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Mar 17, 2013

IDB to explore reorganization of its private sector activities

Board of Governors issues mandate to find business models to improve development effectiveness

PANAMA CITY – The Inter-American Development Bank (IDB) will prepare a proposal to reform its private sector operations with the goal of increasing efficiency and effectiveness, following a mandate issued today by its Board of Governors.

The Board of Governors, the IDB’s top policy-making body, is composed of the finance ministers and other authorities of its 48 member nations. The governors held their annual meeting this weekend in the capital of Panama.

In their working sessions the governors reviewed the IDB’s performance in 2012, during which the Bank approved 169 operations for a total of $11.4 billion. They also considered a series of reports regarding the fulfillment of commitments assumed under the 9th General Capital Increase, approved in 2010.

In comments to the governors, IDB President Luis Alberto Moreno noted that reports prepared by the independent Office of Evaluation and Oversight (OVE) recognized the progress made so far in reforming the Bank.

Quoting the evaluation, Moreno said: “As the OVE report points out ‘… seldom has an international organization completed so many complex initiatives simultaneously in such a short period’.”

The evaluation of the IDB’s private sector operations concluded that a better integration of these activities, currently divided among four windows, would contribute to the institution’s development effectiveness goals. In light of this recommendation, the governors requested the preparation of a reform proposal to reduce costs and achieve greater synergies.

The four windows are the Structured and Corporate Finance Department, which handles the Bank’s non-sovereign guaranteed loans; the Inter-American Investment Corporation (IIC), which specializes in small and medium-size enterprises; the Multilateral Investment Fund (MIF), which focuses on micro-enterprises; and Opportunities for the Majority, which supports projects aimed at the base of the socioeconomic pyramid. Combined, last year the four windows approved nearly $2 billion in loans, guarantees and grants.

“As a multilateral bank, the IDB plays a leading role in backing private sector projects that contribute decisively to sustainable growth and social inclusion,” Moreno said. “We need to define an integrated vision and an operating structure that promotes synergies and efficiencies to increase our relevance.”

Under the mandate granted by the governors, an ad hoc committee will be created including representatives from the executive boards of the IDB and the IIC and from the MIF’s Donors Committee. They will work with the Bank’s management on a restructuring proposal. The committee should present a progress report before the end of October.

The Board of Governors also elected a new chairman, choosing Frank de Lima, Panama’s Minister of Economy and Finance, to replace his Uruguayan counterpart, Fernando Lorenzo.

De Lima emphasized the need to increase the private sector’s access to credit, especially for SMEs. “That’s why it is essential that we transform, modernize and consolidate the IDB Group’s private sector windows … which already offer technical assistance, products and financial services of great value for the private sector, an important engine of our economies,” he said.

Seminars and other activities at the Panama meeting

Coinciding with its annual meeting, the IDB organized a series of seminars on key issues for Latin American and Caribbean development.

The expansion of the Panama Canal was discussed in a seminar about the state of transportation and logistics infrastructure in the region. According to IDB studies, the region needs to speed up efforts to modernize ports, roads and other basic infrastructure. Otherwise, it will not be able to take advantage of the lower costs that will be generated by increased transoceanic traffic of large ships.

Moreno made a presentation on the need for the region to develop broadband, an area where the IDB plans to expand its activities. Despite growing adoption of these new technologies, countries in the region still lag behind the nations leading the digital revolution. A panel of experts from both public and private sectors analyzed alternatives countries could adopt to boost investments in the sector.

The IDB launched a new biodiversity and ecosystem services program that will help countries take advantage of their natural capital to achieve sustainable development.Under this program, the IDB will work with governments, companies and civil society organizations in projects that incorporate the value of biodiversity to generate economic growth and employment.

The IDB also held a seminar about using public-private partnerships to improve social services for the most vulnerable populations. The focus of the discussion was on Salud Mesoamérica 2015, an initiative to improve maternal and infant healthcare for 1.8 million disadvantaged people. Eight Central American countries currently participate in this initiative together with the Spanish government, the Slim and Gates foundations as well as the IDB.

One of the most popular seminars focused on youth leadership and social innovation. The event organized by the IDB Youth Program featured presentations by young social entrepreneurs involved in housing, education and technology projects, as well as by leading experts in nurturing innovation.

As it traditionally does in its annual meetings, the IDB sponsored a community project benefitting a local institution. Through its Solidarity Program, it mobilized support from various partners to improve the building and equipment of a school in the outskirts of Panama City.

Other seminars on the private sector as a motor for growth and development focused on the promotion of women as entrepreneurs, business opportunities at the base of the pyramid and public-private partnerships as tools to bring more investment to develop infrastructure and improve social services.

Among other announcements made during the annual meeting, China will provide $2 billion to co-finance IDB loans for public and private sector projects. The IDB-administered fund is the first of its nature established by the Chinese government and a multilateral bank.

Moreno also mentioned that the IDB has opened talks with Singapore on joining the IDB. Should those talks come to a successful conclusion, Singapore would become the IDB’s 49th member country and the fourth one from Asia, following Japan, the Republic of Korea and China.

The next IDB annual meeting will be held in Salvador de Bahia by invitation of the Brazilian government.

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