Nicolas Dujovne, Treasury Minister of Argentina Federico Sturzenegger, Central Bank Governor of Argentina

Transcription

1 G20 Press Conference April 20, :30 p.m. Washington, D.C. SPEAKERS: Nicolas Dujovne, Treasury Minister of Argentina Federico Sturzenegger, Central Bank Governor of Argentina Mr. Dujovne - Hello to everyone. Thank you. It is a pleasure to be here together with Governor Sturzenegger to brief you on the meetings on the G20 under the Argentina presidency that we just held during yesterday night and this morning. Given the proximity of the very big meeting that we had in Buenos Aires some weeks ago, we focused the agenda on just a few issues. Yesterday we had a session on the global economy. Today we were speaking, we had two sessions, one on the future of work. The second session was on the Compact with Africa. On the Deputies' meetings, they were producing advances also in our other priority, which is infrastructure for growth. So let me make some points on the discussions that we had on the outlook for the global economy. Federico will speak about this later, but the participants stressed and continue to note that growth is firming and that we are going back to levels of growth equivalent to the pre-crisis level. We are back to growth equivalent to the one that we had prior to the crisis of 2008 and Of course, downside risks remain, although contained. And most of the participants pointed to the most important risks being the retreat to inwardlooking policies, the impact of monetary normalization in terms of the impact on the international economy, and then the geopolitical risks. On the future of work, we had a very fruitful meeting this morning. We all recognize the importance of the technological change in which we are in right now. We have a very

2 2 positive view on the outcome that this will have in terms of growth in the medium and longer-term. But, of course, this is also a challenge for our citizens which are facing this dramatic change in the way in which we produce, consume, communicate. So there is a very broad agreement that the outcome will be positive, but we have to shape the future. And in order to shape the future, there are some policy options that we can adopt to make the transition smoother to this new environment; so in that aspect, we discussed how taxes and transfers, competitive conditions, public expenditure, data collection, can help us to live with this transition. We will work with some of the conclusions that we had today to produce a concrete policy toolkit that will be presented in our meeting in Buenos Aires, a meeting of Finance Ministers and Governors, so we are working very hard on that. With respect to the Compact with Africa, this is a very important initiative that also shows how important is the institutional work of the G20 in which the Argentinian presidency maintains this initiative that was created by the German presidency. We received the report by the World Bank, a monitoring report, on how the Compact with Africa is working with very positive results. There are already close to one hundred projects being undertaken in the framework of the Compact with Africa, with 25 projects already completed and 75 which are undergoing right now. So having said that, I will pass the floor to Governor Sturzenegger. Federico, the floor is yours. Mr. Sturzenegger - Thank you, Minister. This is within the Argentina presidency, as you know the meetings here at the IMF do not have a communique; so the working agenda is

3 3 a bit different. We do not have to kind of agree on a particular statement. We can kind of express our views more openly. It is more like a working session in this case, particularly with a view on our July meeting in Buenos Aires and the kind of deliverables that we have to put on the table in that meeting. I think in that respect it was a very, very useful meeting. In terms of the global economy meeting and the perspective of the world, some people referred to things as a Tale of Two Cities, referring to the Charles Dickens book, in the sense that world growth has strengthened since our very recent meeting in Buenos Aires. The forecast, as you know, for growth in the world this year are basically close to 4 percent and remain at that level for next year; so as was mentioned before, the economic scenario in the world has strengthened and is very positive. At the same time there are some risks which loom on the horizon and which provide the contrast with that benevolent scenario in terms of growth. And already back in Buenos Aires, we had identified two main sources of concern -- Nicolas already mentioned them -- the retreat to inward-looking policies and monetary policy normalization. Those were identified in Buenos Aires as two sources of concern. So I think here we had a conversation. I would say that on the first issue there was general appeal for multilateralism. There is certainly the view that a lot of work still needs to be done. For example, the issue of trade in services, which is to some extent a pending agenda, was emphasized again in this meeting. The idea that the gains from trade have to be evenly shared is a concern that was placed both by advanced economies and emerging economies; so I think in that sense, we had a good and positive approach to the issue. On the second issue, which is monetary policy normalization, I would say that the best phrase there is when the sun is shining, it is the time to repair the roof -- I think that is

4 4 the way it is said -- and we have to use this opportunity of this upswing in economic activity to basically prepare fiscal and monetary policies to deal with the monetary policy normalization that we think is coming. People say it is a good thing that we talk about normalization because that means that things are kind of looking better. And, again, and here also, I would say there was a common thread to a lot of the participations and interventions, which was communication. This process has to be gradual, so there was really the concern or the desire or the suggestion that whenever the process of monetary policy normalization is going to take place, should have a gradual deployment but also should entail a lot of communication between the different participants; and I think that was a commonly shared view. So I think those were the main issues that were discussed in the global economy meeting, and maybe I will stop here so we can take the questions. Questioner - You talked about stressing a multilateral approach, but your two biggest members, the United States and China, are busy imposing punitive tariffs on each other. How did that factor into your discussions? Mr. Dujovne - Yes. It is very important to point out that the G20 is a group of macroeconomic coordination. It may be the most important group on macroeconomic governance, so basically trade enters in the discussion as an input to assess the risks to the global economy. So we discussed trade and the potential impacts on the global economy and the potential disruption that modifications on the trade scheme can actually pose to the global economy.

