A Discussion on the Inter-American Development Bank (IADB) and Latin America's Social and Economic Challenges

By Chris Moore and Sarah Farnan
September 16, 2009

Click here to listen to an mp3 audio file of this event.


As the world slowly crawls out of its current economic recession, questions abound as to how the multilateral development banks performed during the meltdown and what their role will be now that the world economies begin their recovery. On Wednesday, September 16th, the Inter-American Dialogue hosted a discussion on the Inter-American Development Bank (IADB) and the various social and economic challenges facing Latin America. The Bank’s Executive Vice President Dan Zelikow led the discussion, and Center for Global Development President Nancy Birdsall, a former Bank Executive Vice President, offered comments.

The discussion addressed a number of specific questions, including: What lending policies and priorities has the Bank been pursuing? What has the Bank been advising its borrowers? And how successful have its approaches been in the past year? The group also examined the Bank’s efforts to secure a new replenishment of its capital, its plans to further increase its lending in the region, and issues related to its investment performance.

In his opening statement, Zelikow outlined the IDB’s current agenda and efforts at reform. He explained that the Bank will likely disperse more than $12 billion in 2009, 2.5 times the average lending from the earlier part of this decade.  Loan requests, which were already high a year ago, have increased dramatically with the onset of the global economic crisis. Among reforms, Zelikow explained that the Bank is reexamining and diversifying its client base. Until 2007, he explained, 98% of IDB loans went to sovereign governments, and three of the 27 sovereign borrowers held over 50% of total outstandings. The goal now is to focus on smaller, poorer countries.  Zelikow also hopes that sovereign lending might be reduced to just a portion of total activity.  He noted how the Bank has opened substantially to private development-oriented lending.

In her comments, Birdsall agreed that reforms must be made within the IDB, though she expressed some skepticism because, as she said, they have been discussing reform for the past 15 years.  However, Birdsall did see some positive changes at the IDB—most notably that the Bank has done a good job of fostering a “cooperative” atmosphere by allocating a majority stake to borrowers. She also lauded their emphasis on the region—what Zelikow described as the Bank’s “footprint”—both by bringing in top talent actually from the region and by contracting research on the ground and not just from Washington. Still, she expressed concern at the Bank’s negative image on Capitol Hill, and doubted that, without the support of the U.S. Congress, any replenishment would come.

Both panelists addressed the issue of how to measure the Bank’s success.  What defines satisfaction; what are the Bank’s goals moving forward?  What are the metrics for success?  These no doubt will need to be clarified before any government—especially a stimulus-weary U.S. Congress—will grant the IDB the replenishment it now requests.