Press Release No. 07/20

Press Release: Statement by IMF Managing Director Rodrigo de Rato at the Conclusion of His Visit to Costa Rica

February 2, 2007

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in San José on his visit to Costa Rica, where he participated in the High-Level Conference on Investment in Central America:

"It has been a great pleasure to come to Costa Rica for the first time as Managing Director of the IMF and participate in this conference, which is the first of its kind in Latin America. I wish to express my gratitude to President Arias and the Government of Costa Rica for hosting this important event, and to the World Bank for co-sponsoring it with the IMF. The discussions by a distinguished and diverse group of senior policymakers, leaders of business associations from Central America, Panama and the Dominican Republic, major international investors, and senior representatives from international financial institutions has yielded new insights on the policies that are needed to improve the investment climate, and thereby enhance growth and reduce poverty in the region.

"Participants at the conference (see communiqué) agreed that this is a critical moment for enhancing Central America's ability to attract investment. The Free Trade Agreement between the United States, Central America, and the Dominican Republic (CAFTA-DR), the beginning of negotiations with the European Union, and the strengthening of regional integration offer great opportunities. The key task for policy makers is to strengthen policies so the region can compete successfully in global markets. We believe that, with the right policies in place, the outlook for enhancing investment in Central America is extremely good, which brings benefits to all sectors of society.

"The key drivers of investment are economic and political stability. Central America's solid macroeconomic performance in recent years reflects stronger policy frameworks, resulting in higher growth and reduced inflation with the support of a favorable global environment. At the same time, several countries in the region have had elections and smooth transitions of power, demonstrating the growing maturity of political institutions.

"The conference focused on the main priorities to enhance Central America's investment environment, including efforts to improve the quality of education, upgrade infrastructure, enhance tax and customs administration, make further progress in harmonizing tax and regulatory regimes across countries, foster regional integration projects, reduce red tape, level the playing field, and put in place wide-ranging governance reforms, including strengthening the rule of law. I believe that sustained progress in addressing these challenges would substantially improve the investment climate in the region.

"It goes without saying that the IMF remains committed to collaborating with the countries in the region to develop an agenda for growth and poverty reduction that takes into account their economic circumstances. The IMF has been engaged in Central America through surveillance and program work (including for debt relief) and will continue to be actively involved in the coming years. The Fund will also continue to support regional integration through technical assistance programs.

"On this trip, I have had the privilege of meeting with President Arias, and to hear his views on economic and political challenges and priorities. I also met Minister of the Presidency Rodrigo Arias, Central Bank President Francisco Gutiérrez, Finance Minister Guillermo Zúñiga, and Trade Minister Marco Ruiz, as well as other cabinet members. We discussed Costa Rica's prospects in the near-term, which remain very favorable, boosted by sound policies and a supportive external environment. In 2007, we expect that growth will remain strong and that inflation will decline further. To underpin this performance, the Fund strongly supports President Arias' reform agenda, including the ratification of CAFTA-DR and tax reforms. There was broad agreement that this ambitious reform agenda will strengthen Costa Rica's integration in global markets, allow higher spending on education, infrastructure and social needs, and reduce vulnerabilities. "