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The IDB and Europe

From its establishment in 1959, the Inter-American Development Bank has sought to strengthen the links between Latin America and the Caribbean and the industrialized countries. Even before they joined the Bank, several European countries set up trust funds with the IDB to channel development financing to the region, thus highlighting their interest.

In the 1970s the Bank looked at ways of bringing nations outside the Americas into the IDB so that they might buttress the Bank's development role with their experience, know-how and additional financial resources.

The Declaration of Madrid in 1974 formalized their entry into the IDB. In 1976 and 1977 full Bank membership was extended to 13 European countries - Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the then Yugoslavia - as well as to Israel and Japan. Portugal joined in 1980, and Norway in 1986. Yugoslavia ceased to be a member in 1993, and Croatia and Slovenia joined in succession, bringing the current complement of nonregional member countries to 18, of which 16 are European.

Membership has proved mutually beneficial. It has enabled European countries to enhance their bilateral development policies in Latin America and the Caribbean through a better coordination with multilateral bank financing. Through membership in the Bank, their companies are able to compete for contracts stemming from IDB projects. In return, the IDB has benefited from the special concerns of nonregional countries on diverse social and environmental issues, which, among others, have been channeled into Bank programs and projects, both through its traditional decisionmaking process and through the establishment of special funds administered by the Bank to meet these concerns.

The European countries have played an important role in establishing trust funds, which have been of particular benefit to low income groups in Latin America and the Caribbean. At the beginning of 2003, 13 European countries and the European Union had established 42 funds for a total amount of $332 million. The main European countries contributing to the funds are Spain, Italy, Norway, the Netherlands, Sweden, France and Denmark, as well as the European Union. Austria, Belgium, Finland, Portugal, Switzerland and the United Kingdom also established trust funds. With the contributions planned for 2003, the Italian government will reach a total contribution of $45.9 million, of which $860,000 are earmarked for the organization of the seminars in the framework of the Milan IDB annual meeting.

The European member countries have three seats on the Bank's 14-member Board of Executive Directors, which conducts Bank operations, deciding operational policies and approving loans. Italy is currently represented by Executive Director Michaela Zintl and Alternate Executive Director Paolo Cappellaci. This constituency chair covers Belgium, Germany, Israel, Italy, the Netherlands and Switzerland. European governments are represented on the Board of Governors, usually at ministerial level.

The current Italian governor is Finance and Economics Minister Giulio Tremonti, who becomes chairman of the Board of Governors as the host of the 2003 IDB Annual Meeting in Milan. Outside the Americas, meetings were held in Madrid in 1981, Vienna in 1985, Amsterdam in 1989, Nagoya in 1991, Hamburg in 1993, Jerusalem in 1995, Barcelona in 1997 and Paris in 1999. The forum of major IDB policy decisions, the annual meetings are now usually held every three years in a country outside the Americas.

Member countries proposed the Eighth General Increase in IDB Resources at the annual meeting held in Hamburg in 1993. Approved in Guadalajara in 1994, the increase added $41 billion to the Bank's authorized capital, bringing it to $101 billion. As part of the package, nonregional countries agreed to more than double their share in the Bank from 7.1 per cent to almost 16 percent – with the European share rising from 6 percent to 11 percent. In addition, nonregional countries gained an additional seat on the Board of Executive Directors.

Under the terms of the agreement for the capital increase, Italy is doubling its shareholding from just under 1 percent to almost 2 percent.

Cofinancing has always been a key element in Bank-supported programs and projects, and in recent years many nonregional countries and multilateral organizations have contributed resources, including the European Union, the European Investment Bank and the Nordic Development Fund, as well as governments and development agencies of Austria, Denmark, Finland, France, Germany, the Netherlands, Norway, Spain, Sweden and the United Kingdom. In the past three years European cofinancing amounted to more than $100 million, excluding the World Bank.

European participation in the IDB Group's private sector activities is also vital. Twelve

European countries are members of the Inter-American Investment Corporation, the IDB affiliate promoting the establishment, expansion and modernization of private enterprises in Latin America and the Caribbean. Italian participation in the IIC represents 1.88 percent.

European companies are participating in the operations of the Bank's Private Sector Department, through which the IDB may utilize up to ten per cent of its portfolio assets without government guarantees for infrastructure projects. Italian companies, like ACEA Spa, Impregilo and ENEL, participated in IDB-financed projects in the water sector in Central America and in toll road and electricity transmission projects in Brazil. European banks have been prominent in the IDB's B-loan Program, through which the Bank syndicates loans to private banks and other financial institutions in order to mobilize additional private sector support for infrastructure projects in Latin America and the Caribbean. Italian banks – including Banca Nazionale del Lavoro, Mediocredito Centrale, San Paolo IMI, Intesa BCI and Banco di Roma – accounted for 7 percent of this program with $185 million.

The Bank's also issues bonds on the euromarket as part of its borrowings, used to help finance economic and social development in Latin America and the Caribbean. In 1998 the IDB launched its first issue denominated in euros. In 2002 the Bank issued up to $2,185 million in Europe, which represents 26 percent of the total of bond issues, with denominations in euros and Swiss francs.

The IDB has a Special Office in Europe, based in Paris, whose basic role is to strengthen relations between the Bank and its regional member countries with the European member countries and Israel. The European Office carries on a strong interinstitutional cooperation activity with the European Union for the development and implementation of the Memorandum of Understanding signed by the Bank and the European Commission in Madrid in May 2002. It also cooperates with international organizations with headquarters in Europe, such as OECD, WTO, UNDP, UNCTAD, UNESCO and Paris Club. The European Office promotes contacts with the academic circles and the civil society, as well as with the European private sector. In coordination with different Bank departments and with national agencies, like chambers of commerce, it regularly organizes information missions for European firms on business opportunities generated by Bank projects. The European Office helps to coordinate the meetings of consultative groups organized by the Bank in Europe.

One of its far-reaching activities is the creation of networks of European research centers on priority topics of the Bank agenda. With the Integration Department, the European Office has created the Euro-Latin Study Network on Integration and Trade, built on an active participation of research centers from many European countries. With the Economic Research Department, a similar network has been created for macroeconomic topics. Other ongoing activities deal with to social topics, state modernization, good governance and democracy.

Finally, the European Office participated, in close cooperation with interested departments at IDB headquarters, in the organization of the annual meeting of Milan in 2003, with the active and generous collaboration of the Italian government.

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