Brothers and Sisters, There is Much to Do

By Christine Lagarde, Managing Director, IMF
2015 IMF-World Bank Annual Meetings Plenary

 Lima, Peru, October 9, 2015

As prepared for delivery


Presidente Humala, Presidente Bedoumra, Presidente Kim, Gobernadores, invitados de honor: Estoy encantada de estar aquí hoy y doy mi bienvenida a la Reuniones Anuales del Fondo Monetario Internacional y del Banco Mundial. ¡Bienvenidos!
Hablo en nombre de todos cuando agradezco al Gobierno y al pueblo del Perú por su gran hospitalidad. ¡Muchas gracias!
Hoy, Lima es la primera ciudad de América Latina sede de las Reuniones Anuales en casi cincuenta años. Esto confirma el dicho “las cosas buenas vienen a aquellos que esperan.”1

So, Lima is the first Latin American city to host the Annual Meetings in almost 50 years. It has been a long time, but it also means that Peru is no longer the proverbial “country of the future”—it is the “country of the present.” As one of the fastest-growing economies in Latin America in the last few years, Peru has the chance to unlock its immense potential and create greater prosperity for all Peruvians.

Of course, nothing can be taken for granted. Being in the present means addressing the big new challenges and constraints. Uncertainty over the global economy is on the minds of policymakers in all countries, including here in Peru.

We are no longer in an economic crisis, but this is a time of change. Old paradigms no longer hold, new economic relationships emerge. This means it is also a time of opportunity and action.

Someone who captured this spirit is the great Peruvian poet César Vallejo. I love how he concludes one of his best-known poems with a confident “Can do!” message:

Hay, hermanos, muchísimo que hacer.”

Brothers, there is still so much to do.

Indeed, brothers and sisters—hermanas—there is much to do! We are all here in this wonderful new convention center to demonstrate to the world that we are ready for this change. That we can do it!

The raison d’être for the IMF and the World Bank—for our membership—is to work together in addressing these new challenges—as we have done many times before!

Let us examine how in this changing global landscape, both Latin America and the IMF are transitioning and adjusting to these new challenges.

1. The Changing Global Landscape

First, the global landscape—where currently we see uncertainty, transition, and balancing acts.

Uncertainty—because global growth will likely be weaker this year than last—at 3.1 percent, compared to 3.4 percent last year—with only a modest acceleration to 3.6 percent in 2016—much lower than what is needed to make deep inroads into unemployment and poverty.

Transition—including China’s shift to a new growth model, and the expected shift in U.S. monetary policy.

Both of these transitions are necessary and healthy, but they are impacting other countries across the globe through trade, exchange rates, asset markets, and capital flows—what we call spillovers.

Emerging market and low-income countries that are heavily dependent on commodity revenues will be particularly affected.

While these uncertainties and transitions may look daunting, I believe they can be managed—with the right mix of policies to support demand, strengthen financial stability, and implement structural reforms. All these are necessary balancing acts.

At the same time, they may not be enough. That is why, during these Meetings, I have been calling for specific policy upgrades.

For instance, central banks in advanced economies should give due consideration to the risks of spillovers from their policy decisions; emerging economies should firmly address the buildup of corporate leverage and foreign debt.

And I am hopeful that—building on the recent TPP agreement—we can restart the stalling engine of global trade.

These upgrades will make the global economy more resilient against the increased uncertainty that we face now. But even as we focus on the short-term policy measures, we need to be mindful of broader changes in the global landscape.

Let me use an analogy. When seen on foot, the ancient Nazca Lines in southern Peru resemble a series of shallow trenches. Only when viewed from the air can one see the shape of a figure. The picture of the hummingbird—which you see on the screen—is deeply ingrained in the Peruvian culture, and it is also the symbol of our Annual Meetings.

Likewise, we must take a wide perspective to understand the global Nazca Lines that will shape our economic future, and thus the destiny of billions of people worldwide.

Some are obvious. One is climate change, where all countries need to integrate its implications into their macroeconomic frameworks. Energy pricing is key: the IMF has projected global energy subsidies at $5.3 trillion for 2015, or 6.5 percent of GDP—a staggering number that needs to come down in the years to come. To get it right, we need to price it right—and now is the time to eliminate subsidies because energy prices are low.

Another Nazca line is innovative technology. As part of the agreement on Sustainable Development Goals (SDGs), the international community has committed to make the internet available to all by 2020. Imagine what can be achieved by everyone having access to online education, healthcare information, a bank account, and so on. There are endless possibilities. The challenge is to make it happen.

