Joint Ministerial Statement
III Western Hemisphere Finance Ministers Meeting
February 3, 2000, Cancun, Mexico

1. Finance Ministers of the Western Hemisphere held their third meeting on February 3, 2000 in Cancun, Mexico. The meeting was chaired by Mexico�s Finance Minister, Angel Gurr�a (a list of participants is attached in Annex III).
2. The Committee on Hemispheric Financial Issues (CHFI) was established in December of 1994, within the framework of the First Summit of the Americas, as a forum where Finance Ministers of the Hemisphere could meet and discuss relevant economic and financial issues for the region. Since the establishment of the CHFI, Finance Ministers have also met in New Orleans, Louisiana, in May of 1996 and in Santiago, Chile in December of 1997.
3. In the Third Western Hemisphere Meeting, Ministers reviewed the performance of the global and regional economy during 1999 and prospects for 2000 and beyond. They agreed that those member economies that experienced a downturn in economic activity in 1999 are gathering pace and that most economies in the region could expect moderate to strong growth and declining inflation this year. The easing of global financial tensions, lower interest rates and reduced currency pressures, and improving commodity prices have all contributed to the economic recovery in Latin America. Ministers reaffirmed their commitment to strong macroeconomic and financial policies, which they agreed are necessary to reduce volatility and ensure the sustained growth and stability needed to raise the living standards of all their people, and reduce poverty.
4. Ministers welcomed and endorsed the Highly Indebted Poor Countries (HIPC) initiative and its focus on poverty alleviation, and they affirmed their commitment to participate fully in providing debt relief on their bilateral claims on HIPC countries. They agreed that such relief imposes exceptional burden on some less developed country creditors, and they supported efforts underway to find a solution to this problem. In regard to providing relief on HIPC country obligations to multilateral, regional and subregional institutions, they emphasized the need for equitable burden-sharing among all member countries of these institutions, according to their payments capacity and level of development. They highlighted the fact that the industrialized countries -- particularly G-7 countries -- should continue to assume a leading role on the HIPC initiative. They also called upon the IADB to make every effort to find a solution to support its share of the HIPC initiative, no later than by its upcoming annual meeting.
5. Ministers reviewed the ongoing efforts to improve the stability of the international financial system and discussed ways in which the countries of the hemisphere can benefit from and contribute to these efforts. In this respect, discussions focused on reducing countries� vulnerability to financial crises, crisis resolution measures, and social safety net mechanisms. They also made reference to the particular problems of small economies.
6. CHFI Ministers agreed that sound national financial policies are central to building an international financial system less vulnerable to crises and endorsed efforts in the region and elsewhere to strengthen banking regulation and supervision. They stressed the important role that sustainable and consistent exchange rate regimes have on reducing financial vulnerability. They also recognized the importance of sound debt management policies, which must not only consider the level of the debt but also its maturity structure, as well as of prudent fiscal management. They discussed the need to address the issue of reducing vulnerability to economic and financial disruptions within the broader framework of national balance sheet management, including the potential role of market based mechanisms to deal short term capital inflows. Ministers agreed upon a set of initiatives that would help attain sound national financial policies. These initiatives are listed in Annex I.
7. Ministers also examined issues relating to crisis response, including the appropriate role of the private sector�s involvement in crisis resolution as well as the adoption of ex-ante measures to reduce the likelihood and severity of crises. They examined the efforts undertaken by governments to design and expand social protection systems in a context of growing economic integration.
8. Ministers discussed the increasing need, as their economies become more integrated with each other and with economies around the world, to work individually and jointly to improve governance and the transparency of national institutions, which they agree is important in its own right and will also help to foster greater growth and stability. In that regard, they agreed upon a set of initiatives intended to address money laundering, corruption and tax evasion, and to improve corporate governance. These initiatives are listed in Annex I.
9. Finance Ministers reviewed and welcomed the progress on the initiatives set forth in Santiago, Chile. Those included several measures to strengthen the stability of banking systems, including implementation of the Basle Core Principles for Effective Banking Supervision, improved transparency and disclosure for banks, additional training for bank supervisors, and strengthened payments and securities clearance and settlements systems. They also included the commitment to establish or strengthen national units to fight financial crime. A summary of the status of the Santiago initiatives is presented in Annex II.
10. Ministers agreed that the next ministerial meeting of the CHFI would be held in Canada in the year 2001, at which time member countries would report back on their progress on the new initiatives. The CHFI will be co-chaired by Canada and Mexico.
11. Finally, Ministers expressed their deepest gratitude and appreciation to Michel Camdessus for his efforts and support towards the region during his tenure as Managing Director of the IMF, and wished him success in any new endeavor he may undertake.

