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IDB lending reflects a new Latin America

In 1997 the IDB approved 99 lending operations for a total of $6 billion, according to a year-end tally presented to the Bank´s Board of Executive Directors on December 18.Both the high number of new loans and the kinds of projects they will finance reflect fundamental changes taking place in Latin America and how the IDB is responding to them, said Bank President Enrique V. Iglesias in presenting the report.

In the first place, the traditional sectors for Bank lending have undergone a sweeping set of changes. Throughout the region, governments are decentralizing their operations and shifting responsibilities to lower levels of government, particularly in the area of infrastructure and the delivery of social services. Also, the private sector is now performing functions previously reserved to the state.

An example cited by the report is the water and sanitation sector, a traditional focus of IDB lending. Largely gone are the days when financing a potable water project involved a simple two-way conversation between the Bank and a public agency. Today, such projects are typically carried out by private or mixed enterprises that rely for funding on tariffs charged to consumers. As a result, a widening circle of players is involved and a far more complicated set of technical, economic, political and social considerations must be taken into account.

Today, before the Bank can fund a project, it must initiate a dialogue among the various players through conferences and seminars that bring together people from the public and private sectors and civil society. In many cases, the Bank also finances studies, helps to create regulatory agencies and strengthens the ability of municipalities and provinces to carry out investment programs.

NEW FIELDS FOR LENDING

Another reason for the shift from large total lending amounts toward larger numbers of projects is the kind of fields the Bank is now entering. Among them are legislative and judicial reform, programs to help children and programs to build peaceful societies in the aftermath of civil conflict. In each case, according to the report, considerable preparatory work must be done to design new methodologies and performance goals involving inputs of not only government authorities, but civil society organizations as well. In many cases, countries have called on the Bank to finance advisory assistance and project preparation, operations that are small in size but are nevertheless crucial in defining strategies and carrying out reform programs.

According to Iglesias, this trend should become more pronounced in years to come as the Bank helps its member countries carry out a second generation of reforms in such areas as modernization of the state, judicial and regulatory reform and strengthening democratic institutions and civil society, in addition to consolidating macroeconomic management.

BOOST FOR SOCIAL PROGRAMS

A major portion of last year's lending--44 percent--will finance social programs, particularly health and education. Small business and microenterprise projects, with their potential for higher income and jobs, received $521 million in new IDB financing.

Nine loans totaling $320 million were approved for private sector projects, eight of them in the areas of transportation and energy. Private sector lending also included an additional $566 million in syndicated loans.

The year´s highlights included:

-The IDB's first loan guarantee for a private sector project.-Loans to Peru and Ecuador to mitigate damage from El Niño.-The Bank's first large-scale bilingual judicial reform program.-The first IDB-financed music program.-The Bank´s first debt reductions under the international initiative to assistheavily indebted poor countries.

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