Inter-American Development Bank
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38°53′58″N 77°01′50″W / 38.899485°N 77.030532°W
| File:IDB logo.gif | |
| Abbreviation | IDB/BID |
|---|---|
| Established | 1959 |
| Type | International organization |
| Headquarters | Washington, DC |
Membership | 48 countries |
Official language | English, Spanish, French, Portuguese |
President | Luis Alberto Moreno |
Main organ | Board of Governors |
Staff | About 2,000 |
| Website | http://www.iadb.org/ |
The Inter-American Development Bank (IADB or IDB or BID) is the largest source of development financing for Latin America and the Caribbean[1]. Established in 1959, the IDB supports Latin American and Caribbean economic development, social development and regional integration by lending to governments and government agencies, including State corporations.
The IDB has four official languages: English, French, Portuguese, and Spanish. Its official names in the other three languages are as follows:
| Language | Name |
|---|---|
| French | Banque interaméricaine de développement; |
| Portuguese | Banco Interamericano de Desenvolvimento |
| Spanish | Banco Interamericano de Desarrollo |
In all three other languages the Bank uses the acronym "BID".
History of the IDB
At the First Pan-American Conference in 1890, the idea of a development institution for Latin America was first suggested during the earliest efforts to create an inter-American system. The IDB became a reality under an initiative proposed by President Juscelino Kubitshek of Brazil. The Bank was formally created in 1959, when the Organization of American States drafter the Articles of Agreement establishing the Inter-American Development Bank.
Member states
The Bank is owned by 48 sovereign states, which are its shareholders and members. Only the 26 borrowing countries are able to receive loans.
- Borrowing: Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, Venezuela
- Non-borrowing: Austria, Belgium, Canada, China, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Japan, The Netherlands, Norway, Portugal, Republic of Korea, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States
Operations
The IDB is the largest multilateral source of financing for the Latin America and the Caribbean region.[2] The IDB makes loans to the governments of its borrowing member countries at standard commercial rates of interest, and has preferred creditor status, meaning that borrowers will repay loans to the IDB before repaying other obligations to other lenders such as commercial banks.
Governance
The IDB is governed by its Board of Governors, a 48-member body who regularly meets once a year. In March 2010, reunited in Cancun, Mexico, the Board of Governors of the Bank agreed on a $70 billion capital increase, along with full debt forgiveness for Haiti, its poorest member country, devastated by an earthquake that had destroyed its capital,Port-au-Prince, two months before.
The developing countries that borrow from the IDB are the majority shareholders, and therefore control the majority of the decision-making bodies of the Bank. Each member's voting power is determined by its shareholding: its subscription to the Bank's ordinary capital. The United States holds 30 percent of the Bank's shares, while the countries of Latin America and the Caribbean combined hold 50.02 percent.[3] This arrangement is unique in that the developing member countries, as a group, are the majority shareholders. Though this arrangement was first viewed as risky, it is believed by some that strict peer pressure prevents the borrowers from defaulting, even when under severe economic pressure. However, Argentina did default in 2001; this was publicly announced in 2002.
Priority areas
- Poverty reduction
- Sustainable energy and climate change
- Water and sanitation
- Infrastructure
- Education and innovation
- Opportunity for the majority
Capital Increase
On July 21st, 2010, the Board of Governors agreed to increase the Bank’s ordinary capital by $70 billion, the largest expansion of resources in the Bank’s history, and to provide an unprecedented package of financial support to Haiti. The agreement also includes a replenishment of the Fund for Special Operations, which finances operations in the region’s poorest nations.
The Bank’s capital increase will be implemented through 2015 as parliaments in each of its member countries appropriate the necessary funds.[4]
Haiti
After the Jan. 12 earthquake, the IDB pledged to provide Haiti more than $2.2 billion in grants over the next decade to fund its recovery efforts and long-term development plans, working closely with the Haitian government and the international community. The Bank’s Board of Governors also agreed to cancel all of Haiti’s outstanding debt.[5]
President Preval also gave the Inter-American Development Bank the mandate to work with the Education Ministry and the National Commission preparing a major reform of the Education System in a 5 year plan.[6]
Financial resources
The callable capital pledged by the 22 non-borrowing members, which include the world's wealthiest developed countries, therefore functions as a guarantee for the bonds that the IDB sells. This arrangement ensures that the IDB maintains a triple-A credit rating, and as a result can make loans to its borrowing member countries at rates of interest similar to those that commercial banks charge their largest corporate borrowers. At the same time, the 22 non-borrowing countries are only putting up guarantees – not actual funds – so their support of the IDB's lending operations has a minimal impact on their national budgets.
The funds that the IDB lends are raised by selling bonds to institutional investors at standard commercial rates of interest. The bonds are backed by (a) the sum of the capital subscriptions actually paid in by the Bank's 47 member countries, plus (b) the sum of the callable capital subscriptions pledged by the Bank's 22 non-borrowing member countries. Together these constitute the Bank's ordinary capital, some US$101 billion. Of this amount, 4.3 percent is paid in, while the remaining 95.7 percent is callable.
Aside from its lending activities for its member countries, the IDB also has lending operations with private sector companies, both directly and by means of the Inter-American Investment Corporation (IIC), a multilateral lender created by the IDB member countries to help develop small and medium-sized companies in Latin America and the Caribbean. An affiliate of the IDB, the Multilateral Investment Fund (FOMIN), uses loans, grants and equity investments to support private projects seeking to bring innovation, boost entrepreneurship, or expand access to financing throughout the region. The Bank, the Corporation and the Fund constitute the IDB Group.
Criticism
There are claims that operations funded by the IDB may have adverse impacts on local environments and indigenous peoples. According to the Bank Information Center (BIC), "civil society groups have long been concerned about the negative impacts the IDB's operations have on the environment and on indigenous and traditional peoples, as well as on the prospects for genuine economic and democratic reform in the region." The BIC cites environmental and social damage funded by the IDB as adversely impacting local economies, contrary to IDB's stated goal of fostering social and economic prosperity.[2]
See also
References
- ^ http://www.iadb.org/en/about-us/about-the-inter-american-development-bank,5995.html
- ^ a b "Inter-American Development Bank". Bank Information Center. Retrieved 2008-12-14.
- ^ Data as of 2005.
- ^ http://www.iadb.org/en/capital-increase/why-increase-the-idbs-capital,1874.html
- ^ http://www.iadb.org/en/countries/haiti/hope-for-haiti,1001.html
- ^ http://www.iadb.org/news-releases/2010-05/english/haiti-gives-idb-mandate-to-promote-major-education-reform-7150.html