Background Paper
New bank initiatives in 2006
The Inter-American Development Bank launched several initiatives in 2006 to update its products and windows with the objective of better serving its member countries.
Chief among them were the following:
Opportunities for the Majority
This initiative, which has a microeconomic focus, is designed to bring the benefits of economic growth to that 70 percent of the population that lacks access to services that would help them accumulate assets and improve their quality of life. The initiative focuses on six areas where the Bank has the potential to make a difference: expanding access to official identification and birth registration; mainstreaming low-income people into the formal financial system; expanding access to housing, public services, basic infrastructure and information and communication technologies; and promoting micro, small and medium-sized enterprises and job training.
Lending without sovereign guarantees
In April 2006, the Board of Governors took the historic decision to expand the number of sectors that the IDB may fund through operations without sovereign guarantees, both in the private sector and in the case of subnational entities. The latter offer a wealth of potential clients, given the need for financing for infrastructure projects and basic services, either on their own or in partnership with private businesses.
The guidelines approved allow the IDB to lend directly to companies active in all sectors, including oil and gas, agribusiness, mining, manufacturing, tourism, technology and services.
Local Currency Facility
In 2006, four operations were approved using local currencies for Brazil, Chile and Mexico under the Local Currency Facility approved in 2005. The Bank is working with other public and private lenders to incorporate currency conversion options so that new or current loans can be tied to local currencies.
Partnerships with the private sector
Agreements were signed with institutions and businesses in the private sector, such as Microsoft and Intel, to take advantage of their capacity for innovation to increase the Bank’s capacity to respond to client demand with higher levels of specialization.
The agreement with Microsoft outlines six strategic areas of common interest for specific projects to be developed: e-government; information and communication technology security for the public sector; technological and scientific capacity building; education; remittances and microfinance; and youth, technology and social inclusion.
The agreement with Intel outlines the following strategic areas of common interest for specific projects to be developed jointly: small and medium-sized enterprises development; education; and digital communities and connecting the majority.
New funds for project preparation
Given the region’s needs to increase investment in infrastructure and disaster prevention, two specialized funds were created to finance project preparation, overcoming a major barrier to the development of new operations. Both the Infrastructure Investment Fund (IntraFund) and the Disaster Prevention Fund have approved their first operations for technical cooperation.
InfraFund will assist private, public and mixed-capital organizations in Latin America and the Caribbean in the identification, development and preparation of bankable, sustainable infrastructure projects with real potential for achieving financial closure.
The Disaster Prevention Fund will provide technical assistance grants for detecting countries’ risks to natural hazards, preparing disaster prevention projects, designing prevention and mitigation investments, improving preparedness plans, using environmental management and land use planning to reduce vulnerabilities and strengthening national and local institutions involved in disaster prevention and response.
Sustainable energy
In November, the Sustainable Energy and Climate Change Initiative was launched with the objective of reducing the region’s dependence on hydrocarbons and to promote energy efficiency. In December, the Bank joined the United States and Brazil in establishing the Inter-American Ethanol Commission, whose mission is to encourage the creation of a hemispheric market for ethanol.
Realignment
The IDB Board of Executive Directors recently approved a new organizational structure in order to realign the IDB Group with the changing needs of Latin America and the Caribbean, focusing IDB activities on those areas where the Bank can have the greatest impact on development.
With the realignment, the IDB will deepen its country focus and sector expertise and enhance its effectiveness with a renewed emphasis on risk management and attainment of results. The new organization, the success of which will depend to a great extent on changing the Bank’s institutional culture, is designed to increase the Bank’s responsiveness by strengthening its strategic and technical capacity and organizing its activities under four vice presidencies: Vice President for Countries; Vice President for Sectors and Knowledge; Vice President for Private Sector and Nonsovereign Guaranteed Operations; and Vice President for Finance and Administration. The vice presidents will report to the president and executive vice president of the Bank.
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