A working group created to come up with a formula for funding debt relief for Bolivia, Guyana, Honduras and Nicaragua held its first session on the eve of the annual meeting of the IDB’s Board of Governors in New Orleans last March.
Participants in the session agreed to hold subsequent meetings to examine possible solutions for funding a $1.2 billion debt relief package in present value terms (PV) based on shared responsibility among official creditors. Debt relief under discussion involves only official debt from multilateral and bilateral sources.
The task facing the working group is to determine how to raise the IDB’s share of $730 million (PV) needed to deepen debt relief for Bolivia and Guyana and initiate relief for Honduras and Nicaragua. An additional $540 million (PV) will be provided by subregional institutions, including $420 million (PV) from the Central American Bank for Economic Integration. Other institutions represented in the working group meeting were the Andean Development Corporation, the Caribbean Development Bank and the Cuenca del Plata Development Fund. The IDB already provided debt relief to Bolivia and Guyana under the initial Heavily Indebted Poor Countries (HIPC) initiative in 1998 and 1999, respectively. These countries, plus Honduras and Nicaragua, are the four Latin American countries being considered for debt relief under the enhanced HIPC initiative. Some 40 countries are eligible worldwide.
The HIPC initiative, originally proposed in 1996 by the World Bank and the International Monetary Fund, was designed to reduce debts to sustainable levels for poor countries that have demonstrated a commitment to economic and social policy reforms. The initiative was updated in 1999 to provide deeper and faster debt relief to more countries.
Forum on development. The Bank’s annual meeting, which followed the working group session, was attended by some 5,000 delegates. Included were official delegations, business people and bankers, representatives of international and nongovernmental organizations, and the media. The Board of Governors, the IDB’s highest authority, is made up of central bank presidents or ministers of finance, economy, or planning from the Bank’s 46 member countries.
The three days of official sessions were complemented by a large number of other events, including 11 seminars that brought together experts from around the world to discuss subjects relating to economic and social development in the region.
Also held in New Orleans was the 15th annual meeting of the Board of Governors of the Inter-American Investment Corporation (IIC), the IDB Group member that supports the private sector with loans and equity investments.
At the IIC meeting, the Corporation concluded subscriptions for a $500 million capital increase and accepted five new members: Belgium, Finland, Norway, Portugal, and Sweden.
In his inaugural speech before the governors, IDB President Enrique V. Iglesias set forth an agenda for the coming years consisting of four priority areas:
- Social reform to reduce the gap between rich and poor.
- Sustainable growth, including promoting greater competitiveness and smoother functioning of markets to mobilize capital and labor more efficiently.
- Modernization of the state to increase efficiency and fight corruption.
- Regional integration to link countries’ economic and commercial relations.
Iglesias also proposed a series of goals for the region during this decade, including reducing poverty by half, doubling the economic growth rate to at least 6 percent, and speeding up public access to new technologies. “These are the pillars of an attainable utopia,” said Iglesias, “a region of prosperous economies in which social justice and democracy hold sway, well positioned in the global marketplace.”
‘Bank brings change.’ In a videotaped message to the meeting, U.S. President Bill Clinton reflected on the work of the IDB during the past four decades.
“The Bank not only helps bring this hemisphere together; it brings real change and real results to its citizens every single day, helping us all to build a future of promise and prosperity across the Americas.”
Clinton said that he will work to ensure that the IDB fully participates in the HIPC program. “No country that is committed to lifting its people out of poverty should have to choose between paying its debt and educating its children,” he said.
The Bank governors unanimously elected U.S. Treasury Secretary Lawrence H. Summers as chairman. He replaces French Finance Minister Laurent Fabius, who was represented at the ceremony by the secretary of state for foreign trade, François Huwart.
Summers stressed the role of international financial institutions in making sure that globalization does not provoke economic insecurity and local disintegration.
“For all these reasons, international institutions that can help to promote more rapid and inclusive growth within countries—and a more stable flow of capital between them—may be the most effective and cost-effective investment that we can make in forward defense of America’s core interests. And among the international financial institutions, the IDB continues to make a crucial contribution,” Summers said.
At the close of the meeting, U.S. Secretary of State Madeleine K. Albright stressed the need to strengthen democracy in the region, boost social investments, and build greater bonds among the members of the inter-American community.
Problems of crime, violence, corruption, and social inequality must be overcome, she warned, or the region’s democracies may “again be lured down the dead-end roads of protectionist policies and authoritarian rule.”
Albright said the IDB has played an “indispensable role in bringing the American nations to the new century more united on agenda, approach and action than we have ever been.”
The next IDB annual meeting will be held in Santiago, Chile.