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The IMF chief executive in Latin America has urged governments to force the rich to pay “more” in taxes, saying that the world’s most unequal region would not prosper unless it responded to economic demands.
Speaking to the Financial Times as he was planning to retire after eight years of work, Alejandro Werner, director of the Western hemisphere, said the recent unrest in Latin America had confirmed the need for equitable sharing.
IMF has already sung for the world’s highest earners those who have done well as a result of the epidemic pay temporary taxes to help those most in need. Latin America has suffered more than any other region as the coronavirus has exacerbated the problems that have been around for some time with little growth, extreme inequality and poverty.
Werner listed “unused” taxes as a good place to start Latin America.
“You need to have even more advanced taxes. . . “The upper classes of the people pay more and then you have to have a financial system where the economic competition is much stronger than it is today,” he said.
“Latin America cannot be the most unequal region in the world and can only go beyond another stage of economic development.”
Prior to joining the IMF in 2013 Werner was a senior official in the Ministry of Finance in Mexico and worked for a Mexican bank; retired at the end of August.
The growing effects of US excitement, strong China growth and global inflation have helped the region recover faster than expected 7% last year on global trade, and the IMF, as well as local financial institutions, have high hopes for its future.
Werner said the IMF’s forecast for 4.6% growth in Latin America this year needs to be revised, possibly because the economy has managed to perform better than expected, even as the Covid epidemic continues.
“The correlation between economic activity and the prevalence of infectious diseases is much lower now than ever [the second quarter] of last year, ”he said.
The region’s richest economy, Brazil and Mexico, have set the stage for reopening their lives in spite of the death toll, helping them to recover faster than other neighboring countries that continue to lose out.
FT over-learning of the dead found that Latin American countries have suffered some of the world’s worst epidemics, with little difference between countries that have imposed stricter laws, such as Peru and Colombia, and those that have not, such as Brazil or Mexico.
Latin American countries have also resorted to a variety of financial measures, with Brazil, Peru and Chile among countries taking additional loans to help those most affected by coronavirus.
Mexico was very diverse and although Wall Street banks expect to grow more than 5% this year, this will not be the 8.5% share it met last year. Werner said he would “have been better off” with the incentive package.
Local politics has been disruptive in recent years, with many street protests rocking Chile and Ecuador in 2019.
In Peru, Pedro Castillo, a candidate for the Marxist-Leninist party, seems to have succeeded In the presidential election this month, even the incumbent anti-Keiko Fujimori denied his victory with rigged allegations in the election.
“The changes we see in the political choices that people are making show that there is a great need to share more money, and more, more… Economic and cultural means,” said Werner.
In April Colombia tried to change taxes in order to increase revenue and increase taxes but the government was forced to abolish it a few days after the country’s brutal protests.
Werner said fundamental tax reforms needed to improve public finances in the region but added that Bogotá’s actions highlighted the need for greater co-operation in economic reforms that continued to prevail in the political arena.
“Politics is critical to achieving change so countries need to be careful in implementing these reforms, in consultation with all people and ultimately forge a consensus… Because these changes are necessary,” he said.
“If we do not, we will see a great deal of instability that can disrupt the work, which will hurt recovery, disrupt social norms. It is a very difficult place.”
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