ANNEX I: New Initiatives

1. Good Governance and Transparent Institutions

1. Money Laundering.

Ministers agree that money laundering, through which criminals seek to disguise the illicit nature of their proceeds by introducing them into the stream of legitimate commerce, facilitates the activities of drug traffickers, arms dealers, terrorists, and corrupt public officials. In today�s age of rapidly advancing technology and globalization, money laundering is global in reach, and efforts to combat it likewise require international cooperation as well as national efforts. If unchecked, it can undermine public trust in financial institutions and governments.

Ministers agree that additional efforts are important to build on commitments agreed upon in Santiago and to strengthen mechanisms to ensure their achievement. In this context they:

1. Call upon all member countries to support full and effective participation in the mutual evaluation mechanism of the OAS/CICAD to be initiated in 2000.

1. Call upon all member countries to support and participate in financial action task forces, in either the Caribbean Financial Action Task Force (CFATF) or the new Financial Action Task Force for South America, whose creation Argentina and Brazil have pledged to lead.
2. Call upon the IMF, working together with the other IFIs:

1. To update previous studies on the magnitude of money laundering and its macroeconomic impacts, and analyze in particular the effects of money laundering flows on the economies of the Hemisphere, employing case studies as appropriate, and
2. To explore mechanisms that could be pursued by the IMF and other IFIs to encourage and support countries in their fight to eradicate money laundering.

1. Corruption.

Ministers agree that corruption has been recognized as a serious problem that adversely affects investment, public revenues, growth and development in much of the Western Hemisphere, and note that the OAS has identified corruption as a threat to investor and taxpayer confidence.

Therefore, Ministers:

1. Call upon IFIs to provide assistance as appropriate and upon request to help ministries of finance and economics to identify and combat problems of corruption in areas of customs, tax, budget, procurement and financial regulatory administration, and
2. Call upon all member governments to ratify and implement the OAS Anti-Corruption Convention and to support establishment of a follow-up OAS mechanism for multilateral and mutual review and evaluation of progress towards effective prevention and punishment of corruption.

1. International Tax evasion

Tax evasion may jeopardize the integrity and stability of financial systems, adversely affect revenue collection, and compromise the fairness and integrity of domestic tax systems. Ultimately, countries� ability to pursue sound fiscal management may be undermined.

Ministers call upon the IADB, the World Bank, the IMF and member countries to provide technical assistance and other support to:

1. Jurisdictions interested in undertaking reforms to reduce the potentially harmful aspects of their financial regimes and whose financial services sector may be adversely impacted by such reforms,
2. Other countries in the region in their efforts to combat tax evasion, and
3. The promotion of international cooperation in this issue.

1. Corporate Governance.

Recent episodes of crises uncovered the weaknesses of the legal, institutional and regulatory frameworks that govern firms� activities. These weaknesses adversely affect the relationships between the different participants of the governing system: a company�s management, its board, its shareholders and other stakeholders. Thus, good corporate governance should provide firms� management and board with the appropriate incentives to pursue the objectives that are of interest to the company and its shareholders, encouraging firms to use resources in a more effective manner. This should stimulate investment, both domestic and cross-border, and should foster more efficient and transparent operation of firms in the economy.

In this respect, Ministers agree to:

1. Establish a working group, chaired by Mexico, to assess corporate governance practices in selected CHFI economies taking into account work already underway in international fora and the private sector, against the standards set forth in the OECD principles of corporate governance.
2. Develop recommendations before the next CHFI ministerial on measures that could be taken to strengthen practices throughout the region.

2. Financial Policies to Achieve Higher and Sustainable Growth

1. FSAP and Standards.

Ministers welcome the work carried out jointly by the IMF and the World Bank during the current, pilot phase of the Financial Sector Assessment Program (FSAP), a Program whose purpose is to assess the soundness and, when applicable, developmental needs of national financial systems.

Ministers support the mainstreaming of the FSAP by the IMF and the World Bank once the current pilot phase is evaluated in the second quarter of the year. After noting that this pilot phase includes assessments of Colombia, Canada and El Salvador, they encouraged the participation of other Western Hemisphere countries in the new phase of the Program.

Ministers further endorse the recent and ongoing work on codes and standards -- covering, inter alia, financial supervision, policy transparency, and data dissemination -- carried out by the various competent standard-setting bodies, including the IMF and the Basle Committee on Bank Supervision. Ministers support and agree to participate in the IMF experimental Reports on the Observance of Standards and Codes ("transparency reports").

2. Debt and Fiscal Management.

Ministers agree that sound debt and fiscal management are increasingly important in a more integrated world to reduce countries� exposure to refinancing risk and improve their ability to manage efficiently cyclical fluctuations in revenue. Sound debt and fiscal management contribute critically to reducing countries� vulnerability to financial crises, to making countries more resilient in the face of various shocks and, ultimately, to achieve long-run stability and growth.

