Inter-American Development Bank President Luis Alberto Moreno today unveiled an initiative aimed at generating economic opportunities for low-income people in Latin America and the Caribbean, who make up a majority of the region’s population.
In a briefing held at the IDB’s headquarters in Washington, D.C. and transmitted to field offices across the region, Moreno explained that the Building Opportunities for the Majority initiative will seek innovative solutions to help low-income people develop their economic potential and accumulate assets.
Moreno pointed out that the benefits of economic growth had not trickled down to most people in Latin America and the Caribbean. Some 360 million people, or 70 percent of the region’s population have incomes with a purchasing power of under $3,000 a year.
“Latin America and the Caribbean have achieved macroeconomic stability, but this is not enough to solve the problems of people living near or below the poverty line,” said Moreno, who became IDB president in October. “In fact, poverty and inequality levels have hardly changed over the past 45 years.”
“I think it’s time for a new approach: less macroeconomics and more microeconomics. We have to go directly at the obstacles that prevent low-income people in our region from improving their living standards,” he added.
The lack of broad-based growth leads to economic exclusion, social conflict and political unrest. Most of the region’s population pays a “poverty penalty” that hampers progress for their families, their communities and their countries.
This population also represents a sleeping giant. To study its economic potential, the IDB is working with two leading independent think tanks, the World Resources Institute (WRI) of Washington, D.C. and Instituto Libertad y Democracia (ILD) of Lima, Peru.
ILD, led by Hernando de Soto, took stock of the “dead capital” – unregistered and untitled assets such as businesses and real estate that cannot be used as collateral for loans because they are not legally recognized – in 12 countries in the region. According to the ILD study, these assets amount to $1.2 trillion.
WRI, which is known internationally for its work on environmental issues and the “new emerging markets” of low-income people, estimated this population in Latin America and the Caribbean represents a $510 billion market, measured by purchasing power parity.
For its part, the IDB developed Mapping the Majority, an Internet-based tool that displays statistics on the various issues of Building Opportunities for the Majority, by income deciles as well as at national levels. The tool uses data from household surveys carried out in Latin America and the Caribbean as well as from public and private institutions.
IDB specialists also carried out a series of studies on the initiative’s key sectors, with brief diagnoses, proposed actions and concrete cases that could serve as models for projects.
New directions, specific sectors
Moreno said that the challenge for Latin America and the Caribbean, and consequently for the IDB, is to give low-income people access to opportunities and tools that will enable them to reach their economic potential.
The IDB will concentrate on a few sectors where it can make a difference: low-income housing, microfinance services, social infrastructure (drinking water, sanitation, electricity, urban transport and rural roads), job training and support to small and medium enterprises, access to information and communication technologies, and registering persons who lack identity documents.
“We don’t have all the answers, “ Moreno said. “That is why I’m proposing that we work with governments, private sector companies and civil society organizations to leverage their experience, their resources and their comparative advantages.”
In order to catalyze such partnerships the IDB will create a network of Innovation and Opportunity Centers in several of the region’s countries and one at its headquarters. The Bank will finance part of the operating costs of the centers, which will be selected based on their capacity to research, design, implement and evaluate pilot projects aimed at meeting the needs of the low-income majority.
Lessons learned through these pilot projects will shape a growing proportion of the IDB’s lending, which can amount to as much as $8 billion per year, and will be used to scale up successful experiences.
Moreno also announced that the IDB will pour more resources into specific sectors. During the next five years it will double loans for basic infrastructure projects benefiting low-income communities, to $1 billion per year by 2011. It will create a $1 billion loan fund for small and medium-size enterprises. And it will increase by 50 percent its financing for job training, to $2 billion over a five-year period.
The IDB also plans measures to spur the volume of microfinance in the region from $5 billion to $15 billion by 2011. It will also work to help reduce the average fee charged for remittances to the region from the current 5.6 percent to 3 percent during the same period.
Moreno said that the IDB will continue to make significant loans to traditional sectors, since its mandate still requires it to devote at least half of its annual lending to programs in social sectors such as health and education, and to essential efforts involving modernization of the state and citizen security.
Building Opportunity for the Majority will be launched at a June 12-13 event in the IDB Conference Center (1330 New York Ave, NW, Washington, D.C.). Bill Clinton, Jamaican Prime Minister Portia Simpson Miller, Honduras Cardinal Oscar Rodriguez, Telmex Chairman Carlos Slim, WRI President Jonathan Lash, ILD President Hernando de Soto and Nicholas Negroponte, founder of One Laptop per Child, will be among the keynote speakers.
The conference sessions will center on the main topics of the initiative, featuring case studies of innovative initiatives to improve low-income people’s living standards. There will also be a technology fair where private enterprises and non-profit organizations will exhibit products and services that address the needs of low-income consumers. The fair will be held in the atrium of the IDB’s main building on June 13 and 14.