In accordance with Inter-American Development Bank (IDB), strengthen confidence is the key to face the economic recovery once the Covid-19 pandemic in Latin America can be overcome. According to the entity, Lack of trust is an acute problem that limits the region’s socio-economic development and affects its ability to solve complex challenges, like climate change.
In a report titled “Trust: the key to social cohesion and growth in Latin America and the Caribbean”, the IDB assured that 9 out of 10 Latin Americans distrust others, with a confidence level for the region that is equivalent to a quarter of that of developed countries that make up the Organization for Economic Cooperation and Development (OECD).
“Mistrust – between governments, citizens, workers and companies – obstructs any path to inclusive growthIn other words, it restricts entrepreneurship, innovation and investment. It also limits the movement of workers, capital and ideas towards companies and sectors with the greatest growth potential, ”the report adds. “Untrustworthy governments reduce business incentives to employ, invest and innovate”, They maintain.
For the IDB, “in Latin America and the Caribbean, low confidence in the private sector and in private companies is a reflection of low confidence in public institutions”. That mistrust, according to the report, translates into a tendency to evade taxes: “In a context of widespread mistrust, people are more likely to take advantage of the contributions of others and they do not contribute to the financing of government actions ”.
The organism refers to a “Human capital paradox” in the region: “Although companies in the region frequently cite the shortage of skilled workers as a key impediment to growth, investments in human capital by both companies and individuals have not increased significantly to close the gap”.
“Promote trust through greater transparency and stronger institutions should be a priority on the Latin American political agenda“, He said Mauricio Claver-Carone, President of the IDB, in a statement. “Putting trust at the center of government decision-making rwould significantly encourage development in the region”He added.
“Greater trust means less red tape that hurts business, investment and innovation. It means more transparent governments, committed to keeping their promises and being accountable. It also implies committed citizens actively participate in enhancing democracies and support the construction of more inclusive societiesClaver-Carone added.
According to the IDB, countries with higher confidence tend to enjoy higher levels of productivity, while those with low confidence indices “have a larger informal economy in relation to their GDP.” Therefore, the IDB’s recommendation for the governments of the region is create incentives, through public policies, “for public officials, economic agents and citizens to act reliably”.
Along these lines, the IDB indicates that governments should “reduce power asymmetries, raising the accountability index and strengthening independent institutions to ensure compliance with the rules so that citizens and firms feel that they can count on these institutions in case of abuse, whether by the government, companies or other citizens ”.