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The IDB and the United States

As a founding member of the Inter-American Development Bank, the United States played a key role in the creation of the institution in 1959, subscribing to the largest single block of shares. The present U.S. subscription, equivalent to 30.5 per cent of the Bank’s $101 billion in capital, reflects continued support for the economic and social development of Latin America and the Caribbean.

The United States was instrumental in creating and strongly backing the Fund for Special Operations (FSO), the Bank’s soft-lending window. The FSO was established in 1960 to provide loans on concessional terms for special circumstances in specific countries and specific projects. FSO loans are currently extended to the poorest countries in the region: Bolivia, Guyana, Honduras, Nicaragua and Haiti. Over the years, the United States has provided roughly half of the FSO’s $10 billion in resources.

In an effort to promote private investment and the development of the private sector in the region, the United States has played a leading role in the establishment of two autonomous institutions affiliated with the IDB, the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF).

The IIC, established in 1984, provides project financing in the form of direct loans and equity investments to private companies, lines of credit to local financial intermediaries, and investments in local and regional investment funds. It particularly targets small and medium-sized companies and markets that lack access to alternative sources of financing. As the largest single shareholder of the IIC, the United States subscribes to 25 percent of its capital.

The MIF, established in 1993, provides technical assistance grants to support enhanced regulatory and legal frameworks to assist in building a modern work force and to reduce for financing for microenterprise and small enterprises. Working in coordination with the IIC, it also invests in market institutions, such as equity funds, that give small firms access to financing options normally available only to larger companies. The United States and Japan have each pledged $500 million to the $1.2 billion fund.

Through the IDB, the IIC and the MIF, the United States has helped countries build stronger institutions and strengthen regulatory and legal frameworks to foster market-based growth and reduce poverty in Latin America and the Caribbean.

These efforts have led to broader and deeper economic ties between the United States and Latin America. The United States accounted for 47 percent of foreign direct investment on average in Latin America during 1997-1998, and total U.S. trade with the region in 1991-1998 increased 128 percent against a 75 percent increase in U.S. trade with the rest of the world.

The Summit of the Americas process, launched in Miami five years ago by the heads of state of the Western Hemisphere and supported by the IDB, was also a mark of the long commitment of the United States for integration and prosperity in the Americas.

The United States continues to play a leading role in the negotiations for the establishment of the Free Trade Area of the Americas.

United States priority areas for future IDB support include poverty reduction, modernization of the state, governance, environmental protection, regional integration, and improved delivery of social services. The issues of promoting transparency and fighting corruption are of central concern, and the United States strongly promotes measures to improve governance in the region and to enhance procurement procedures used for the Bank´s projects. The United States has also led efforts to encourage transparency of the Bank’s operations and a participatory approach, including input from civil society, in the development and execution of Bank projects and policies.

The United States strongly supports IDB participation in the initiative to provide debt relief to the heavily indebted poor countries (HIPC) in conjunction with the World Bank, the International Monetary Fund, and other international creditors. The IDB is currently providing debt relief to Bolivia and Guyana and the Board of Directors is in the process of discussing the provision of additional debt relief to those same two countries, as well as to Honduras and Nicaragua, under the enhanced HIPC initiative.

Besides promoting economic and social development in the Bank’s 26 borrowing member countries in Latin America and the Caribbean, United States membership in the Bank entitles U.S. companies to pursue business opportunities in IDB-financed programs.

U.S. firms rank first in the amount of contracts that are awarded by the Bank to nonborrowing countries.

Year 2000 Annual Meeting

New Orleans will host the 41st Annual Meeting of the IDB Board of Governors March 27-29, which will take place concurrently with the 15th Annual Meeting of the Board of Governors of the Inter-American Investment Corporation.

As the premier world forum on development for Latin America and the Caribbean, the Annual Meeting for the year 2000 is expected to attract thousands of public and private sector officials, bankers, experts and journalists, as well as representatives from a variety of nongovernmental organizations.

The Bank’s top policy-making body, the Board of Governors – whose members hold the rank of finance ministers, economy ministers or central bank presidents ? is expected to discuss among other issues a strategy document for the next century prepared jointly by the Bank´s management and Board of Executive Directors, as well as the participation of the Bank in the enhanced HIPC initiative.

The IIC governors are expected to receive an update on the status of the $500 million increase in the Corporation’s capital.

Previous annual meetings held in the United States took place in Washington in 1967 and in Miami in 1987. The Bank´s headquarters is located in Washington, D.C.

By the end of 1999, the IDB, the leading lender to Latin America and the Caribbean, had approved 2,652 operations totaling approximately $104.6 billion, supporting projects with a total cost of $240 billion.

In 1999 the IIC approved 22 transactions for $190 million for projects whose total cost was $1.5 billion. When implemented, these projects will create 12,000 jobs, generate annually $2.3 billion in value added and close to $800 million in foreign currency income in the borrowing countries.

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