Poverty Reduction and Social Equity

In 2007 the IDB approved 10 loans, 29 grants for individual countries and six grants for regional projects in the social sectors, totaling some $1.2 billion. Eight of the loans approved were for social protection or health, and the two others were for education. Of the operations approved, 32, totaling over $2.7 billion, were classified as poverty-targeted investments or social equity enhancing. Beyond sheer scale, the social sector portfolio reflects the IDB’s commitment to finding innovative formulas in its operations that can be adjusted to specific needs and complexities without sacrificing rigorous technical preparation.

Three of the operations approved illustrate this approach to innovation with flexibility and rigor: (i) a loan for social development through music in Venezuela, (ii) a loan to strengthen the primary health care strategy in Argentina and (iii) a grant for sustainable development in the Lower Urubamba watershed in Peru.

In Venezuela, the IDB is supporting expansion of the youth orchestra system to 500,000 children throughout the country by the year 2015. Two-thirds of the program beneficiaries are poor. Through innovative music education, program participants improve their academic performance, reduce delinquent behavior and accelerate their psychological and social development. The participating communities have seen their crime rates drop, and the state cuts losses from social investment because of lower dropout rates in the public school system.

In Argentina, the IDB-assisted program is designed to strengthen systems for the efficient management of social services, which were severely affected by the 2001 crisis. Specifically, the program establishes incentives in the form of results-based disbursements to improve primary health care. These innovative arrangements will be based on a monitoring and evaluation system that will provide direct information on patient outcomes. The information will strengthen interagency coordination among different levels of government (federal, provincial and municipal) and executing agencies (authorities and health care service providers) and will ensure better and more timely decision making.

In Peru, the IDB is carrying out a project with a participatory approach to expanding access to basic services and boosting local development by improving local government capacity to carry out productive investments. The project is geographically targeted mainly to indigenous groups in the Lower Urubamba watershed.

These projects illustrate the Bank’s commitment to technical rigor in its project preparation. In designing the operations, the Bank conducted cost-benefit and cost-effectiveness studies, laid the groundwork for ambitious monitoring and evaluation systems (with baseline data compiled prior to project implementation), and obtained decisive input from prospective program beneficiaries.

In the area of health, the Bank approved two loans for the strengthening and development of health networks in Nicaragua and Guatemala, for $20 million and $50 million, respectively. The projects are expected to improve the coverage and quality of health services for the poor in both countries.

These programs are examples of the value added by the IDB in social development in the region. Specifically, the programs introduced mechanisms to improve efficiency, such as evidence-based decision making and performance-based payment systems. At the same time, the operations finance both the expansion of universal services—with safeguards for nonexclusion— and targeted interventions (see Box 3 • Equity and Fiscal Sustainability in Latin American Cities).

Through its Social Entrepreneurship Program (SEP), the Bank promotes social equity and economic development among poor and excluded groups by providing support for private institutions, such as nongovernmental organizations and private businesses, with innovative, high-impact projects that provide sustainable financial, social and community development services. During the year, SEP approved nine operations for a total amount of $4.7 million. For example, a program in Bolivia will improve the productivity, sales and income of over 700 quinoa, alpaca and tourism microenterprises in the Altiplano region through small loans, technical assistance and improved marketing linkages.

In 2007 the Bank also conducted research designed to inform social policy. Among the products delivered, the IDB, in collaboration with the World Bank, prepared and published a poverty assessment for the Dominican Republic entitled “The Dominican Republic: Achieving More Pro-Poor Growth.” The IDB also collaborated with the government of Ecuador on a series of studies on poverty targeting, labor markets, impact evaluation and vulnerability to be used as background for a poverty profile.

The IDB also prepared the first part of an Operational Youth Action Plan, which included a study on Ecuador, Colombia and Peru. The objective of this plan is to help improve the timely design and execution of high-impact, integrated, scalable youth components and programs. Three technical notes were prepared for each country, along with an intervention strategy and general recommendations to improve the Bank’s work with youth.

In addition, the Bank held three subregional meetings and one hemispheric meeting of the Regional Policy Dialogue on Poverty and Social Protection to further dialogue among countries in the region. The topics discussed in these meetings included the transition of beneficiaries of social programs into the labor market, next steps in the development of comprehensive social protection systems and access to financial services for the poor.