Inter-American Development Bank Essay ⋆ Business Essay Examples ⋆ EssayEmpire

A regional development institution for the Americas was first proposed in 1890 at the First Inter-American Conference held in Washington, D.C. Not until 1959 did it come into being, as a complement to the World Bank’s Latin American activities. The Inter-American Development Bank (IDB) was the first regional development bank and originally included the United States and 19 Latin American nations. It has since expanded to become the largest source of multilateral funds in the Americas, even including European nations as non-borrowing members, and includes 423 member banks. Headquartered in Washington, D.C., the IDB maintains offices in Paris, Tokyo, and every borrowing member nation.

The 26 member nations eligible for IDB loans are Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, and Venezuela. There are, additionally, 21 non-borrowing member nations: Austria, Belgium, Canada, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Japan, the Netherlands, Norway, Portugal, South Korea, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Borrowing countries hold the majority of the shares in the IDB, setting it apart from other regional banks. The majority of the governors on the board come from Latin American and Caribbean nations, and a board of directors handles most functions, including the approval of loans. Historically, the IDB has tended to support U.S. and capitalist-democratic interests—loan applications from Salvador Allende’s Chilean administration were routinely refused in the 1970s.

IDB loans are typically granted for infrastructure expenditures (highways, dams, etc.), and since the Latin American debt crisis, have reflected policy based lending, reshaping economic policy within debtor nations in return for and as part of granting loans. Funding priority is given to projects that integrate a nation’s economy with the worldwide economy, reduce poverty, and further sustainable development. The IDB tends to come under criticism from the same corners as the International Monetary Fund (IMF) and the World Bank. In the 21st century, the IDB’s pro-American, Washington Consensus leanings have been more prominent, with as much as a third of the loans in any given year being granted for economic reforms and modernization rather than more policy-neutral loans. A special operations fund has also been established for loans to less developed nations at special below-market rates to encourage economic growth and health in the region. In October 2008 IDB announced it would join the Goldman Sachs 10,000 Women Initiative to support and promote women entrepreneurs in the region.

The IDB’s funds are raised by selling bonds to institutional investors, backed by the IDB’s ordinary capital (about 5 percent of which is paid in, the remainder of which is callable from the non-borrowing member nations). The weakness of Latin American economies has put the IDB’s credit rating at risk, but peer pressure has seemed to help to ensure that the borrower nations—which constitute the majority shareholders—will not jeopardize their peers. Argentina did default on its loans in 2001, and there has been concern expressed about Brazil and Mexico.

Bibliography:

Bank Information Center, “Inter-American Development Bank,” www.bicusa.org (cited March 2009);
Inter-American Development Bank, www.iadb.org (cited March 2009);
Inter-American Development Bank (IDB) Handbook (International Business Publications USA, 2007);
Paul Nelson, “Whose Civil Society? Whose Governance? Decision-making and Practice in the New Agenda at the Inter-American Development Bank and the World Bank,” Global Governance (v.6/4, 2000);
Inder Jit Ruprah, “‘You Can Get It if You Really Want’: Impact Evaluation Experience of the Office of Evaluation and Oversight of the Inter-American Development Bank,” IDS Bulletin-Institute of Development Studies (v.39/1, 2008).

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