The Inter-American Development Bank Group approved new operations totaling more than US$9.6 billion in 2007, confirming its role as the leading source of multilateral lending for Latin America and the Caribbean.
In his year-end report to the IDB Board of Executive Directors, President Luis Alberto Moreno said these results reflect the Bank’s efforts to serve “a region with diverse visions and different development models, by striving to be more flexible, efficient and versatile to meet their needs and become our countries’ premier partner.”
In 2007 the IDB proper approved US$9 billion in financing for 97 projects, the largest volume of approvals since 1999. In 2006 it had approved US$6.4 billion in new operations.
The Inter-American Investment Corporation, the IDB Group affiliate specialized in financing for small- and medium-sized businesses, also had a good year. The IIC approved 53 operations totaling US$486 million this year, up from 48 projects for US$337.7 million in 2006.
The Multilateral Investment Fund, the IDB Group program that focuses on microenterprises, approved 117 projects totaling US$134.3 million, of which nearly US$100 million were grants. Last year it approved US$125 million in new projects.
In his comments to the Board, which represents the IDB’s 47 member countries, Moreno highlighted the significance of the IDB’s financing for infrastructure and competitiveness projects, which rose to US$5.7 billion this year.
Moreno noted Latin American and Caribbean countries have yet to recover from decades of underinvestment in infrastructure, in contrast with Asian countries that have faster-growing economies, such as China and South Korea.
“To reach that level need to invest at least double what they are currently investing in that sector, 2% of GDP annually. They need to spend between 4% and 7% of GDP per year for the next two decades in order to have high-quality infrastructure that can become the backbone of our development,” he said.
Outlook for 2008
According to the year-end report, the outlook for Latin America and the Caribbean for 2008 is favorable, despite the instability in international financial markets. Consensus forecasts for regional growth range between 4% and 4.5%, down from 5% in 2007. The decrease would largely stem from a slowdown in the U.S. economy and a possible weakening of prices for Latin American exports.
Regional inflation, which in 2006 was at a historical low of 5%, was 5.3% in 2007. According to different analyses, it will tend to increase in several Latin American countries in 2008. On the fiscal front, several countries that posted primary surpluses this year could slide into deficits next year, since very few have taken steps to strengthen public sector revenue and offset increased spending.
In terms of social impact, in 2007 Latin America and the Caribbean reached the lowest levels of poverty and indigence in 17 years (35.1% and 12.7%, respectively. However, there are marked disparities. While Brazil, Chile and Mexico have reached the Millennium Development Goal of halving the extreme poverty rates of 1990, several countries are still far from reaching their targets.
Other 2007 highlights
The IDB, in an effort to be more responsive to its borrowers’ needs, carried out reforms to simplify its procedures and delegate more operational responsibilities to its offices in its 26 borrowing member countries.
By implementing new policies the IDB was able to boost its nonsovereign-guaranteed operations. This year it approved 28 such loans and partial credit guarantees totaling US$2.3 billion for private sector and public sector clients, up from US$960 million in 2006.
In terms of innovations, the IDB established two trust funds to finance projects linked to its Sustainable Energy and Climate Change Initiative. These funds allow the IDB to work with a variety of partners on key issues for Latin America and the Caribbean, such as building a sustainable biofuels industry and seeking creative solutions to improve energy efficiency.
Moreno also hailed as “historic” the IDB’s decision to grant US$4.4 billion in debt relief to Bolivia, Guyana, Haiti, Honduras and Nicaragua. Unlike other multilateral institutions, the IDB is bearing the cost of this cancellation without additional contributions.
In 2008, Moreno added, the IDB expects to launch new projects under its Opportunities for the Majority initiative, which seeks to expand low-income people’s access to tools and services that can help them improve their incomes and living standards.