CANCÚN, Mexico – The Inter-American Development Bank today closed the annual meeting of its Board of Governors with a historic agreement on a capital increase and an unprecedented package of financial aid for Haiti.
The Board of Governors, the IDB’s top decision-making body, issued a declaration on the agreement reached by the 48 member countries to boost the Bank’s ordinary capital by $70 billion, raising it to more than $170 billion. The capital increase, the largest in the IDB’s history, will allow it to double its lending capacity to $12 billion a year.
Thanking the Governors for this gesture of confidence, IDB President Luis Alberto Moreno said the Bank will press ahead with its internal reforms to improve its efficiency, increase its transparency and strengthen risk management.
“It was clear this week that the Bank enjoys solid support from its members, for which we are very grateful and even more motivated to go forward,” Moreno said in his closing remarks. “For the IDB, the message is evident: keep working hard.”
The new chairman of the Board of Governors, Mexico Finance Secretary Ernesto Cordero, said that with this capital increase Latin America and the Caribbean will be able to rely on a “strong and efficient Bank for years to come”. Cordero also underscored that the IDB maintains its triple-A credit rating.
The Governors – most of whom are finance ministers or central bank presidents-- also agreed to forgive Haiti’s debt to the IDB and to provide more than $2 billion in grants over the next 10 years to help the Caribbean nation recover from the January 12 earthquake.
In his speech to the Board of Governors, Haiti Finance Minister Ronald Baudin said his country is due to present an ambitious reconstruction plan emphasizing decentralization at a March 31 donors conference in New York. In that sense, he urged the IDB to continue with the investment projects it was financing in regions beyond Port-au-Prince.
“I would like to invite you...to turn Haiti into a model to demonstrate how our Bank can help a member country get back on its feet and rebuild after such a devastating blow,” he said. “By doing so, you would have helped us build a stronger Haiti out of the rubble of Port-au-Prince.”
The Board of Governors also agreed on a full replenishment to ensure the liquidity of the Fund for Special Operations, the IDB window for concessional lending for Bolivia, Guyana, Honduras and Nicaragua.
Governors also set priority areas for the IDB’s work, such as providing more support to the smaller and more vulnerable countries and to programs to reduce poverty, which still affects some 200 million people in the region, about one-third of its population.
Governors also underscored the importance of expanding private sector access to credit, particularly for small and medium-size enterprises, which make up a huge majority of businesses in the region.
The IDB must also intensify its efforts to assist borrowing countries in mitigating the effects of climate change. Half of the cities in Latin America with more than five million inhabitants are in coastal areas that could be threatened by rising sea levels.
In 2009 the IDB reached record levels of approvals and disbursements, playing a counter-cyclical role to help countries deal with the impact of the global economic crisis. New loans and credit guarantees rose to $15.5 billion, while disbursements totaled $11.8 billion. However, without the capital increase agreed in Cancún, in coming years the IDB would have had to scale back its operations drastically.
Seminars and events
As part of the Cancún activities, Moreno and senior IDB officials met with civil society organizations to talk about the capital increase process, transparency and accountability. They also discussed a proposal for a new information disclosure policy and the new Independent Consultation and Investigation Mechanism.
Prior to the formal sessions of the Board of Governors, the IDB held a series of seminars and events on a range of topics relevant to the region’s social and economic development.
The IDB presented its flagship publication, Development in the Americas, which this year focused on productivity in Latin America and the Caribbean. In contrast with the widespread notion that this region lacks sufficient investment, the study found that countries can boost growth by adopting policies that promote a better use of their existing resources.
Other events covered the prevention of financial crises in emerging economies, the role of the private sector in promoting development, women’s contributions to economic growth, the impact of climate change in Latin America and the Caribbean, community development and road safety.
During the meeting, the IDB signed several loan contracts and agreements with partner institutions. The IDB’s Multilateral Investment Fund and the Inter-American Investment Corporation joined public and private sector partners to launch a $250 million lending mechanism for microfinance institutions.
From Cancun to Calgary
Mexican officials highlighted the significance of holding the annual meeting of the Board of Governors in Cancún, the leading tourism destination in the Caribbean Basin. The IDB supported the resort’s development from the start, when it was a practically uninhabited strip of sand. Today it has 80 thousand hotel rooms, which generate between 10 and 15 direct and indirect jobs.
Next year the Board of Governors will meet in Calgary. Extending an invitation to his fellow governors, Canada’s Minister of State of Foreign Affairs (Americas), Peter Kent, said the Western city is known as a hub for the oil and gas industry but is also a growing financial center.