Representatives of Latin American and Caribbean countries on Monday urged that the Inter-American Development Bank (IDB) be better equipped to help them face natural disasters and potential economic downturns.
The call came during the annual meeting of the IDB Board of Governors in Montevideo, Uruguay, an IDB press release stated.
The Board is the bank’s top policymaking body and is composed of representatives from 48 member countries. Governors are finance ministers, central bankers and other government authorities.
Uruguayan Finance Minister Fernando Lorenzo, who was elected chairman of the Board of Governors, said that the recent capital increase has put the IDB in a better position to support its 26 borrowing member countries in Latin America and the Caribbean.
However, Lorenzo added that the region’s governments also need hedging instruments such as contingent credit lines in anticipation of emergencies, such as those triggered by natural disasters or contagion from international financial crises.
“The region’s countries today need a stronger IDB, more active and creative in developing new tools,” said Lorenzo, who emphasised that Latin America and the Caribbean still face great challenges in reducing inequality—a vulnerability of their countries.
“In the past, insufficient funding was the main cause of dysfunction in national policies and… in instances when it was necessary to carry out painful, excruciating adjustments, with extremely negative social consequences for region,” he said. “Therefore, the IDB and other regional institutions do well in offering us more and better tools to address such contingencies,” he added.
IDB President Luis Alberto Moreno thanked the Board of Governors for its vote of confidence in completing the recent capital increase, the largest in its history, which raised the authorised capital to $171 billion.
Moreno also highlighted the significant progress made in areas such as development effectiveness, transparency and accountability, risk management and financial management.
“However, building a more solid and effective institution is an ongoing process of strengthening and learning. The bank will continue working to ensure that the goals of this agenda are achieved,” said Moreno.
Regarding the prospects for Latin America and the Caribbean, Moreno noted the region’s economies’ good performance, which have been sustained despite the uncertain global context.
The region today is recognised for its dynamism and its opportunities, he said. Over the past decade, more than 50 million people were lifted out of poverty and the middle class expanded substantially.
However, those achievements could be threatened by crises sparked in other parts of the world. On the eve of the annual meeting, the IDB issued a report on the potential impact on Latin America and the Caribbean of risks such as a deepening of the European debt crisis or a sharp slowdown in China’s economy.
A recovery is underway in the United States, but unemployment, the fiscal deficit and public debt remain at high levels, the release noted.
The report, “A World of Forking Paths,” stated that while a majority of Latin American and Caribbean countries remain relatively resistant to a global economic slowdown, they now have less room for fiscal stimulus measures to cushion the impact of a crisis.
To meet borrowing countries’ requirements, Moreno said the IDB will explore the creation of new flexible and temporary financial instruments that could help governments at times when they have to deploy countercyclical policies. Such mechanisms, he added, could be particularly helpful for small and vulnerable economies in the region.
The Montevideo meeting also provided a framework for analysing the participation of Latin American and Caribbean countries in other major international forums scheduled to be held in the region in June, such as the Rio+20 UN Conference on Sustainable Development, which will take place in Rio de Janeiro, and the G20 Leaders Summit in Los Cabos, which will be chaired by Mexico.
Ratifying the IDB’s commitment to Haiti’s reconstruction, the Board of Governors approved a US$200 million transfer to a fund that provides grants to the Caribbean nation. Since the 2010 earthquake, the IDB has approved more than US$442 million for infrastructure, energy, agriculture, water and sanitation, education and private sector development projects in Haiti.
The IDB also presented an initiative on citizen security, one of the biggest concerns in the region, which has the highest murder rate in the world. In order to assist its borrowing member countries, the bank will establish a technical assistance focus on sharing the lessons learned from successful experiences in crime and violence prevention.
In terms of accountability and focus on results, IDB Executive Vice President Julie T. Katzman presented MapAmericas. This innovative digital mapping platform will provide information on projects funded by the bank in Latin America and the Caribbean. The platform will also serve as a tool to facilitate collaboration between the IDB and executing agencies in borrowing countries.
As part of its work with civil society, the IDB held a meeting with 250 representatives from more than 100 non-governmental organizations to discuss how they can collaborate more effectively with the bank and governments to promote sustainable development in the region. This work will be carried out by the civil society councils the IDB has established in each of its 26 borrowing countries.
Private sector development is a priority in the IDB’s agenda. During the annual meeting it organised seminars on promoting small and medium-size enterprises, public-private partnerships in infrastructure projects and basic services, as well as on the development of logistics infrastructure and services to boost competitiveness.
Co-operation with Asia, a region with growing ties to Latin America and the Caribbean, is another area of work for the IDB, which announced that it is preparing a study with the Asian Development Bank on how to deepen economic ties, trade and technical cooperation between Latin America and the Caribbean and Asia.
During the annual meeting, the bank presented details of a US$1 billion investment platform in partnership with China Eximbank to finance private sector projects in this region. It has already signed an agreement with the Japanese International Co-operation Agency to fund up to US$600 million in renewable energy projects in Central America and the Caribbean and another agreement with the Republic of Korea for the creation of a US$40 million trust fund for public sector modernisation.
The IDB also organised youth-focused activities in Montevideo, featuring discussions on promoting youth development through sport, culture and technology; more effective job training programmes; and problems facing secondary education in the region to prepare young people to join the labour market.
The IDB’s next annual meeting will be held in March 2013 in Panama City, by invitation of the Panamanian government, the release concluded.