Inter-American Development Bank President Luis Alberto Moreno laid down a set of challenges for a new initiative to help low-income people in Latin America and the Caribbean gain more economic opportunities and improve their living standards.
At the end of a two-day conference held at IDB headquarters, Moreno said Tuesday that over the next five years the Building Opportunity for the Majority initiative will support innovative efforts with public and private sector partners to halve the number of unregistered and undocumented people in the region, treble the volume of microcredit and lower the costs of remittances.
As part of the new plan, the IDB will establish a $1 billion loan fund for small and medium-size businesses, increase its lending for job training by 50 percent to $2 billion for the five-year period and double the financing for basic infrastructure projects benefiting low-income communities to $1 billion a year by 2011.
“These goals are ambitious but very much within our reach”, Moreno said in his closing speech. “Development should not be subject to rigid formulas and limited to traditional relationships. The work of development needs to be charged with new ideas and revitalized by creativity and innovation. At the IDB, this means that our way of thinking and acting must change.”
The IDB, the leading source of multilateral financing for Latin America and the Caribbean, can lend $8 billion a year. Moreno said the new initiative would complement the institution’s traditional work, which emphasizes social sectors such as education, health and violence prevention, as well as state modernization.
Building Opportunity for the Majority will target some of the key issues pointed out by two of the seminar’s keynote speakers, President Bill Clinton and Hernando de Soto, as obstacles to poor people’s access to the middle class: identity registration, bureaucratic barriers to entrepreneurship and recognition of property rights.
“As President Clinton said, the poor are intelligent and hard working but they are encumbered by systems they cannot overcome. It is our job to deepen our focus on microeconomic issues and institutional structures that currently inhibit opportunity for the majority,” Moreno said.
To underpin its new initiative, the IDB conducted research on six key areas for action: unregistered births and undocumented citizens, housing, financial services, basic infrastructure, job training and employment creation, and access to modern technologies.
The research set the foundations for a new statistical information tool, Mapping the Majority, which measures access to essential goods and services by income level in Latin American and Caribbean countries, providing baselines for the initiative’s goals.
The IDB also entered partnerships with two leading development think tanks, De Soto’s Instituto Libertad y Democracia (ILD) in Lima, Peru and the Washington, D.C.-based World Resources Institute (WRI).
ILD, hailed for its work on promoting property rights for the poor, conducted a survey of businesses, dwellings and rural properties in the informal or “extralegal” sector of 12 Latin American countries, finding that these assets are worth an estimated $1.2 trillion.
WRI, which is internationally renown for its investigation of the global environment and emerging markets of low-income consumers, calculated that the “market of the majority” in Latin America and the Caribbean includes some 360 million people, or 70 percent of the population. This group’s annual income totals $510 billion, measured by purchasing power parity.
While low-income people own assets and consume goods and services, existing laws and rules prevent them from taking full advantage of their economic potential. This population is burdened by a “poverty penalty” in the form of higher cost and lower quality goods and services.
To address such problems, the IDB will create an Innovation and Opportunity Network to seek partnerships with government agencies, private sector companies, universities, foundations and other civil society organizations in Latin America and the Caribbean to research new ideas and sponsor pilot projects in each of the six key areas.
“We are establishing this network because we recognize that we cannot do it alone and that we don’t have all the answers,” Moreno said.
Lessons learned through pilot projects, which may range from $5 million to $15 million, will be used to launch expanded programs. The IDB expects to gradually increase the number of such projects to around 100 a year.