The integrator.

Between 1999 and 2001, a period during which the majority of countries in the region experienced serious crises, the Corporacion Andina de Fomento (CAF) was the multilateral organization that lent the most money to Andean countries, more then the World Bank and the Inter-American Development Bank (IDB) combined. The CAF, whose portfolio in 2004 was US$7.80 billion, has financed more then 34 infrastructure and integration projects in the region. Bolivian Enrique Garcia, 63, has been director of the CAF since 1991 and has been crucial to the entity's endeavors. Garcia talked with LATIN TRADE editors about how the region's countries have improved macroeconomic management and forecasted that the good economic times will last several years.

How important is the CAF for the public and private sectors of the region?

During years in which countries' economies are doing fine, the requests for government financing decrease; in this case, our focus is on the private sector. When that is the case, we focus on the public sector. For example, during the crises of 1999, 2000 and 2001, the CAF was fundamental for Andean countries. Without it, I don't know what they would have done because their credit was cut off. Now that the countries are starting to be more stable economically, possibly they will require us less. In this case, the private sector will start to have much more weight.

How has the macroeconomic management of the countries of the region changed?

If we compare Latin America in the 1970s and 1980s with what we see now, it's clear that all the countries are more conscious now that they cannot play with macroeconomics. Right now, there is no country with macroeconomic imbalances or that has shown a lack of responsibility in this regard.

But only three years ago Argentina plunged into a historic crisis.

Argentina came to a point where there was a significant crisis of the political system, a social crisis as well as an economic one. But what has happened? Like it or not, Argentina is dealing with its situation and, surprisingly after such a large devaluation, it has been able to regain price stability.

How important has Chinese demand been to the region and its current boom?

The fact that the economies have had such an accelerated recovery in the last few years is due in large part to good policies but also in large part to the international environment. That is to say, if we look back at 1992,1999, 2000, 2001, internationally, we were in crisis. There was a recession in the United States, Japan also continued to be in recession and Europe was not doing well. To recover under those circumstances was very difficult. Then we experienced a very unusual phenomenon, the India and China phenomenon. In particular, China has had an important effect on the international economy. Last year was Latin America's best in 25 years due to three very important phenomena. First, we've seen the fastest economic growth in 25 years--the average for the region is approximately 6%. The second reason is that inflation has dropped to below 10% in the majority of the countries. And the third reason is that the majority of the countries have had a surplus in their current accounts, something that is not common.

What do the governments in the region need to improve on?

There hasn't been enough work done microeconomically. I'm talking about infrastructure and logistics, about the capacity for technological innovation, about education, about the existence of capital markets that allow the financing of companies at reasonable costs. I am talking about institutionality, where the rules of the game are ongoing and permanent, where separation of powers exists, where there is justice. To be able to talk about a sustained growth we need to increase the capacity for domestic savings. For example, in Latin America the average is approximately $0.18 out of every dollar of national income, unlike the Chinese, who save $0.40.

How long do you think that the current, stable economy will last?

I believe that if matters are handled rationally it will last. I believe that under these circumstances, it is important that Latin American countries make critical changes and not spend all the money. Obviously the cycle will shift; you don't need to be a magician to see that. I believe that the Chinese economy's growth will continue for at least a few years, maybe three or four.