Of course, a Nazca Line on all our minds today is migration. We need action now to resolve the heartbreaking plight of refugees from war-torn countries. I applaud those who are demonstrating leadership on this issue, and those on the ground who are working day and night to help.

We at the IMF will play our part—through our economic analysis of the issues, both in originating and receiving nations, as well as through fiscal support for member countries facing these pressures—as we have already done, for instance, in Iraq and Jordan.

Another Nazca Line—closely related to migration—is demographic change. Think of the Middle East, where a third of the population is aged between 15 and 29. No wonder that many of these young people feel they have no choice but to leave in search of work.

Or the shrinking working-age populations in advanced economies—especially in Europe—which may need to attract more foreign talent to replenish the reservoir of qualified workers.

Regardless of whether populations are ageing or rapidly growing, one thing is clear: economies will need to adapt.

A major factor that can help—as research from the IMF has recently affirmed—is empowering women to participate more in the economy. Whether to mitigate the effects of shrinking work forces, or to create jobs by starting small or mid-sized enterprises, no country can afford to disregard the contributions women make to their economies.

Closing the gender gap will be a global economic game-changer.

A further major issue shaping the future is personified by many of you here—the dynamic role of emerging economies.

These countries helped pull the global economy back from the brink of another Great Depression a few years ago. They have accounted for almost 80 percent of global growth over the past five years. They now generate more than half of global output.

Only the grumpiest pessimist would bet against the long-term success of emerging markets. And yet—as emerging markets themselves recognize—braving the winds of uncertainty and spillovers that are currently swirling will not be an easy task.

The changing Latin American landscape helps to tell that story.

2. The Changing Latin America

From Tijuana to Tierra del Fuego, we see a region that is incredibly diverse—economically, politically, and culturally. Indeed, it embodies the diversity of the emerging market universe that has, in many ways, outgrown the one-size-fits-all label.

Latin America is also symbolic of the shifts that we have seen in so many emerging markets over the past two decades.

One was the adoption of more robust policy frameworks. This allowed many countries to fully benefit from rising commodity prices, booming international trade, and favorable global financial conditions.

A second shift came during the global financial crisis. Policymakers responded with bold, counter-cyclical measures. Latin America showed that it can do the right thing at the right time.

As a result, most countries saw strong growth and low inflation, and also tangible social progress—with income inequality and poverty levels declining sharply for more than a decade.

The result? This is no longer your abuelo’s Latin America. It is a new region—but it now faces new challenges.

The good news is that, like other emerging markets, Latin America is generally better prepared for the changing winds than in the past. The not-so-good news, again as in other countries, is that there are concerns about the region’s capacity to buffer shocks—falling commodity prices, the anticipated rise in U.S interest rates, and volatile capital flows.

That is why confidence in policies and policymakers is vital. For most countries, the priority is to strengthen their policy frameworks—which we know will be put to the test.

That means using fiscal policy responsibly and putting rising public debt back on a sustainable path. It means using monetary policy wisely and shrinking large current account deficits.

But again, this may not be enough. I spoke earlier of “policy upgrades” by addressing the buildup of leverage and foreign debt in major companies. Monitoring these foreign currency exposures is key, as is bolstering the resilience of banks. This will reduce downside risks and strengthen financial stability.

Most countries in the region also need to press ahead with structural reforms to diversify their economies, boost growth, and unlock the full potential of all their people.
How can it be done?

First, greater inclusion. Latin America—despite recent progress—remains the world’s most unequal region. The IMF has argued that reducing excessive inequality is not just sound social policy but sound economic policy as well. Our research shows that a one percentage point increase in the income share of the poorest 20 percent can lift growth by about 0.4 percentage points.

Let me emphasize, in particular, the immense potential of Latin America’s indigenous people. When last in Peru, I met Maximiliana Taco. Living in a small village in Ayacucho, hers has been a difficult life. Yet, she told me how today she is farming her land and making a living, how she is financially savvy, and how she has educated herself thanks to a government program called “Haku Wiñay—My Enterprising Small Farm”.

There are millions more Maximilianas out there—their potential just waiting to be unleashed.

Natural resources is another major asset which, if properly managed, could transform the region for future generations. Too often, however, the needs of affected communities—their culture and dignity—have been neglected. Too often the rule of law has been ignored. And too often transparency and governance have been too weak. This must change.

