Top officials stress job creation as key to Latin American economic development

The new president of the Western Hemisphere’s top development bank and the top U.S. trade policy official see job creation and growth of the middle class in Latin America and the Caribbean as the keys for regional economic development, and a boon for U.S. policy in the region.

Mauricio Claver-Carone, who became the Inter-American Development Bank’s (IDB) president in October, told The Hill that he sees job creation as the IDB’s top goal.

“Across the board, the challenge is job creation. Good, quality jobs. I mean, that’s the bottom line,” said Claver-Carone.

That goal stands in contrast to the IDB’s regional reputation as an aloof financier of grandiose projects with macroeconomic impact and little effect on the lives of the region’s population.

But Claver-Carone, the first IDB president from the U.S., said he sees the bank’s future as prioritizing small and medium-sized businesses, with a focus on woman-owned firms, over the mega-projects most Latin Americans associate with the bank.

“A small- medium-size business owned by a woman in Latin American and the Caribbean produces an average of 10 percent greater income than one owned by a man, yet they have about 50 percent less access to credit financing,” said Claver-Carone. “So I think that we need to really focus it on there.”

Claver-Carone said he will focus on digitalization, financing for small and medium enterprises and near-shoring during his five-year IDB term — he’s pledged to only serve one.

The IDB was founded in 1959 as a tool to help develop Latin America and the Caribbean, with the United States as its largest shareholder. The idea was that economic development in the region would ultimately benefit U.S. foreign and domestic policy.

Although U.S. involvement in hemispheric economies at the height of the Cold War focused on aid and development assistance, trade policy became an important tool of regional integration and economic growth.

The crown jewel of that policy was the North American Free Trade Agreement (NAFTA), which was replaced last year by the United States-Mexico-Canada Agreement (USMCA), a more ambitious deal with environmental and labor provisions that could revolutionize the Mexican workforce.

“There is in the U.S. hopefully a recognition going forward that, the U.S. is better off if the Latin American economies are doing well and workers in those economies are doing well and that has impacts of course on not just trade but also immigration policy and a whole gamut of issues,” said United States International Trade Commission (USITC) Chairman Jason Kearns.

Kearns, a Democrat, was first nominated to the USITC by President Obama, and then renominated by President Trump in 2017.

On Wednesday, Kearns will join Claver-Carone and U.S. Agency for International Development acting Administrator John Barsa at a symposium on trade organized by the Congressional Hispanic Leadership Institute.

For Kearns, the labor provisions in the USMCA have the potential to dramatically influence labor relations in the country, potentially moving forward the development goals that stalled under NAFTA.

To the extent that lower wages in Mexico pulled down wages in the United States or U.S. jobs were lost to lower-wage Mexican workers, Kearns pointed to Mexican labor relations as a culprit.

“It should come as no surprise that wages in Mexico and the U.S. are different from one another and I think economists would tell you you shouldn’t expect them to be the same,” said Kearns, who noted that his views do not necessarily reflect those of other USITC commissioners and added that he views his role as nonpartisan.

“What we should be looking to is productivity and whether or not wages in each country reflect the productivity of labor in each country, and I think what you would find is that it has long been the case that wages in Mexico don’t reflect productivity in Mexico, because workers haven’t been able to exercise their rights,” he said.

Mexico is among the top three trading partners of the United States, along with Canada and China, so its economic development necessarily has an effect on the U.S. economy.

But throughout the hemisphere, economic instability often leads to increased migration to the United States, as well as instability that benefits organized crime in the region.

Claver-Carone is pushing a recapitalization of the IDB, looking to expand its lending power beyond $20 billion to help the region recover from the economic downturn caused by the coronavirus pandemic.

The United States is the bank’s largest shareholder with 30 percent of the vote, so Claver-Carone will have to convince U.S. lawmakers to go along with his plans.

“Since the creation of the IDB in 1959, there has never been a true U.S. commitment to the IDB,” said Claver-Carone.

“The goal [is] to really cement a U.S. commitment to the IDB as a key preeminent instrument for integration, economic growth and development in Latin America the Caribbean,” he added.

Claver-Carone, who last worked for Trump as Western Hemisphere head at the National Security Council, said there is space for bipartisan support of hemispheric development, touting both the Trump administration’s América Crece program and the Obama administration’s Alliance for Prosperity, spearheaded by then-Vice President Joe Biden.

“President-elect Biden has historically shown a great interest in the Western Hemisphere,” said Claver-Carone.

“Whether it’s América Crece or President-elect Biden’s Alliance for Prosperity, I think that the end goal is the same, which is to increase U.S. commitment towards economic growth development, therefore leading to stability and security in the neighborhood the United States lives in,” he added.

That potential for bipartisanship on hemispheric trade and development was evident when the House overwhelmingly passed USMCA in December, showing lawmakers of both parties understand the need for economic development in the region, according to Kearns.

“I just don’t think there were many members of Congress on either side of the aisle who had any interest in scrapping NAFTA and not replacing it with another strong economic agreement between the countries,” said Kearns.

“Going back to duties, just tariffs, and treating Mexico like any other trading partner, Most Favored Nation tariffs, was not much of an option,” he added.