Salvador has a similar initiative in Mexico that’s created a number of centers for its small and medium-sized entrepreneurs following this model.

So first, trade. And I believe that Pathways to Prosperity creates links between open countries that are willing to trade more in goods and services, but not just to benefit large companies. Seventy-one percent of trade is taking place between those large enterprises. What we want to do, in fact, is replicate the Central American model and to see how we can include SMEs into this vitality of the 16 countries that are part of Pathways. We are champions of this initiative because we are true believers in the fact that only through this type of trade, through the opening of pathways, that we can achieve this inclusion and the articulation – linkage with companies.

And let give you another example. This example truly pains me. It is 40 times more expensive to access broadband in Bolivia than in France, a hundred times more expensive in Bolivia than in Korea. That is unconscionable. Pathways’ goal is to link broadband everywhere so everybody has access, so all companies have access to cheap broadband, and that is also here. And that has been achieved through the support of the European Union as well. And we have other partners that are interested in the region that want to create better linkages in trade, SMEs, large enterprises, and employment. And I emphasize this: Employment is the key to equality.

MR. LOPEZ: (Via interpreter) How do we do away with the suspicious that generate in too many countries in which people say, well, the assistance from the large multilateral organizations is for others, not for me?

MR. PUIG: (Via interpreter) Communication is very important. What I did when I came here to the Dominican Republic today – the first thing I did is that I couldn’t stay here in the capital city but go to Santiago to explain what we are doing in multilateral terms to benefit the SMEs and other companies working in the country, and I believe other multilaterals are also doing so. We have a task before us, which is to communicate better what we truly do, to organize meetings such as this, and present summaries about we do.

Recently at the World Bank meeting two weeks ago, we presented a paper among 31 multilateral and bilateral organizations in which we summarized similar cases as presented in this publication. So I think that what we’re missing is communication about what it is that we do.

MR. LOPEZ: (Via interpreter) Secretary, we’re talking about Pathways to Prosperity. The U.S. economy is undergoing a difficult stage. The Latin American economy has fared better during this crisis. The Pathways to Prosperity in the United States is in Latin America, and would that enable the region to harness this possibility to make the most of it?

SECRETARY CLINTON: Well, that is certainly one of our hopes because, as we just heard, Latin America is our biggest trading partner. The hemisphere trades more with each other than we do with anybody around the world, and I think that’s to our benefit because of our other connections. So we want to deepen and broaden that cooperation that can come through trade, through investment, open up the doors and knock down the barriers that still exist.

But it is also true that we believe strongly in making sure that we benefit the most people. The days of just having, as the Secretary General Insulza said, just having the benefits from trade and business and investment go to a small group of people so that you just perpetuate inequality have to end, because you cannot grow stable prosperity unless you broaden the base of prosperity. So our mission and what we are trying to do through Pathways is to open as many pathways as possible. There’s not just one superhighway pathway between Latin America and the United States which is only populated by the biggest companies, the multinationals, and only benefiting the very tops of our economic elites. We want many pathways to prosperity. And that’s why it’s plural, because we’re looking for all the good ideas and the best practices. And we’ve seen so many changes in Latin America in the last decade, and we want to build on those changes.

MR. LOPEZ: (Via interpreter) We’re running out of time and I’d like to ask a question to the four of you. You’re – we’re talking about an investment in microenterprises, SMEs, and the large ones. And in the report, I found some data from APLEX saying that micro-SMEs generate 60 percent of jobs in four countries – Argentina, Brazil, Chile, and Mexico – but only 28 percent of the GDP, and only 8 percent of exports, while larger corporations generate 40 percent of jobs, 71 percent of the GDP, and 92 percent of exports.

Here’s my question: What you are proposing, to give greater room for micro – small and middle-sized enterprises, if this pathway, this model, if it creates more jobs, will it be quality jobs or should we work on the basis of a new formula in which we enhance the share of these enterprises at the economic level?

MR. INSULZA: (Via interpreter.) Well, that’s the whole idea. Indeed, the figures that you mention are accurate, because as we said repeatedly, new opportunities are created. But still, the small and medium-sized enterprises have not had enough access to technology, funds, markets. As you clearly stated, only 8 percent of exports are produced by them, and – but at the same time, they are perhaps if one also focuses on the issue of value added, we would have to consider that many of the large corporations that export from Latin America are exporting commodities.

In this growth process, there is a problem in Latin America that we have not discussed but which are of concern, which is that the export of commodities have grown much faster than the export of manufactured goods. In this extraordinary growth, the export of manufactured goods have not grown at all. And where do we find this? We’re not going to find it among the large copper or steel corporations or oil corporations. Most probably, we’ll find it throughout a large network of SMEs to the extent that they are people that are better prepared, better skilled, with the ability to compete, that they can access credit, and as well, access technology, and that ultimately, they will have markets where – to place their goods.

So this transformation is essential not only to enhance the living conditions of many of these people, but also to improve the basis of opportunity – substantially improve this basis of opportunities.

MR. PUIG: (Via interpreter) I think that large companies don’t necessarily come about as large companies. They actually are born as small companies, medium companies. And I think we need to follow up with the small and medium enterprises to make sure that they do become large enterprises. And what we’ve done on our side, if we’re looking at SMEs through the Inter-American Investment Corporation, is provided technical assistance. SMEs that export, we’ve looked at the export figures that have been discussed for SMEs.

