DECLARATION OF THE COUNCIL OF TREASURY OR FINANCE MINISTERS, CENTRAL BANKS AND HEADS OF ECONOMIC PLANNING  

The Andean Community Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning, at its Eleventh Regular Meeting held on February 2, 2009 in the city of Lima, Peru;

WHEREAS: 

The Council of Presidents, meeting on October 14, 2008 in Guayaquil, Ecuador, agreed to call a meeting of the Andean Community Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning to analyze the short-, medium-, and long-term economic and other effects of the international financial crisis, with a view to issuing recommendations that will enable the countries to explore the possibility of undertaking concerted action to counteract its impact on the subregional economies; 

In compliance with that Presidential mandate, the Andean Community Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning held its Tenth Regular Meeting on November 24, 2008 in the city of Lima, Peru;   

The Member Countries recognized at that meeting that Andean integration, by contributing to the search for alternatives to mitigate the adverse effects of the crisis, offers a favorable vehicle within the context of international financial turbulence for supporting efforts by the Member Countries to accomplish their socioeconomic development objectives; 

At its Tenth Meeting, the Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning instructed the Permanent Technical Group (PTG) to prepare several technical studies.  These will be submitted to the Council and will serve as the basis for recommendations to enable the countries to explore the possibility of undertaking concerted action to counteract the effects of the crisis on the subregion’s economies, among them measures related to the new international financial architecture; 

The Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning considered that it would be desirable to obtain technical assistance, for the preparation of these technical studies, from not only the Andean Development Corporation (CAF), the Latin American Reserve Fund (FLAR) and the Andean Community General Secretariat (SGCA), but also from the Latin American Integration Association (ALADI), the Inter-American Development Bank (IDB), the Center for Latin American Monetary Studies (CEMLA), the Economic Commission for Latin America and the Caribbean (ECLAC) and the Latin American and Caribbean Economic System (SELA);  

The PTG called upon specialized experts from the Member Countries and the above-cited international organizations to carry out this undertaking.  Responsibilities were assigned for the preparation of the studies described below, which were enriched over the course of four working meetings: 

1.      Detailed evaluations, using different scenarios, of the effects of the crisis in the Andean countries, including its impact on the fiscal, external, financial and production sectors, with a special analysis of its impact on employment and exports. 

2.      Proposal of financing alternatives in a context of restricted international liquidity: (i) Analysis of the existence of financial instruments in multilateral organizations and proposal of new instruments; (ii) Evaluation of the possibility of strengthening ALADI’s Agreement on Payments and Reciprocal Credits as an alternative for foreign trade financing; and (iii) Examination of the possibilities for the use and management of the Andean countries’ international reserves.    

3.      Review of the use of foreign exchange derivative instruments, with a view to reducing their risk and volatility in a scenario of tighter capital markets. 

4.      Study of experiences with capital flow control mechanisms in Latin America (case studies such as those of Colombia and Chile) that make it possible to stem the entry and outflow of short-term capital, as an instrument for reducing its volatility. 

5.      Identification of specific financing facilities for grassroots economies. 

6.      Evaluation of the impact of the crisis on remittances to the Andean countries. 

7.      Identification of an institutional framework that would reinforce the exchange, among the Member Countries, of information about economic measures to alleviate the effects of the crisis and about monetary and exchange policy. 

8.      Opportunities created by the crisis.  Options that are opening up for the CAN.   

In the light of the advances made in these studies and of the broad and fruitful exchange of ideas among the participants at this Eleventh Meeting, the topics assigned to the PTG were prioritized. Several joint actions were defined for coping with the unfavorable international situation and opportunities that are emerging for the Andean countries were identified; 

The Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning took note of Decision 592 creating the Andean Council of Ministers of Social Development and instructing the two Councils to coordinate efforts in identifying and designing innovative financial mechanisms to fight poverty, strengthen democratic governance and achieve justice and social equity.   

DECLARES: 

1.      To recognize that within the context of the unfavorable international situation, the effects will be felt more deeply in the grassroots economies. For that reason, a proposal is needed to define guidelines for boosting the microfinance that will support efforts to create better conditions for access to credit, particularly among the most vulnerable sectors.  

2.      To stress the significance of remittance flows as an important component of Andean financing of external accounts and as a source of available income for households in the subregion.   A proposal is accordingly needed to strengthen action taken by the regional and subregional banking systems to secure better channeling of migrant remittances to, and their use in, production activities.    

3.      To agree that the Andean countries may have to face liquidity restrictions and limitations in access to international financing and that optimum management of international reserves will be required.  This makes it necessary to evaluate alternative new financing instruments and possibilities and to strengthen the role of financial shield played by the FLAR for the subregion, which could improve the countries’ capacity to respond.   

4.      To instruct the PTG, based on this prioritization, to submit to the Council of Treasury or Finance Ministers, Central Banks and Heads of Economic Planning, within three months’ time, its technical studies in greater depth, together with the advances made in regard to the proposals and lines of action for the future that were entrusted to it.  Member Countries will continue to enjoy the collaboration of regional and international organizations for that purpose. 

5.      To request a continuous follow-up of the effects of the international crisis, particularly on the most vulnerable Andean economic sectors, that would sound a warning about the possible deterioration of socioeconomic indicators and, at the same time, would allow for a timely economic policy reaction.  Those analyses should be included in the Convergent Action Programs and in their respective Follow-up Reports.  The PTG will hold meetings at least quarterly to identify new lines of action for confronting the economic turbulence.    

6.    To stress the importance of the transparency and exchange of information about economic measures to be adopted by the Andean countries. 

7.     To express its willingness to coordinate with the Andean Council of Ministers of Social Development and to work jointly in the design of innovative financial mechanisms to fight poverty, strengthen democratic governance and achieve justice and social equity.    

8.      To support the initiative in the United Nations General Assembly on the establishment of a New International Financial Architecture that will guarantee the democratization and transparency of international financial management and the strengthening of regulatory mechanisms.   

9.      To point up the importance of the efforts of the Permanent Secretariat of the Latin American and Caribbean Economic System (SELA) with regard to Latin American reflection on and harmonization of the diagnosis and impact of the current international economic crisis and to the elaboration of regional policy proposals to face up to it.   

10.  To recognize the importance of the transparent and ethical handling of external financing and of that democratic and clearly-defined governance of regional and international financial organizations that is also proportional and in which the responsibility is shared equitably.

11.   To recognize the efforts made by the Member Country representatives belonging to the Permanent Technical Group and to thank the experts from the IDB, CAF, CEMLA, ECLAC, FLAR and SGCA for their valuable assistance in preparing the studies and recommendations on which this Eleventh Meeting based its deliberations.     

FOR BOLIVIA

FOR COLOMBIA

Jorge Toro Córdoba
Assistant Manager for Economic Studies
Banco de la República (Central Bank of Colombia)

FOR ECUADOR

FOR PERU