* Lula says protectionism only brings short-term relief
* World Bank official says protectionism "not a good idea"
* Some regional countries have raised trade barriers
By Stuart Grudgings
RIO DE JANEIRO, April 15 Latin American leaders
and executives urged governments in the region on Wednesday to
stop erecting trade barriers, saying the financial crisis was a
chance to tackle problems that have long hindered the region's
Brazilian President Luiz Inacio Lula da Silva, hosting the
Latin America World Economic Forum in Rio de Janeiro, said
protectionist moves by some countries would only deliver
short-term relief from the economic downturn.
"Protectionism is like a drug, which offers immediate
relief but then puts its victim in a prolonged depression,"
Lula, a strong proponent of renewing world trade talks, said in
a speech opening the two-day meeting of business leaders.
The global financial crisis has slammed the brakes on five
years of buoyant economic growth in the region, knocking demand
for commodities from oil to copper, pushing economies into
recession, and driving millions of people into poverty.
In a region with a long history of populism, leaders are
feeling pressure to shield their economies as trade flows
plunge and jobs are lost. Ecuador has sharply increased tariffs
on imports, Mexico has raised duties on a long list of American
imports, and Argentina tested Brazil's patience by imposing
extra import restrictions.
Mexico expects its economy to contract 2.8 percent this
year, while fellow regional giant Brazil last month slashed its
2009 growth forecast to 1.2 percent from 3.2 percent.
U.S bank Morgan Stanley said in a report last month that
the region would contract at least 4.3 percent this year, its
worst showing since 1983.
But unlike in previous crises that have hit the region,
stronger government finances have enabled governments to
respond with "counter-cyclical" policies such as lower interest
rates and fiscal stimulus packages.
"Independently of ideology, every single government should
focus on counter-cyclical measures," said Ricardo Villela
Marino, chief executive of Brazilian bank Itau.
CHANCE FOR REFORMS
"Also countries should focus on trade with their neighbors.
There's scope for new initiatives in Latin America,
particularly in inter-regional trade."
Despite five years of strong growth, the region still
suffers from poor infrastructure and low education standards
that economists say hinders its long-term potential.
"Maybe this crisis was the only way of making the needed
reforms," said Marcelo Bahia Odebrecht, the executive president
of major Brazilian construction firm Odebrecht.
"Latin America was at a velocity we couldn't sustain. There
is a lack of everything -- engineers, capable people,
products," he said.
Pamela Cox, the World Bank's vice president for Latin
America and the Caribbean, said countries should use their
fiscal responses to the crisis to strengthen social safety nets
and tackle long-standing inefficiencies.
Poor education, a lack of infrastructure, and subsidies
that favor the rich are areas that could be improved if
governments targeted them in their fiscal responses, she said.
"The quality of education is very poor in the region. It's
a competitive issue, it's a poverty and equity issue, so pay
attention to investment in people and not just in roads," she
Cox also voiced concern at recent protectionist steps,
although she said she saw no "wholesale" rise in such barriers
in the region.
"We are telling people this is not a good idea," she said.
"If you look back to the experience of the depression in
the 1930s, it's clear that these beggar-thy-neighbor policies
ended up in lower growth and a longer period of recession for
(Additional reporting by Elzio Barreto and Daniela Machado;
editing by Mohammad Zargham)