The last area with massive potential that I want to mention is infrastructure investment. Here, I cannot describe it better than Mauricio Tong—a 23-year-old student at the Universidad del Pacifico here in Peru—and winner of the IMF’s Peruvian Student Essay Competition.

What Mauricio wrote about his country resonates for the entire region:

“In 2025, I see my country interconnected by an outstanding ground transport system, a system that is convenient, competitive, and held in high regard internationally, as our Inca roads once were. I see our fish, caught in the ocean, on the tables of homes in the mountain region. I see qualified teachers in schools, as well as medical specialists in hospitals in remote communities. And through all of this, I see development, I see a growing Peru, and I see the country unified and connected.”

As Latin America faces a pivotal moment, Mauricio challenges us to deliver on his dream, to realize the region’s full potential.

Hay, hermanos y hermanas, muchísimo que hacer.2

3. The Changing IMF

I have talked about a new global landscape and the changing winds felt across the world, including in Latin America. One thing is clear: such is the nature of the challenges we face—from economic spillovers to climate change—no country can go it alone, and cooperation is key.

I have called for a “new multilateralism”—for a stronger, more dynamic fabric that combines new strands: such as civil society groups, think tanks, and unions—alongside reinvigorated international institutions.

The Fund is at the heart of this new multilateralism. Which brings me to my final topic: the changing IMF.

Yes, it is no longer your abuelo’s—your grandfather’s Latin America. Well, it is no longer your abuela’s IMF either.

The Fund has changed in dynamic ways in recent years. My Management team and I deeply appreciate the support that you have given us in this effort.

Looking ahead, I envision an even stronger Fund that can even better address the needs of our 188 member countries. This vision rests on three objectives: agility, integration, and member-focus.

Together, conveniently, they spell the word “AIM”.

First, more agility. Earlier this year, the Fund moved swiftly to provide the Ebola-affected countries with debt relief and financial support worth more than $400 million. Thanks to an innovative approach, we were able to provide “cash in the bank” quickly to help those countries fight this devastating disease.

Another example of this agility is our support for the SDGs. Not only are we increasing access to all our concessional loan facilities by 50 percent, but we are also maintaining zero interest rate for countries facing major shocks and disasters.

We are taking steps to ingrain this new agility in the Fund. I promise you that we will be ready for future challenges. You will not hear: “this is not how we used to do it,” but instead: “how can we explore it with you?”

Second, a more integrated IMF. What does that mean? Connecting the dots on macro-financial linkages and cross-border spillovers. We will increase the macro-financial focus in a number of our upcoming Article IV reports—for example, for Mexico, Brazil, and Canada. And this is only the beginning.

We will also do more work on the Nazca Lines that shape our global destiny. That is why I am committed to a stronger emphasis on financial inclusion, inequality, gender, and climate change—where we will focus on the macro-critical aspects of these issues. This will allow us to complement the work of our partner institutions, like the World Bank.

Third, I want to see an IMF that is even more member-focused. A good example here is capacity building. In the past six months alone, we have provided support to 125 countries. To deliver our training and technical assistance even more efficiently, we are increasing the scope and reach of our online tools.

We will also be placing increased emphasis on servicing our low-income members—including to better mobilize the domestic revenues that are so important to tackle poverty and drive sustainable growth.

And we will strengthen our knowledge management to make best practices more easily available to all our members.

Our “AIM”—to become more agile, more integrated, and more member-focused—is no easy task. Working together, I know that we can—and will—deliver.

Why am I so confident about that? Because we have fantastic staff, the best we could possibly have, who have risen to countless challenges in the past. They are ready to do it again, and do it even better!

Governors, let me also pay tribute to your representatives at the Fund, the Executive Directors who—together—bring to bear the collective wisdom of all our member countries in the running of this institution.

Together, we have work to do; together, we are ready; together, we can do it


Let me conclude by shining a light on some of the young people that are with us today.

Earlier, we heard about Mauricio who inspired us with his dream for Peru. Behind me, you can see two evocative photos— “Smiling at Dawn” by Ramon Martinez and “Smiling at Life” by Juan Pablo Troncos. They are the winners of our photo contest.

Through their words and their art, these young people express a confidence in the future—for Peru, for Latin America, and for the world. They inspire us.

Brothers and sisters, hermanos y hermanas—yes, together we can do it!

I would like to end by thanking you—and by thanking them:

All the finalists—would you please stand up?

Muchas gracias.

1 President Humala, Chairman Bedoumra, President Kim, Governors, honored guests: I am delighted to be here today and would like to add my welcome to the IMF and World Bank Annual Meetings. Welcome!

