Closing session of IDB 2001 Annual Meeting in Santiago, Chile. Photo by J. Inostroza

Representatives of Latin American and the Caribbean countries this week proposed that the IDB create rapid and flexible financial instruments to help counteract the economic and social impact of turbulence in world markets.

The requests were made by treasury ministers from the region during the 42^nd Annual Meeting of the IDB´s Board of Governors, whose final plenary session today was closed by Chilean Finance Minister Nicolás Eyzaguirre Guzmán, the new board chairman, and IDB President Enrique V. Iglesias.

Iglesias welcomed a decision by the governors to open the debate on revising the Bank’s financial instruments to help borrowing countries overcome some of the most detrimental effects of globalization.

"We are witnessing the formal launching of a debate on our objectives and instruments," the IDB president said. "It is necessary to revise the traditional instruments of the Bank," he said.

Eyzaguirre said that Latin America and the Caribbean are committed to an irreversible process of globalization that brings both possibilities for progress and dangers from political, economic, and social crises.

In this regard, multilateral organizations like the IDB have to make a determined effort to adopt their instruments to the new global reality, Eyzaguirre said. "We need to be flexible to support economic systems of our region. But we also need to be flexible to understand that reform cannot be achieved by mere acts of will, but by sustained effort over a period of time."

Both Eyzaguirre and Iglesias emphasized the participatory nature of the Santiago annual meeting, which brought together not only the economic leadership of the region but also delegates from the 46 country members of the IDB and representatives of the private sector, academia and civil society organizations.

Iglesias said the IDB would continue working to reduce poverty, increase competitiveness of the region’s economies and consolidate integration

The governors of the IDB and IIC took the following actions:

• Approved the financial statements for the ordinary capital of the Bank and the Fund for Special Operations for the year ending Dec. 31, 2000.
• Assigned an aggregated amount of $55,500,000 in convertible funds from the General Reserve of the Fund for Special Operations to the Intermediate Financing Facility account and approved the financial statements of this account for the year ending Dec. 31, 2000.
• Approved the financial statements of the IIC for the year ending Dec. 31, 2000.
• Thanked several countries for extending invitations to host future Annual Meetings: Brazil, Italy, Peru, Belgium, Bahamas, Japan, Panama, Mexico and Costa Rica.

Mexico’s Treasury Secretary Francisco Gil Díaz was among the Bank governors who emphasized the need for of new facilities to reduce the vulnerability of Latin American and Caribbean economies from external turmoil. "If the Bank is to adequately serve these development priorities, we must make its lending policies more flexible and create new financial products that respond more effectively to the credit requirements of our countries," he said in an address to the Bank governors.

"I am referring to new products such as backstop credit facilities, exchange coverage instruments, and the program operations it is currently studying."

Gil Díaz added that it would be appropriate to make additional efforts to introduce insurance against natural disasters, such as those that have battered the countries of Central America and the Caribbean in recent years.

Several Latin American governors backed a proposal to increase the maximum limit on financing directly to the private sector in order to consolidate the processes of privatization in the region and give it continuity.

Brazil’s Planning Minister Martus Tavares said his government backed a recommendation that "the 5 percent cap on private-sector operations as a proportion of total IDB lending be abolished, provided that the risk management of that loan portfolio is strengthened."

These initiatives were echoed, to one degree or another, by delegates from nonborrowing countries, whose governments emphasized the need for the IDB to direct its strategies to these main objectives: reduction of poverty and social inequality and promotion of sustainable growth that is compatible with environmental protection."

Bank governors from nonborrowing countries also asked the IDB to deepen its cooperation with the World Bank and the International Monetary Fund. They praised the IDB’s participation in the international initiative to ease the debt burden on heavily indebted poor countries (HIPC), which not only reduces the financial load on the beneficiary nations, but also offers new stimulus to combat poverty and corruption.

They also urged that the IDB ensure that assistance provided to middle income countries benefit the most vulnerable social sectors, such as women heads of household, youth, the elderly, those with disabilities and ethnic, and racial and linguistic minorities.

The next Annual Meeting of the Boards of Governors of the IDB and the IIC will be held in March 2002 in Fortaleza, the capital of the state of Ceará, Brazil.

In other news

IDB President Iglesias and Michael Danet, secretary general of the World Customs Organization, today signed a memorandum of understanding pledging the two parties to cooperate in promoting the modernization of customs services in Latin America and the Caribbean.

Bahamas Minister of Finance William C. Allen and IDB President Enrique V. Iglesias today signed documents for a $21 million loan for the reconstruction and rehabilitation of infrastructure in the Family Islands that was damaged by Hurricane Floyd.

IDB President Iglesias and a group of senior bank officials yesterday signed an agreement for a $10 million equity investment in the to-be-created Inter-American Corporation for Infrastructure Finance. The new entity is the result of the efforts of Caja Madrid and the IIC to provide funding to small and medium-size infrastructure projects in the region. During its first five years of operations, the ICIF is expected to finance 110 projects.