• IDB estimates annual gap in development financing for Latin America and the Caribbean is US$650 billion.
• Region’s private sector, crisis in Venezuela and macroeconomic challenges among topics of discussion.
GUAYAQUIL, Ecuador – The 60th Annual Meeting of the Inter-American Development Bank (IDB) and IDB Invest concluded today in Guayaquil, Ecuador, with the approval of an updated institutional strategy for 2020-2023 that is intended to increase resource mobilization.
The agenda of the Governors, who represent the 48 member countries of the IDB, included discussion of the challenges facing Latin America and the Caribbean as the region seeks to boost growth at a complex moment for the global economy. The economic, political and social crisis in Venezuela was also discussed.
In his opening address, IDB President Luis Alberto Moreno said that the region “has urgent needs, but none greater than to reverse the deterioration of Venezuela,” where 94 percent of the population is currently living in poverty.
Updated priorities to bridge financing gap
The IDB periodically updates its institutional strategy to anticipate the needs of member countries and to take advantage of new economic, technological and social developments. The update presented to the Governors in Guayaquil is based on the pillars of ensuring social inclusion and equality, promoting productivity and innovation, and promoting economic integration. It also emphasizes the adoption of new technologies and innovation in the public sector, in view of the opportunities afforded by the digital revolution.
Recognizing the difficulties that governments face in obtaining the funds needed to achieve the UN Sustainable Development Goals, the updated strategy seeks to increase the mobilization of resources from new sources, such as private pension funds, in order to leverage IDB loans. Finally, it seeks to accelerate progress on gender equality and diversity, climate change and environmental sustainability, institutional capacity and the rule of law.
In order to achieve the UN Sustainable Development Goals, the countries of the region will need resources that far exceed what the public sector or multilateral banking institutions can generate. According to IDB calculations, the gap in development financing for Latin America and the Caribbean is equivalent to US$ 650 billion per year. That figure is 38 times more than what the IDB Group approved last year.
It is difficult to obtain these additional resources, in part because of the risk profile of the economies of the region, and in part because some countries are approaching an average-income level that no longer qualifies for international assistance.
As such, the IDB is promoting a systematic strategy for building alliances and mobilizing resources with donor countries, foundations and the private sector, which includes generating financial guarantees to facilitate the participation of institutional investors.
President Moreno and the Minister of Economy and Finance of Ecuador, Richard Martínez, announced the signing of four loans totaling US$631 million to improve water and sanitation services, energy and social housing, and to strengthen the country's fiscal stability. Moreno announced that the IDB Group foresees the approval of US$1.9 billion this year for operations in the public and private sectors of Ecuador.
In 2018, with a historic sum of US$17 billion in approved loans, the IDB and IDB Invest consolidated their position as the principal source of multilateral financing for Latin America and the Caribbean. The IDB approved 96 sovereign guaranteed loan projects with total financing of more than US$13.4 billion and disbursed more than US$9.9 billion.
The year 2018 was a record year for BID Invest, with approvals of US$4 billion, representing a 26-percent increase in volume and a 21-percent increase in number of transactions compared to the previous year. IDB Invest expanded its support to sectors such as infrastructure and Fintech, in addition to education, tourism, water and sanitation, transportation and energy.
The next annual meeting of the IDB and IDB Invest will be held in March 2020 in Barranquilla, Colombia.
The IDB Group is the leading source of development finance for Latin America and the Caribbean. It helps to improve lives by providing financial solutions and development knowhow to public and private sector clients. The group comprises the IDB, which has worked with governments for 60 years; IDB Invest, which serves the private sector; and IDB Lab, which tests innovative ways to enable more inclusive growth.