I know that I speak for all in thanking the government and the people of Peru for their incredible hospitality. Thank you very much!

Lima is the first Latin American city to host the Annual Meetings in almost 50 years. This confirms the saying that “good things come to those who wait.”

2 Brothers and sisters, there is still so much to do.

Communiqué of the Thirty-Second Meeting of the International Monetary and Financial Committee (IMFC)

Chaired by Mr. Agustín Carstens, Governor of the Bank of Mexico

 October 9, 2015, Lima, Peru

Global economy

The global recovery continues, but growth remains modest and uneven overall. Uncertainty and financial market volatility have increased, and medium-term growth prospects have weakened. In advanced economies, the recovery is expected to pick up modestly, supported by lower commodity prices, continued accommodative monetary policies, and improved financial stability, but underlying productivity growth remains weak and inflation remains generally below central bank objectives. While growth prospects differ across emerging market and developing countries, the overall outlook is affected by uncertainties around commodity prices and global financial conditions.

Risks to the global outlook have increased. With stronger fundamentals, buffers, and policy frameworks, emerging market and developing countries are generally better prepared than earlier for a less favorable environment. Nevertheless, many emerging market economies are exposed to tighter financing conditions, slowing capital inflows, and currency pressures amid high private sector foreign currency indebtedness. Further declines in commodity prices could weaken the outlook for commodity exporters, many of which are low-income countries.

Developments in several countries connected with large refugee flows have created economic and humanitarian challenges for both source and host countries. China’s ongoing rebalancing toward more sustainable growth is welcome, while vigilance is necessary with regard to external challenges that might arise. In advanced economies, a sustained recovery in the euro area, positive growth in Japan, and continued solid activity in the United States and the United Kingdom are positive forces, although spillovers from increased market volatility may pose financial stability challenges in the near term. In many advanced economies, the main risk remains a decline of already low growth, particularly if global demand falters further and supply constraints are not removed. More broadly, high levels of debt remain a concern. Global imbalances are reduced from previous years but a further rebalancing of demand is still needed.

Global policy priorities

The key policy priorities are to take further measures to lift short-term and potential growth, preserve fiscal sustainability, reduce unemployment, manage financial stability risks, and support trade. We reaffirm our commitment to cooperation to implement this agenda forcefully in order to secure strong, sustainable, inclusive, job-rich, and more balanced global growth.

Careful calibration and clear and effective communication of policy stances are essential to help limit excessive market volatility and negative spillovers. We also reiterate our commitment to refrain from all forms of protectionism and competitive devaluations.

Support growth today: Advanced economies should maintain an accommodative monetary stance, where appropriate, consistent with central bank mandates. We are mindful of financial stability risks. We will implement fiscal policies flexibly to take into account near-term economic conditions, so as to support growth and job creation, while putting debt as a share of GDP on a sustainable path.

Emerging market and developing countries should use available policy space to smooth the adjustment to less favorable external conditions, while pursuing efforts to remove bottlenecks to stronger growth. In economies with limited policy space, fiscal policies should ensure sustainability while preserving efficient social and infrastructure spending. Commodity-exporting countries with worsening terms of trade and limited buffers may need to reassess their fiscal policies in the face of lower commodity-related revenue.

Invest in resilience: The global financial regulatory reform agenda should be completed and implemented in a timely and consistent manner and further developed, including through monitoring and addressing issues raised by financial activities outside the banking system, as necessary.

Priorities in many advanced economies are to repair balance sheets, tackle nonperforming loans, and monitor and, if necessary, address market liquidity issues. Emerging market and developing countries should continue to enhance policy frameworks and maintain adequate buffers. Foreign currency exposures warrant special attention, while exchange rate flexibility, where feasible, can act as a shock absorber. Appropriate, well targeted macro-prudential tools as well as strong supervision are important to preserve financial stability. When dealing with risks from large and volatile capital flows, necessary macroeconomic policy adjustment could be supported by macro-prudential and, as appropriate, capital flow management measures. A strong global financial safety net remains important in order to provide liquidity in times of need.

