The Inter-American Development Bank launched multiple new initiatives during 2004 to expand its financing operations in Latin America and the Caribbean, the Bank said in its Annual Report 2004.
“The IDB faces complex but inspiring challenges ahead,” IDB President Enrique V. Iglesias said. “In particular, it will have to operate more flexibility and effectively in providing both financial and nonfinancial services, improving the efficiency and transparency of its activities and responding to the specific needs of each borrowing country.”
Bank lending to the region totaled $6 billion in 2004 compared with $6.8 billion in 2003. Disbursements totaled $4.2 billion. The Bank approved 340 technical cooperation projects for a total of $56.7 million.
For the 11th straight year the IDB was the leading source of multilateral development financing in the region, particularly for the smaller and more vulnerable countries.
Cofinancing by international lenders and donors for IDB-financed projects more than doubled to a total of $3.1 billion.
Forty-two percent of investment loans, a total of $1.55 billion, were targeted for poverty reduction, and 24 loans for a total of $883.9 million were dedicated to modernization of the state.
The IDB aligned many of its social investment and technical assistance programs with national strategies and plans designed to achieve the Millennium Development Goals, human betterment targets set by the United Nations for the year 2015.
The Bank provided $82 million in debt relief to Bolivia, Guyana and Nicaragua under the Heavily Indebted Poor Countries (HIPC) Initiative.
New, more flexible instruments
During 2004 the Bank launched a vigorous program of initiatives to make its operations in conjunction with governments of borrowing countries more flexible and effective.
Among the main initiatives were:
- Approval of credit lines that are disbursed on the basis of concrete economic and social results. Nicaragua, for example, received the first loan of this type for $30 million for maternal-child health.
- Approval of an integral system of support for sectors or economic and social programs, joining resources of the Bank with those of other organizations or governments. The IDB approved a loan of $1 billion to Brazil for the Bolsa Familia program.
- Adoption of greater flexibility for local counterpart funding and the type of costs financed for projects.
- Adoption of the $400 million Regional Trade Finance Facilitation Program that provides partial credit guarantees to support short-term credit transactions for private exporters and importers
Initial bond issues and guaranties in local currencies
In an innovative policy the Bank issued its inaugural bonds in the currency of the borrowing country members. Concurrently, the Bank began the approval of guarantees in local currency to support governments and the private sector and is considering lending in local currency.
Bonds were issued in Brazilian reais and in Mexican and Colombian pesos. The first operation of partial guarantees to the private sector in pesos was undertaken in Mexico for US$75 million.
This type of operation represented a qualitative jump of great importance in the Bank’s cooperation with its member countries for development and in the strengthening of local capital markets.
Opening to Asia
During 2004 negotiations culminated for the entry of the Republic of Korea into the Bank. The Annual Meeting in Okinawa will open new avenues of communication with Asian countries in both the public and private sectors.
Coordination of private sector activities
The position of Private Sector Coordinator was established to create greater synergy among the different parts of the IDB Group that collaborate with the private sector: the Private Sector Department of the Bank, the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF).
Replenishment of MIF resources
Negotiations for a $500 million capital replenishment for the Multilateral Investment Fund will be successfully culminated. This fund has become the most important instrument of the Bank to promote new initiatives in the areas of modernization of the state and development of the private sector, especially small and micro enterprises. By the end of 2004 MIF had approved a net total of $924 million for 667 projects. When counterpart resources are considered, MIF has mobilized $1.8 billion for the region.
Internal efficiency
In addition to becoming more flexible and adopting new policies, the Bank continues to improve its management and procurement systems while increasing its communication with the public by placing more documents on the Internet.
Latin America achieves growth
The Annual Report welcomed a favorable growth rate of 5.5 percent for Latin America and the Caribbean during 2004, representing the best growth in 10 years for Argentina, Brazil, Ecuador, Uruguay and Venezuela. It said favorable international trade conditions and prudent fiscal management contributed to the positive performance, but it warned that challenges must be overcome to sustain the turnaround.
“The five years of sluggish growth in Latin America prior to 2004 left a scar on the social climate that the recent recovery has not healed,” the report said. “The recovery so promisingly begun must translate quickly into improved standards of living for the most vulnerable segments of the population in Latin America and the Caribbean if the region is going to make sustainable progress in alleviating poverty and improving social equity.”