The Inter-American Development Bank during 1999 met its targets for social sector and anti-poverty investments and also set new records for loans directly to the private sector and for emergency financing designed to help counteract international financial volatilities, the Bank said in its Annual Report 1999.
The IDB approved $9.5 billion in loans during 1999, the second highest level in history, and disbursements reached a record $8.4 billion. Emergency loans, a temporary program designed to counteract the harmful effects of worldwide financial volatilities, were a record $4.6 billion during 1999, compared with $2.85 billion during 1998, according to the report.
IDB President Enrique V. Iglesias said the Bank’s lending program shows the institution is "undertaking very significant activity in three strategic areas" that have been identified as priorities by the Bank’s Board of Executive Directors: reform of the social sectors, modernization of the state, and competitiveness.
He said the Bank expects to take "new initiatives which will be direct and necessary responses to the challenges of regional development."
The Bank's Board of Governors will review the Annual Report at its 41st Annual Meeting in New Orleans, March 27-29, when it will also analyze the evolution of the region's economies and their financial needs.
For the sixth consecutive year, the IDB remained the main source of multilateral development financing for Latin America and Caribbean.
"The heart of the Bank’s lending program in 1999 continued to reflect its strong commitment to social sectors," according to Annual Report 1999.
Forty-two percent of lending volume, excluding emergency loans, and 49 percent of operations were dedicated to social investments and poverty reduction during 1999, the report said, meeting the official targets.
Among the investments were $400 million for education, $492 million for water and sanitation, $475 million for health, $233 million for urban development, $100 million for microenterprise, $80 million for environmental protection, and $284 million for other diverse social investments.
Lending directly to the private sector without government guarantees reached a record $635 million during 1999 and included the first loans for a private sector toll bridge and telecommunications. Syndicated loans, parallel financing by commercial institutions, totaled $432 million.
The Bank continued to be active in financing efforts at relief, recovery, and reconstruction from natural disasters. It reformulated $200 million in existing loans to Venezuela so that the resources could be channeled to the response to disastrous flooding and landslides.
The IDB chaired the 1999 meeting in Stockholm of the Consultative Group for the Reconstruction and Transformation of Central America that pledged $9 billion in assistance to the Central American nations that suffered destruction from Hurricane Mitch.
In addition, the Bank approved $300 million in new financing to assist countries coping with natural disasters.
In the area of modernization of the state, the IDB approved 15 projects totaling $2 billion, investing in programs for social and public sector reform and the strengthening of institutions in the legislative, public administration and judicial sector.
The Inter-American Investment Corporation, an autonomous affiliate of the IDB that finances small and medium-size businesses, approved transactions in 12 countries in addition to four regional operations, for a total of $150 million. IIC member countries agreed to a $500 million capital increase.
The Multilateral Investment Fund, an autonomous fund administered by the Bank that promotes private sector development, approved 89 projects for a total of $132 million.
The Region
Latin America and the Caribbean responded rapidly to an economic slowdown during 1999 that was touched off by the contagion effect of financial crises in Asia and Russia, the Annual Report said. To meet the economic and financial challenge, countries strengthened their fiscal and financial reform policies and deepened their privatization strategies. The region’s economy is expected to rebound in 2000 compared with a flat growth rate in 1999.
Discipline in maintaining the current structural policy framework helped to offset fiscal problems and to maintain the flow of direct investment to the region.
In addition to financial shocks from overseas, the region’s economies were also battered by the strain of a series of natural disasters, including Hurricane Mitch, an earthquake in the coffee-producing region of Colombia, torrential rains and flooding in Venezuela, and the El Niño-La Niña atmospheric irregularities.
"In several economies of the region, external shocks were compounded by fiscal, exchange rate, and financial vulnerability," the report said. "Measures therefore had to be taken to limit domestic demand in order to preserve macroeconomic stability in the medium term."
The report estimated the region’s growth at only 0.3 percent in 1999, while growth in the year 2000 is expected to be 3-4 percent.
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