Secure sustainable long-term growth: Timely-implemented and well-sequenced structural reforms remain critical to raise productivity, potential output, and living standards; bolster confidence; and reduce inequality. There is a need to identify new sources of growth; address supply bottlenecks, infrastructure gaps, and population aging; and promote inclusive, environmentally sustainable growth. Further trade liberalization could complement and reinforce other reforms. Lower oil prices provide an opportunity to reform inefficient energy subsidies and energy taxes, as needed, while strengthening targeted social safety nets. In advanced economies, invigorating productivity growth will require a combination of policies to stimulate labor demand as well as labor supply—for example by raising female labor force participation—boost innovation, and enhance resource allocation in services sectors and investment. In emerging market and low-income countries, improving business conditions, institutions and governance, and closing education and infrastructure gaps can support continued convergence to higher income levels and help reduce inequality.
IMF operations

We welcome the IMF’s initiatives to be even more agile, integrated, and member-focused.

Countries are facing an increasingly uncertain global environment. Economic and financial linkages are becoming more complex and difficult to predict. In this global context, the IMF has to deepen its analysis and surveillance activities, and broaden the scope of its policy advice on macro-critical issues.

Policy advice and surveillance: We ask the IMF to help members calibrate policies to overcome the twin challenges of addressing vulnerabilities and enhancing strong, sustainable, and balanced growth.

We welcome progress in implementing surveillance priorities, including ongoing work on risk and spillover analysis, examining the links between monetary policy and financial stability, analyzing and addressing, as appropriate, “de-risking” pull-backs by international banks, strengthening exchange rate analysis, deepening macro-financial analysis, and closing data gaps—which should continue. We encourage the IMF, in cooperation with other international institutions, to continue to play its role with regard to international tax issues. Following the adoption of the IMF’s institutional view, we support a stocktaking of members’ policies in handling capital flows. The IMF should help emerging market and developing countries reap the benefits of foreign financing, including through advice to strengthen policies in order to mitigate risks of capital flow reversals. We look forward to expanded work on macro-critical structural reforms, including by leveraging the expertise of other institutions.

Attention should also be given to the macroeconomic consequences of demographic transitions, as well as migration and large-scale refugee flows in particular in the Middle-East and Africa.

We welcome the IMF’s contribution to the global framework for sustainable development and look forward to its implementation. We also look forward to the IMF’s active contribution—including through the assessment of macroeconomic implications of climate change—to a positive outcome of the Conference of Parties 21 (COP21) in Paris, consistent with its mandate.

Lending: We call on the IMF to continue to stand ready to respond promptly to future demand for financial assistance, including on a precautionary basis, for appropriate adjustments and reforms and to help protect against risks. In this regard, we look forward to the forthcoming stocktaking of the international monetary system, including a review of the adequacy of the global financial safety net architecture. We welcome the progress made in enhancing access to concessional resources. We look forward to the completion of the follow-up crisis program review; continued work on sovereign debt issues so as to facilitate timely and orderly debt restructuring; the review of the exceptional access framework; and completion of the review of the method of valuation of the SDR. We call on the IMF to continue to work closely with the World Bank and other international institutions to support the countries affected by the humanitarian and refugee crises, especially in the Middle East and Africa, in order to mitigate the adverse effects on the economies of the regions and spillovers to the global economy.

Capacity building: We support more integration and synergies between surveillance, program work, technical assistance (TA), and training, and the increased use of a results-based management framework. We welcome a shift in focus of capacity building and TA to bolster resilience, maintain debt sustainability, improve governance, and support global sustainable development goals within the IMF’s mandate, including boosting domestic revenue mobilization and financial deepening in developing countries and small and fragile states, and deepening the dialogue with developing countries on international tax issues while closely collaborating with other development partners.

This will also help countries tackle illicit flows. We look forward to IMF initiatives to boost peer learning and facilitate the transmission of best policy practices among its membership.

Governance and representation

We remain deeply disappointed with the protracted delay in implementing the 2010 IMF quota and governance reforms. Recognizing the importance of these reforms for the credibility, legitimacy, and effectiveness of the IMF, we reaffirm that their earliest implementation remains our highest priority and urge the United States to ratify the 2010 reforms as soon as possible.

Mindful of the aims of the 2010 reforms, we call on the IMF Executive Board to complete its work on an interim solution that will meaningfully converge quota shares as soon as and to the extent possible to the levels agreed under the 14th General Review of Quotas. We will use the 14th Review as a basis for work on the 15th Review, including a new quota formula. We remain committed to maintaining a strong, well-resourced, and quota-based IMF. We reiterate the importance of enhancing staff diversity in the IMF and encourage further progress.

We thank the government and the people of Peru for hosting our meetings and for their warm hospitality. Our next meeting will be held in Washington, D.C. on April 15-16, 2016.

Attendance can be found at