Before taking up her new duties at the Carnegie Endowment for International Peace, where she will manage their economics programs, she talked to IDBAmérica about the future of multilateral financial institutions, the changes taking place in the region, and her achievements at the Bank.

IDBAmérica: What expectations did you have when you came to the IDB five years ago?

Birdsall: My ambition was to be part of Latin America's second wave of reforms, working with countries that are getting down to the business of making major institutional and social change.

I also had ambitions--modest ones--to help strengthen the IDB's ability to carry out analytical work. The IDB was already moving beyond being primarily a bank that finances projects. I thought there was--and I think there still is--plenty of room to strengthen the kind of country analysis and economic, social and political analysis that can make Bank staff more helpful to government officials who are setting and implementing policy. I think we've progressed a great deal in this regard over the last few years with the creation of the Office of the Chief Economist, the Inter-American Institute for Social Development and the Sustainable Development Department.

Our borrowing countries are looking to the IDB not only for money, but also for ideas. It's not a matter of the Bank telling anybody what to do, but rather of being a partner in a very complex discussion.

IDBAmérica: The policy framework dubbed the "Washington Consensus" maintains that the key to creating prosperous and equitable societies in Latin America is fiscal discipline, open markets and private sector-led growth. But critics now argue that after a decade of putting these policy prescriptions in place, many Latin American countries are actually worse off than before. Do the critics have a point?

Birdsall: I think we are now moving into something that could be called the "Santiago Consensus." In Santiago, Chile, the hemisphere's heads of state met earlier this year and reaffirmed these reforms, but also called for taking a new look at how some of the changes are being carried out. Rather than create privileges, these reforms must create opportunities. For example, Peru, Bolivia and other countries have developed programs to improve access of the working class to the shares of privatizing companies.

Equally important at Santiago, the heads of state emphasized the need for the second generation of reforms, including education, and the strengthening and reform of judicial and other public institutions so that they can better serve the needs of the great majority.

So I would say that the critics are partly right, because there is room to make reforms work better for more people. But they are wrong that countries are worse off.

IDBAmérica: You have been outspoken over the need for Latin America to increase equity. What are the prospects?

Birdsall: Latin American societies are among the most unequal in the world, reflecting that many poor people are being left out of the growth process. Their potential productive contributions are being lost. But this also means that there is considerable potential for increasing growth rates, and in this way provide more opportunities to the poor. There need be no tradeoff between growth and equity goals. A win-win scenario is possible, and this was implicit in what the heads of state were saying in Santiago.

At the same time, we have to recognize that the situation is not going to change much in the short term. We have to focus on improving opportunities for those at the bottom.

IDBAmérica: How about the role of education in the second generation of reforms?

Birdsall: Of course, education is absolutely critical. After all, education, along with other assets such as land and access to credit, enables people to generate income. When more people have more education, there is a better overall distribution of assets, and in effect, of opportunities for people to be productive.

IDBAmérica: Do you think there is a danger that the recent rise of nationalist and populist movements in some key Latin American countries could put the reform process in jeopardy?

Birdsall: I am not very good at political forecasting. But I find it interesting that Fujimori, Menem and Fernando Henrique Cardoso, each of whom has shepherded his country through major market-oriented reforms, each in some sense also has come from the left. What is happening in Latin America is also happening elsewhere. Clinton and Tony Blair, who understand the benefits of the market, also came from the left.

So it looks as though in certain kinds of democracies, including mature democracies, political leaders are combining a market orientation with an increased commitment to fighting poverty and inequality. But they are doing so by creating opportunities for all in a market setting rather than through populist transfers and redistribution.

IDBAmérica: As multilateral lending is dwarfed by huge inflows of private capital into developing countries, how can institutions like the IDB continue to have an impact?

Birdsall: I think it's very significant that IDB lending and advice continue to be in demand even from countries that receive large capital inflows. More and more, IDB loans are becoming vehicles for creating a policy dialogue about ideas. It goes back to the fact that money is not the IDB's main resource; ideas are.

If anything, the demand for our lending and our advice has increased. While the dollar value of our lending is not rising very much, the number of projects that we are doing every year has exploded, particularly if we take into account the Multilateral Investment Fund.

IDBAmérica: Despite changes in the IDB's organization that have speeded the delivery of Bank services, you yourself have noted that borrowers think the Bank is still too slow. What more can be done?

Birdsall: This matter is under study right now. One part of the solution would be to recognize that different kinds of loans-different products-should be prepared according to different procedures. Today we essentially prepare a $1 million loan and a $400 million loan the same way, and have been doing so for the past three decades. So we've got to rethink this--I hesitate to say-- "cookie cutter" approach.

The second part of the solution involves the issue of delegation from the Bank's Board of Executive Directors to its management, and within management itself. What level of management should approve loans of different complexity and different cost? I think it's clear that decentralizing those decisions as much as possible is crucial. But this has to be done in a context that takes into account the risks. I believe we can find ways to balance delegation with an appropriate approach to risk.

IDBAmérica: How would you like to be remembered at the IDB?

Birdsall: How I would like to be remembered? I think as having brought a little more of a consistent and analytical focus to social policy issues, to issues of poverty and inequality, and as having tried to ensure that the Bank increase its analytical capacity across a range of areas in order to be more helpful to borrowers. And for having reinforced whatever efforts women were making in the Bank to enhance their status.

I also would like to think that in chairing the IDB's loan committee, which is the bread-and-butter business of the Bank, I made a contribution by emphasizing the quality of our operations and the link between the commitment of the borrower to the project in terms of ownership, accountability and sustainability.