In a speech marking the 40th anniversary of the Inter-American Development Bank, IDB President Enrique V. Iglesias said the Bank will focus its efforts to assist the economic and social development of Latin America and the Caribbean in five broad areas in the 21st Century: reform, social compact, governance, regional cooperation, and taming the turbulence of globalization.
After outlining the history of the IDB and tracing its roots to calls for Pan American cooperation in the 19th Century, Iglesias stressed the importance of drastically increasing the region’s growth rate.
"With the present growth rates it is impossible to solve the social problems," Iglesias said in an address Tuesday presented at IDB Washington, D.C., headquarters. The presentation was jointly sponsored by the Professional Bankers Association and the IDB.
Iglesias noted that in the last century, at the Pan American conference of 1889 in Washington, D.C., three items were discussed that still have relevance today: monetary union, customs union, and creation of a bank. The idea of founding a development bank received new impetus during the 1950s, when the concept was strongly promoted by Latin American nations, and in 1959, some 70 years after the idea was first suggested, the Bank was launched, Iglesias related.
The IDB assumed a unique identity from its very first operations under its first president, Felipe Herrera, in that it took a leading role in financing in areas that other banks had traditionally avoided, such as investments in social sectors and higher education, and promotion of economic integration.
Later, under the Bank’s second president, Antonio Ortiz Mena, the IDB’s membership was expanded to include Canada and countries in Europe, Japan and Israel, increasing the institution’s resources during periods of the 1970s and 1980s when the region and world experienced difficulties, such as the petroleum crisis, high inflation, and indebtedness.
Iglesias, who is the IDB’s third president, gave his priorities for Bank activities in the next century as follows:
• Reform: "We must advance the reform process, moving to reforms of the second and third generation . . . A new and redefined state is perhaps the most important task now facing the countries of the region."
• Social Compact: "A grand social compact between government and society is needed to solve social problems, of which education in all its aspects is a central issue, as are problems related to health, employment, and small and medium-sized businesses, among others."
• Governance: "An integral reform of the state is needed. . . A great potential for the region is the active co-participation in power by local governments. They, above all, have capacity to work with civil society."
• Regional Cooperation: "It is necessary to strengthen regional cooperation at all levels, going beyond mechanisms of integration. Support is needed in two areas: first, financial cooperation, and, secondly, coordination of macroeconomic policy."
• Globalization: "We need to support the countries of Latin America and the Caribbean in active participation in a new international financial architecture, especially in the area of the new round of multilateral negotiations that will begin at the end of this year, the so-called Millennium Round."
Iglesias added that "support for the cultural identity of our countries is a priority we feel strongly about." It is not only "significant for self-affirmation," he said, "but it is also a way to maintain our identity to be better citizens, better Latin Americans, and, finally, better members of the international community."
He noted that the IDB’s ordinary capital resources have increased from $850 million in 1959 to $101 billion today.
The Fund for Special Operations, which provides concessional financing for the region’s poorest nations, has $10 billion in capital. The IDB also administers the $1.3 billion Multilateral Investment Fund, that supports private sector development.Another member of the IDB Group, the Inter-American Investment Corporation, provides loans and equity to small and medium-sized businesses. This year the IIC members voted in favor of a $500 million capital increase for the IIC.
Iglesias recalled that IDB member nations increased the Bank’s resources dramatically to confront the debt and inflation crises that hit the region during the 1980s. To deal with the crisis, most Latin American and Caribbean countries adopted orthodox macroeconomic reforms under the guidelines of the so-called Washington Consensus, which promoted macroeconomic stabilization, economic openness, and downsizing of the state.
Iglesias said that despite volatilities and much unfinished work in the development area, Latin America and the Caribbean from the point of view of macroeconomic stability "now has its house in order." He praised the region’s current economic leadership as "infinitely more prepared than it used to be," but he warned that political advances are lagging and that representative democracy must be supplemented by participatory democracy. He noted the region’s inflation is now 10 percent, compared with inflation in the triple digits that plagued many of the countries during the 1980s.
The IDB, although it commands unprecedented resources, "can not solve all the problems, but it can be an institution that is a friend a friend of countries in crisis, a friend of countries suffering natural disasters, a friend of countries in their international dialogue," Iglesias said.
Summers, Wolfensoh, Camdessus, Gaviria inaugurate IDB anniversary celebrations
Ceremonies commemorating the IDB’s 40th anniversary were launched Monday night at the Bank with speeches by U.S.Secretary of the Treasury Lawrence Summers, World Bank President James Wolfensohn, and International Monetary Fund Managing Director Michel Camdessus. César Gaviria, secretary general of the Organization of American States, delivered a written message saluting the Bank, and Iglesias gave an introductory speech.
Summers stressed the importance of supporting multilateral institutions as the "best investment we can make in terms of payoff, dollar for dollar, of what we spend for a future security."
"We can tell you that President Clinton and his entire administration believe in the work of this institution, have fought for its support, and will continue to fight for its support for going forward," he said.
Wolfensohn praised the long-standing cooperation between the World Bank and the IDB, and stressed the importance of the IDB’s pioneering programs in new areas of social concern and in the field of culture. "At this institution, we not only have partners, we have friends," he said.
Camdessus remarked that the IDB "has never stopped reminding us that development is something that goes beyond building factories, power plants, highways and bridges."
"The IDB is in the vanguard of strengthening a second generation of reforms and institutional reforms and good government for the countries of the region," he said.
On Tuesday evening Mexican author Carlos Fuentes delivered a lecture at the IDB on "Latin America on the Bridge of two Centuries," one of a series of cultural events and other ceremonies marking the IDB’s 40th anniversary that are being held.
The ceremonies will culminate Dec. 3-4 at the Quitadinha Hotel in Petrópolis, Brazil, where Bank authorities will commemorate a meeting of finance ministers in 1954 who took steps that led to the eventual founding of the IDB.