5 5 The G20 is not the place in which we discuss the specific measures, which is WTO, which is the institutional arrangement that we have to deliver on the specific rules that are mandatory. So every discussion held under the G20 on trade is related to how can that affect growth, and we did not have a discussion on specific measures on trade. Questioner - I have a question for each one of you. Mr. Dujovne, can you give us an idea of what is the concern between the Ministers of the group regarding the consequences of a potential trade war on global growth? Like how deep into the discussion did you go on this topic? And for Mr. Sturzenegger, there has been some talk in this meeting about a potential reversal in the financial conditions in the future with increasing interest rates and all that. I was hoping if you can give us a sense of what did you talk with the other central bank presidents about what is the main risk that could trigger this reversal in the financial conditions? Mr. Dujovne - Thanks for the question. Concerns on trade disputes occupied some part of the discussions that we had yesterday, and, of course, it is still one of the three main concerns in terms of the downside risks for the economy, as I mentioned before. The three downside risks that most of the participants noted were the retreat to inward-looking policies, geopolitical risks, and monetary policy normalization. So it is clear that it is a source of concern, and some of the participants expressed that when they gave their opinions. I will also stress that even when there are some differences that maybe one year ago were not present at these discussions on the G20, still we have a very strong consensus on

6 6 how beneficial is trade in terms of increasing growth, increasing prosperity, lifting productivity. So even when some difference appeared in the last few months, still we can say that we still have a very big consensus on the benefits of trade for growth. Mr. Sturzenegger - Let me take the monetary policy normalization, which was the second part of the question, and this is certainly something that is happening. I mean, I think nobody will challenge the view that that monetary policy normalization is going to happen across the globe. Of course, that might mean an increase in interest rates. You know that debt levels have increased significantly, not only in emerging markets, but also in advanced economies. So that really poses a challenge to fiscal policy. That is the reason why we say when the time is good, then you have to prepare your fiscal policy and strengthen your fiscal policy to prepare for that world with higher interest rate. Regarding emerging economies, always monetary policy normalization in the advanced economy has spillovers into the emerging market world, so this was also a source of concern and a source of discussion. The scenario is a little bit different. Today most countries have floating exchange rate. Floating exchange rates provide a substantial buffer to this kind of re-accommodation, so also I think that provides some relief and some comfort regarding as to how the economies are going to react to the monetary policy normalization. Perhaps 2017 in that respect is a good example. And as we were saying, the growth prospects for this year and next, which are two years in which monetary policy normalization is going to proceed, still remain very strong; and that has to do with the fact that monetary and macroeconomic policies are much stronger in emerging markets and that you have these buffer mechanisms to deal with that.

7 7 Two other things that I want to mention that were part of the discussion, was the question is that you know the risk appetite, some of the participants mentioned, is very strong. I mean, people are looking for yield. They are willing to hold assets. Once you have the process of monetary policy normalization, you may have a sudden reversal in the risk appetite of players; and that can somehow generate some disruption in the market, so that is something that was mentioned. And another issue, which is perhaps a bit more technical but very significant in size, is that since the great financial crisis, and I think G20 played a very central role in strengthening the regulatory framework for the international financial system and for financial institutions; but since then -- and this was discussed by several participants - - market-based financing sources, which do not go exactly through the regulatory framework, have grown at an astounding rate. So the question is when we should start looking at that a little bit, that may be a source of risk in the process of monetary policy unwinding, and that was, I would say, this is something that has to be looked into but was mentioned also as part of the discussion. Questioner - I wanted to ask you about the progress being made by G20 in the fight against corruption and curbing terrorist financing. Quite often it has been said that G20 has not been very effective on these two fronts, so can you update us on that? Mr. Sturzenegger - Let me take one piece of the agenda which I think touches on the corruption agenda. Of course, as you know, there is a particular session that we did not deal with in this meeting in particular, which was on antiterrorism financing and moneylaundering. We did touch on that issue in Buenos Aires. A very important part of the

