Cofinancing of Inter-American Development Bank projects has become an increasingly important source of development resources for Latin America and the Caribbean in recent years, supplementing IDB loans and grants with financing from other organizations.
Multilateral and bilateral cofinancing transactions, not counting the IDB Group private sector areas, or trust fund operations, totaled approximately $2.2 billion in 2005, substantially above the $1.6 billion average of the last five years. The number of cofinanced projects, beneficiary countries and cofinancing partners all increased substantially.
This steady progression in the Bank’s cofinancing operations reflects closer relationships with other multilateral institutions, enhanced programmatic cooperation with bilateral partners and growing IDB leadership roles in regional integration, and multiphase, sector and policy-based lending.
Cofinancing benefits all parties involved: borrowing members benefit from larger and more diversified capital inflows with favorable financial conditions and technical assistance, and donors can realize more effective development contributions at lower transaction costs. The IDB’s operations are facilitated by raising risk ceilings or local counterpart restrictions. Cofinancing also enhances the platform for successful policy dialogues, thus boosting the development effectiveness of sector-wide-approach operations.
During 2005, 29 cofinancing operations were approved for 16 countries. These included 24 investment loans, three policy-based loans, and two emergency operations. Support was received from 21 partners, nine multilateral and 12 bilateral.
The World Bank remained the IDB’s principal partner, participating in 18 projects in 12 countries.
Other important multilateral contributions came from the Andean Development Corporation (CAF), the Central American Bank for Economic Integration (CABEI), the Nordic Development Fund, the Organization of the Petroleum Exporting Countries (OPEC), the United Nations Development Program (UNDP), and the International Fund for Agricultural Development (IFAD).
Bilateral support was mainly provided by US Agency for International Development (USAID), KfW of Germany, the Canadian International Development Agency (CIDA), the Swedish International Development Cooperation Agency (SIDA), the Department for International Development Cooperation of the Ministry for Foreign Affairs (FINNIDA) of Finland, and the Netherlands. Almost half of the cofinancing volume related to social projects and roughly one-third to infrastructure.
Besides project support, the IDB also received 12 special donations of $2.4 million, supporting development effectiveness enhancing activities including governance reviews, guidelines and strategies for indigenous peoples’ development; social indicators and equity; and building political consensus for fiscal reforms. These were all cofinanced by the United Kingdom’s Department for International Development (DFID), with Sweden subscribing to the fiscal consensus program. GTZ of Germany made a 1 million euro (US$1.2 million) donation to a Renewable Energy and Energy Efficiency Program. In addition, numerous private sector contributions sponsored fora on microenterprise development and corporate social responsibility.
Enhanced cooperation with the European Investment Bank, formalized in a memorandum of understanding signed in December 2004, began with joint seminars on requirements for successfully implementing infrastructure projects and the potential for public-private partnerships. Similar documents were signed with the Export-Import Bank of the Republic of Korea, the Bank’s newest member country, and the Institute for Official Credit of Spain. Special cofinancing outreach activities included seminars on regional integration projects for public and private sector audiences in various donor countries.