IDB ENTERS NEW YEAR WITH NEW ADMINISTRATION AND NEW, MORE FLEXIBLE LENDING FRAMEWORK
Lending to Latin America and Caribbean increases to $7 billion
The Inter-American Development Bank enters 2006 with a new administration and a new lending framework that will allow greater flexibility and a sharpened country focus for loans and grants to support the economic and social development of Latin America and the Caribbean.
IDB President Luis Alberto Moreno, who assumed office as head of the world’s oldest and largest regional development bank on Oct. 1, recognized the achievements of his predecessor, Enrique V. Iglesias, in an end-of-the year message to the Board of Executive Directors. He said the Bank will continue its role as a major contributor in assisting the region increase its growth in a framework of stability, poverty reduction and modernization.
“We live in a time of important changes and challenges to our region, with many of our countries electing new leaders,” he said. “The IDB member countries can count on the Bank to be at their side as they consolidate the recent gains of the past two years and adopt strategies and programs to ensure that the benefits of growth reach all of our citizens.” (Click for video)
Bank lending reached $7 billion during 2005, a 17 percent increased compared with 2004, when lending totaled $6 billion. More than 50 percent of the lending during 2005 was targeted to poverty reduction and social equity programs, exceeding guidelines set by the Board of Governors. A total of 92 projects were approved compared with 77 in 2004. In addition the Bank approved 390 technical cooperation projects during 2005 for a total of $83.5 million compared with 340 projects totaling $56.7 million during 2004.
Moreno told the Board of Executive Directors that his priorities will include advancing the hemispheric trade agenda and promoting competitiveness, meeting the demand for greater infrastructure investment, launching new initiatives to fight poverty, expanding activities to promote private sector growth and generating more credit and financial opportunities for small businesses and average citizens.
For the 12th year in a row the IDB during 2005 was the main source of multilateral development financing for Latin America and the Caribbean. In a move to make the institution more agile and country-focused, the Board of Governors during 2005 adopted a new lending framework that ends many restrictions on lending and provides new guidelines to make financing more flexible and country-responsive while simultaneously enhancing mechanisms for accountability.
In another innovation aimed at greater flexibility the Bank introduced a local currency option for disbursements on some loans.
The governors also authorized a $500 million increase in resources of the Multilateral Investment Fund. Administered by the IDB, MIF is the largest source of technical assistance to the private sector in Latin America and the Caribbean, particularly to small enterprises.
Moreno noted that the economies of Latin America and the Caribbean grew by 4.3 percent during 2005, the second straight year of healthy growth ─ a rate expected to continue during 2006. He said that although an estimated 10 million persons left the ranks of poverty during 2004 and 2005, the present poverty rate was “unacceptable” at an estimated 40.6 percent of the population.
Nevertheless, he added, it is noteworthy that extreme poverty in the region dropped by 25 percent since 1990, achieving 50 percent of the United Nations Millennium Development Goal set for 2015.
The IDB president said the region was demonstrating maturity and responsible fiscal and macroeconomic management in a framework of democratic institutions despite the challenges of political diversity and external vulnerabilities.
MIF, IIC and Private Sector Department
The Multilateral Investment Fund approved 115 projects to support private sector growth totaling $113.2 million, mostly grants, and introduced two new project clusters, one for the promotion of dynamic business ventures and another to support competitiveness through public-private partnerships. France, Haiti, Sweden, Switzerland and United Kingdom became new MIF members, bringing the total number of member countries to 38.
The Inter-American Investment Corporation (IIC), a member of the IDB group that supports private sector development approved a record level of financing during 2005 for a total of $341,650,000 for 37 projects, channeling resources to hundreds of small and medium-sized companies. The IIC also issued the first local currency bond in Latin America by a multilateral financial institution in which the proceeds ─ 150 billion Colombian pesos, or US$70 million ─ were reinvested locally.
The IDB’s Private Sector Department approved six loans from ordinary capital and eight guarantees for a total of $583 million to support infrastructure projects, financed without government guarantees, and international trade finance.
Debt reduction
The Bank granted more than $100 million in debt relief assistance to Bolivia, Guyana, Honduras and Nicaragua ─ countries that qualify for relief under Heavily Indebted Poor Countries (HIPC) Initiative. The IDB is the main contributor to HIPC debt reduction in the Western Hemisphere, having written off more than $1 billion in debt of those countries.
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