The Inter-American Development Bank (IDB) and the Government of Sweden have signed an agreement that establishes an innovative risk transfer mechanism to support development in Latin America and the Caribbean (LAC). The instrument will provide a Guarantee of up to $100 million from Sweden, enabling the IDB to increase lending up to $300 million for new projects in Bolivia, Colombia, and Guatemala. The Guarantee will focus on efforts related to poverty alleviation, climate change, and gender equality, which are priorities for the partners and the LAC region and is intended to serve as a model for future efforts.

In response to the current crisis caused by COVID-19, the Government of Sweden and the IDB have agreed to launch the Guarantee in Guatemala to sustain quality of life and the incomes of vulnerable populations impacted by the pandemic through support to the Fondo Bono Familia program. Guatemala’s Ministry for Social Development will be responsible for the implementation of the program, while the IDB will provide technical assistance and $100 million in additional financing, enabled by the Guarantee from the Government of Sweden.

“The COVID-19 pandemic is a challenge to societies all around the world,” said Sweden’s Ambassador to Guatemala, Anders Kompass. “Those hardest hit are the poor, especially informal workers and women. This is a global challenge that can only be met through new partnerships based on innovation. This unique collaboration between Guatemala, the IDB and Sweden is a great example of such a partnership.”

“I thank the IDB, and Sweden for their belief in and willingness to support Guatemala by facilitating access to resources that will benefit those who are most vulnerable,” remarked Alvaro Gonzalez Ricci, Minister of Finance of Guatemala. “The deployment of these new resources into the economy will help generate the conditions for a reactivation of the economy as a whole.”

Carlos Melo, the IDB’s Representative in Guatemala, said, “As the first operation under this innovative initiative with Sweden, this effort will work through the Program for Economic Rescue to strengthen support to the most vulnerable populations, seeking to guarantee quality of life particularly at this time when issues like malnutrition can generate lasting effects that will be difficult to overcome. This program will operate through transfers and intends to make electronic payments, promoting financial inclusion and banking, avoiding conglomerations, and adhering to social distancing guidelines.”      

This new mechanism is a result of the IDB’s innovative finance initiatives, which seek to go beyond traditional financing instruments to help LAC countries achieve the United Nations Sustainable Development Goals (SDGs) and, given the current context, also support COVID-19 recovery. It builds upon a longstanding Sweden-IDB partnership, which has worked in transparency, gender and diversity, and climate change, among other topics.