8 8 discussion in Buenos Aires had to do with crypto assets, but I think there was a certain concern in the group that to the extent that those crypto assets become a vehicle for moneylaundering, they have to be addressed. We did not discuss this issue here, but it was, I would say, a very, very significant part of the discussion in Buenos Aires, and I think it is going to come back in July in Buenos Aires. There is a second part of the agenda which is, as you know, that one of the two priorities of Argentina is to building infrastructure assets as an asset class in the same way that today we have sovereign debt being an asset class and which was created back in the 1990s as the result of a multilateral effort that one of the two big issues that Argentina has chosen for this G20 is to see if we can somehow provide the framework of standardization, project preparation, legal framework, which where an investor in the world can buy a paper where the underlying asset is an infrastructure contract. Why do I mention this? In this meeting it was touched upon in the Deputies' meeting, and we have very high hopes of bringing deliverables to the table on this issue in July. Why do I relate this to your question, you may be asking yourself? The reason is this one, is that in order for you to be able to go to the market and buy an asset where the underlying asset is an infrastructure contract, that infrastructure contract has to be standardized. It has to be clear what that contract is. It has to be clear what that conflict resolution mechanism is. That will cut across the corruption agenda as well because that will force -- well, it would have to have a clear and transparent procurement process. If it does not have it, then probably, and you cannot ensure that, probably the investor will not be so excited about buying that paper. So the infrastructure as an asset class, even though the main theme of that project is how do we connect the trillions of dollars earning negative yields in the world with high-

9 9 return projects in the development world, and that is the main theme of the project, I think it also touches upon the anti-corruption agenda because it standardizes basically the procurement of infrastructure around the world, and I think that adds into that dimension. Mr. Dujovne - Of course, there are other issues related to that that are treated in the G20 -- not in these sessions -- but BEPS is a very important part of that, base erosion and profit shifting. Also, in the taxation part of our work, there are also a lot of things related to corruption fighting. Questioner - I am curious; the Managing Director has been speaking out a lot about debt levels as a major concern, but it is not one of your three top concerns; and I am wondering what was discussed. Was the US deficit and its potential to upset markets discussed? Were the Chinese One Belt One Road debt levels that the Managing Director has talked about brought up in these conversations? Where did debt fit in? Mr. Sturzenegger - Well, the Managing Director did mention the topic again, and not only her, but I think as I was mentioning before in the answer to a question, as part of the monetary policy normalization, if you enter this normalization with high debt levels around the world, then of course you are going to have fiscal policies very much pressed on this issue. So certainly that was -- it was an important source of concern. Mr. Dujovne - Another issue with regard to that is a point was made especially by, also by the IMF, in terms of watching on the levels of debt and the impact on the lenders on

10 10 low-income countries that increased rapidly the level of debt. But also a call for using this period of increased growth, once we are reaching levels of growth similar to the ones that we had prior to the crisis, it is time to face the necessary corrections on the fiscal side. So this phrase that Federico also mentioned before, fix the rooftop on a sunny day, applies also to the responsibility that we as policymakers have in terms of being countercyclical with our fiscal policies, and the time is now, because growth is turning to be robust, and we have to take note that this growth is robust; and there is no room right now to avoid entering into countercyclical policies so as to ensure that the future path of the evolution of the debt will be solvent. Questioner - Thank you very much. I would like to put a question to the Minister on trade. I think the recent moves, tit for tat moves between the United States and China, are threatening destabilizing the postwar liberal trade order are based on the rules of WTO itself. So I deeply understand your case you made earlier on trade about the role of G20 that the roles are limited; but I was wondering if -- the efficacy and rationale of such an international forum as G20 are tested now more than ever, I think. So I was wondering if G20 could play a more proactive role to encourage better behavior of the US and China in this aspect? Mr. Dujovne - Well, one or two points regarding your question. First, the G20 is a group that decides on a consensus basis. It is not that we vote and the result of the majority is imposed to the rest of the members. We do not issue regulations. So the outcomes that can come from the G20 in terms of tranquility are conceptual, very, very conceptual. So clearly right now the consensus that we have reached on trade is on the benefits of trade. There are

11 11 discussions on multilateralism but not on the benefits of trade. So even when some differences appear, still there is a very broad consensus; and we have to also recognize the limitations that we as a group have. This group was very important to make smoother the financial crisis of 2008, 2009, and we have to keep this group working together. We have to focus on the things that put us to work together rather than the differences that we have, because, of course, this is logical that in a group of 20 countries, some differences will arise; but it is part of the job to try to find the consensus, even if the consensus is more limited than the one that we want. But having this group working together, being prepared to provide rapid resolutions and recommendations if we face another crisis, is crucial in our view.