In this context, Ministers call on interested countries, under Canada�s leadership, to prepare discussion papers on their debt management and on their fiscal management, and ask the IADB, the IMF and the World Bank to host a seminar to discuss these papers. The papers would include the following:

(1) Debt management:

1. current debt management practices, in the context of the debt management "best practices" currently being developed by the IMF and the World Bank,
2. profile of outstanding debt structure,
3. establishment of adequate communications with the market.

(2) Fiscal management:

1. current practices for setting and achieving fiscal targets,
2. current practices for responding to cyclical fluctuations in revenue.

The debt and fiscal management initiatives will build on the work being carried out in other international fora and focus on implementation within the hemisphere.

(3) Harmonization of fiscal and debt statistics.

ANNEX II: Santiago Initiatives

• Strengthening and Promoting Financial Stability.

• Basle Core Principles. Ministers note the ongoing work performed by the Association of Supervisors of Banks of the Americas (ASBA) in reviewing countries� implementation of the Basle Core Principles for Effective Banking Supervision. They welcome the ASBA�s plans to conclude its Santiago work program with a review of Basle Principles implementation by 15 countries in the Western Hemisphere, which will be finalized by not later than December 2000. In that regard, they welcome and endorse the financial support to be provided by the IADB/Multilateral Investment Fund (MIF) and by member countries being reviewed. They further agree that this ongoing work by the ASBA should be complementary to the financial sector assessment initiative described in Annex I.
• Transparency and Disclosure. Ministers reaffirm the importance of improving transparency and disclosure practices of banks in the hemisphere and appreciate the working group�s efforts to evaluate the reporting and disclosure requirements of five countries (Argentina, Brazil, Chile, Mexico, Venezuela). Ministers recognize Chile�s leadership in this area and agree that the working group will continue its work, under the leadership of Chile, with assessments of bank transparency and disclosure in additional countries of the region. Ministers encourage countries undergoing these evaluations to share their experiences with other member countries and to develop concrete plans to address identified weaknesses. Further support of IFI�s is needed.

• Strengthening Financial Markets.

• Bank Supervisor Training. Ministers thank member governments and ASBA for their efforts to develop an effective curriculum and infrastructure for bank supervisor training. Two formal training programs are currently underway, one for 18 Spanish-speaking countries, under which a number of supervisors and instructors have already been trained, and one for 12 Caribbean countries, for which IADB funding is available. Ministers encourage member governments, in conjunction with ASBA and others, to continue their training efforts.
• Payments and Securities Clearance and Settlement Systems. Ministers reaffirm the importance of transparent, efficient, and secure clearance and settlement systems. Ministers recognize the World Bank and member governments for their productive work on this initiative, including the formation of an advisory council consisting of representatives of several central banks and bank supervisory institutions, the development of greater communication among securities regulators and central banks, and work on country assessments of Peru, Argentina, and Chile. Ministers agree that a sustainable effort is warranted in this area which would: (1) promote and assist with the mobilization of resources for continued work on improving clearance and settlement systems in the hemisphere, and (2) evaluate the usefulness of establishing a regionally-based mechanism to advance implementation of relevant standards set by international standard-setting bodies such as the Committee on Payments and Settlement Systems.
• Combating Financial Crimes. Ministers welcome the progress since Santiago on the establishment and strengthening of special country-level units to combat financial crimes, including money laundering, and on the timely sharing of information on financial crimes. They note that eight new units have been formally recognized since the last ministerial and seven more are nearing completion in the hemisphere, which will bring the total number of units in the hemisphere to 20. Ministers reaffirm their commitment to encourage the establishment of such units where they do not now exist and to continue to expand national and international coordination to fight financial crimes and money laundering.
• Establishment of an FTAA Financial Services Negotiating Group. Ministers note that discussions on trade in financial services have been progressing as part of negotiations on services and investment under the Free Trade Area of the Americas (FTAA) process. Ministers reaffirm the importance of dealing with financial services in a separate negotiating group within the FTAA, which could be established at an appropriate time in the near future. It will work within the context of a single undertaking.
• Credit for Microentrepreneurs and Small Businesses. Ministers welcome the progress made under their Santiago initiative to expand access to credit and broaden economic opportunity to microentrepreneurs and small businesses in the hemisphere. Ministers thank the IADB for its leadership role in this area, including: (1) the $1.4 billion investment during 1998-1999 by the IADB and MIF in microfinance and small business credit as well as other programs to facilitate the expansion of such credit, (2) laying the groundwork for the upcoming meeting, co-hosted by the IADB and MIF, which will address concerns of the region�s superintendents with respect to regulation and supervision of microfinance and will set up an advisory council for the establishment of sound microfinance lending guidelines. Ministers encourage member governments, the IADB, and other regional and subregional groups to continue their efforts to expand the availability of credit to microentrepreneurs and small businesses.

ANNEX III: List of Participants