The Diplomat
The Governor of the Bank of Spain, Pablo Hernández de Cos, believes that the ratification of the trade agreement reached in 2019 between the European Union (EU) and Mercosur would have significant positive effects on trade flows and on GDP in the two areas, particularly those of Mercosur.
Hernández de Cos, who participated on Thursday in a digital meeting organized today by the Business Council Alliance for Ibero-America (CEAPI) to analyze the economic situation and the challenges of Latin American economies, assured that, “within the EU, Spain would be among the economies that would benefit most from the agreement”.
The Governor stated that one of the main challenges facing the region today is the possible increase in inequality as a result of the pandemic.
In the current context, Hernández de Cos considered that Latin American economies could benefit “notably” from the design and implementation of a “broad” program of structural reforms to transform their productive structures and increase their competitiveness and productivity.
In his opinion, fiscal policy could play a “significant” role through public spending on infrastructure and improving the quality of education.
Hernández de Cos recalled that almost 31 percent of Spanish foreign direct investment assets are located in the region, with a prominent position in Brazil and Mexico. He added that trade exchanges are also very significant, since 4.8 percent of Spanish exports of goods and 7.8 percent of those of services are destined for Ibero-America.
The Governor of the Bank of Spain also pointed out that the region is also increasingly relevant for the Spanish banking system. “Spanish banks’ exposures to Latin America represent, with data prior to the pandemic, almost one fifth of the system’s total exposures and close to 30% of exposures outside Spain,” he said, while warning that the risks could become systemic.
On the other hand, Hernández de Cos said that the region’s authorities could “facilitate the initiatives of entrepreneurs” with less regulatory burden and encouraging the reduction of the informal sector, which “would increase the tax collection capacity of the tax systems”.
He also referred to a report that CEAPI and the Ibero-American General Secretariat presented in mid-2020, which encourages the essential role of entrepreneurs in overcoming the economic and social crisis caused by the pandemic.
For her part, Núria Vilanova, president of CEAPI, highlighted the relevance of entrepreneurs “to make more Ibero-America, doing more business”.