And here in the DR yesterday, we were launching a program with the export promoting authority in the DR, and this has the aim of helping small producers to understand the labeling that’s required for exports, the type of imports that they can avail themselves of to gain better access to markets and to be able to negotiate better prices in the destination market for their products. All these things require technical assistance, not just for exporting but we also want to focus on their own governance, we want enterprises that are incorporated, and that they understand how to have association plans or incorporation plans. Oftentimes, these SMEs don’t have that wherewithal. And we also want them to harness efficiencies at other levels, including energy efficiency, in order to make the most of those products.

MS. BARCENA: (Via interpreter) This is something that will not occur overnight. I’m convinced that policies are required, state policy is required, as well as deliberate interventions, Because the market by itself has already shown that it will not do it, so a state is required that is capable of designing, of developing very clear industrial policy where they clearly say which sectors are the ones that one could, to a certain extent, lead to enhance productivity, because this is a very structural issue, Latin America. The structural heterogeneity of the large companies that are very successful and the SMEs, 90 percent of these corporations that are generating 60 percent of jobs, but as 60 percent of jobs that are very limited because they are very, very small corporations that don’t have social security scheme, and it really costs them a lot to formalize their workers. So we bring here an example from the Colombian social security system where both the business sector and the state join efforts in order to be able to register them within the formal social security system.

But that requires the countries to develop very clear policy in terms of innovation, industrial policy, credit instruments, because credit is essential for SMEs, but frequently, they simply have no access because they have assets. For example, access to IT innovative mechanisms; we include here a beautiful example on how we can bring together clusters and networks and set them off through shared services that will not cost that much money to the SMEs. So, deliberate policies have to exist as well as much more investment. For example, in science and technology, our company invests very little, less than 1 percent in research and development. We will not even make it through the quarter with that.

In the large corporations, what we have to do in that case is to regulate in such a way that the large corporations will make a commitment. A beautiful example that I can give you of an exporting Paraguayan company – it exports finished goods – they used to export raw fruit and now they export a well-prepared product. We have to sit around the same table with large foundations, large companies, different stakeholders, private sector, public sector – we all sit around the table and we say, “Okay. If this good is being produced in our region, why are we going to buy it from abroad? Why don’t we benefit other communities? Why don’t we bring them on board?” And there are clear examples, but for this, we require instruments, policies, investment.

And that is why I believe that this initiative of the United States and all the countries, that each will contribute. And it’s happening. There are very interesting examples on how we are seeing this industrial policy; industrial in the American sense, in the English sense. I’m not talking about opening up plants everywhere, but to articulate, these productive networks based on our own wealth, our own natural resources, our region produces 45 percent of the copper in the world. Thirty percent of renewable energy in the world is produced in Latin America and the Caribbean, so we have one-third of the farming surface in the world, one-third of the water. With this wealth, why are we not able to come up with innovative ideas? Hence, why did we, the three agencies, do this?

I heard a conversation earlier in the quarter with someone who was saying, “No, there are mere empty proposals, no concrete things,” but then there are concrete things. There are people who are making great efforts to do things to create companies, to create a better, different world for which we need policies. And that is why our agencies must make themselves available to the communities, to serve the communities that are trying to move forward, having to pay very, very, very high prices for energy or for food. And they don’t really necessarily want to migrate to the U.S. They want to stay in their countries, but we have to identify these opportunities. And I do believe that by our – it will not happen itself. Policy is required.

MR. LOPEZ: (Via interpreter) We’re running out of time, I have a last question for Secretary Clinton. How difficult has it been or how easy has it been to convince your partners in this ministerial meeting? You’ve underscored this fourth meeting, how difficult has been to convince them of U.S. intentions? Everybody says the United States always acts in its self interest. It’s true with every other country, but it’s something that is thrown out a lot, and how will you continue to work in the region, through these efforts, so that you are all partners on equal footing and that the region is convinced of this?

SECRETARY CLINTON: Well, I think we’ve certainly have demonstrated our commitment and our persistence in following through on this kind of a model because we know that it can work. And I will follow-up on what Alicia said. There are some countries in the region that are taking advantage of what works. They are looking at the evidence, they are talking to their neighbors, they are reaching out around the world, and they are implementing all of these best practices. And there are some countries that just are not interested, or their politics don’t permit it, or their ideology doesn’t permit it.

So we want to focus on working with those countries who understand that in today’s competitive world, if you stand still, you fall backwards. And that’s true with the United States, just like it is true in every country represented here. But what’s so exciting about this time is we now have a body of evidence about what works. We’re not making it up. We’re not just throwing it out there. We can say, “Those cash transfer programs have worked in Mexico, Brazil, and Chile; why don’t you try them?” Then it’s up to the countries. It’s up the leadership, the citizenship.

So what we want to do is just to make sure that the people who are committed to inclusive growth, to broad-based prosperity, are all at the table. And that we’re going to support those who are really out there trying to make a difference in the lives of their people, and I think that’s the best way for us to be judged.

MR. LOPEZ: (Via interpreter) Thank you. Thank you very much, Secretary of State of the U.S. Thank you Mr. Insulza, Secretary General of the OAS. Thank you to Ms. Barcena and to Mr. Puig, the vice president of the IDB. Thank you for joining us, and we thank you the audience for being so patient. Now I ask you to kindly remain seated while our distinguished guests leave the room. I’m Juan Carolos Lopez from CNN en Espanol and it has been an honor and a pleasure to be here and to continue to be in the Dominican Republic.

PRN: 2011/1680