BID warning: war in Iraq could hamstring Latin American economy

The U.S. war in Iraq could further affect the already stagnated Latin American economy, warned Uruguayan Enrique Iglesias, president of the Inter American Development Bank (BID), at the opening session Monday of the 44th BID Annual Assembly in Milan, Italy.

“The immediate prospects for the world and regional economies can’t be any darker and blurrier… and they only get bigger in the face of this complicated situation now going on in the Middle East,” admitted Mr. Iglesias speaking to ministers and representatives from 46 countries, including Latin American and Caribbean nations.

Mr. Iglesias stressed that if the situation doesn’t get any worse off, “the regional economy could grow between 1.5 and 2 percent this year. Would this upturning trend go on, then growth rate could really peak 4 percent by 2004.”

According to the BID annual report, Latin America squandered half a decade back in the 1990s after remaining bogged down altogether in the lost decade of the 1980s.

For Brazilian minister of economic planning, Guido Mantega, “the world scenario was no doubt very harmful for Latin America during 2002.”

”The war in Iraq, more than any financial problem, stands for as political predicament of dire proportions that jeopardizes the multi-side approach that’s been supporting mutual understanding among nations since the postwar,” Mr. Mantega said.

The BID is also reckoning estimates based on plummeting oil prices from the current $30 tag down to an average $24 per barrel, a balance that could be broken by the ongoing war against Iraq.

”It all depends on the length of the conflict,” Mr. Iglesias told a group of reporter at the end of the meeting.

”If this war is brief, the impact will be relatively lesser. It’ll hit both oil and tourism, anyway. But if this war drags on, the impact on the economic growth of industrialized nations will be a whole lot more and with menacing consequences for developing nations,” he went on to explain.

For Argentina minister of economy, Roberto Lavagna, if the conflict drags on “then nobody will come out a winner. The global effect is negative,” he said during a press conference.

The economic downturn and its possible repercussions over poverty lines in Latin America were equally broached by many an attendant.

The percentage of people living with a meager income of just two dollars a day –a figure that had dropped from 48.3 to 42 percent in the 1990s- went back up to 43 percent in 2001 and climbed one notch to 44 percent in 2002.

Extreme poverty (one dollar or less a day) –down from 22.6 to 17.8 percent in that same decade- shot up to 18.1 percent in 2001. According to the BID, that same index probably reached 20 percent last year.

Out of the 523 million people living in Latin America and the Caribbean, 214 million are poor and 88 million live in extreme poverty. The latter indicator clambered in 6 million more poor people last year, in line with stats disclosed by the United Nations Economic Commission for Latin America.

Ministers of economy from Argentina, Colombia, Mexico, Uruguay, Chile and Panama, explained the current situation undergone by their nations and agreed to ask the bank for more flexibility in the face of each and every country’s latest developments.

The BID announced earlier this month the implementation of a $1 billion loan program aimed at uplifting the region’s economy following the 2002 slump when it posted the lowest numbers of the past 12 years.