Background Note on Inter-American DevelopmentBank

Annual Meeting IDB – IIC

Miami, 3 – 8 April 2008

The Inter-American Development Bank is the main source of multilateral financing for economic, social and institutional development in Latin America and the Caribbean. It provides loans, grants, guarantees, policy advice and technical assistance to the public and private sectors in its member countries in Latin America and the Caribbean.

The IDB was established in 1959 and comprises three institutions:

The Inter-American Development Bank

The Inter-American Investment Corporation

The Multilateral Investment Fund

Members

The Bank is owned byits 47 members, all sovereign states, which are also its shareholders. Of these, 26 are countries in Latin America and the Caribbean that are eligible to receive loans from the Bank (see chart below). Sixteen European countries are members of the Bank, as well as Israel, Japan and the Republic of Korea. Twenty-one IDB members are not eligible to receive loans. Neither Cuba, nor the OECS countries of the Eastern Caribbean are members. The voting power of each member country is based upon its payment into the bank’s capital fund and is held in the following proportion:

Latin America and the Caribbean50.2 percent

United States30.1 percent

Japan 5.0 percent

Canada 4.0 percent

European members, Israel, Korea 10.97 percent

According to the charter of the IDB, the majority of the voting power is to be held by the 26 borrowing member countries as a group, a unique arrangement.

Borrowing member countries of the IDB / Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, and Venezuela
Non-borrowing member countries of the IDB / Austria, Belgium, Canada, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Japan, The Netherlands, Norway, Portugal, Republic of Korea, Slovenia, Spain, Sweden, Switzerland, United Kingdom and the United States

Governing Bodies and Staff

The highest authority of the Bank is the 47-member Board of Governors, composed of one governor appointed by each member country. Governors are usually ministers of finance, central bank presidents or high-ranking public officials. They hold an annual meeting in a member country to review the Bank’s operations and make major policy decisions. In between the annual meetings of Governors, the operation of the Bank is directed by the Board of Executive Directors, composed of 14 members, all elected or appointed for three-year terms. The United States and Canada have their own representatives, while others represent groups of countries. The Executive Directors approve loans, authorize borrowing, approve the budget and also approve the Bank’s country and sector strategies.

The Bank has approximately 1,900 employees. Two-thirds of these serve at the headquarters in WashingtonDC, while the remainder is assigned to country offices. Thus the IDB is more than three times larger than the OAS. The organizational structure of the IDB is found in annex to this note.

Luis Alberto Moreno, the former Colombian ambassador to the United States and a former cabinet minister in Colombia, became the fourth IDB president on October 1, 2005.

Relationship to other Multilateral Financial Institutions

The IDB is a part of the Inter-American system, while its related multilateral financial institutions, the IMF and the World Bank, are part of the United Nations system. The IDB provides more lending to Latin America and the Caribbean than does either the IMF or the World Bank and is the largest source of multilateral financing for the region. However, the IDB cooperates with the IMF and the World Bank, in order to strengthen macroeconomic stability in LAC in the former case and to co-finance projects and programs in the latter case.

Budget/ Financial Resources

The IDB disposes of two sources of funding for its lending activities:

Ordinary Capital (OC) which constitutes the subscriptions of its members and which totaled $101 billion at end 2006. Of this amount, 4.3 percent is paid-in and the remaining 95.7 percent is callable capital that serves as backing for bonds issued in world financial markets. Included in the callable capital are the IDB’s reserves of $14.4 billion (at end 2006).

Fund for Special Operations (FSO) which are used to provide concessional loan financing to assist the poorest countries in the Western Hemisphere and to finance debt relief initiatives. Since its creation in 1959, the FSO has received $10 billion. In 2007, the IDB determined that Bolivia, Guyana, Honduras and Nicaragua and eligible to receive concessional financing from the FSO. Until 2009, Haiti is eligible to receive up to $50 million in annual grants. The FSO also finances up to 20 percent of loan approvals to Ecuador, El Salvador, Guatemala, Paraguay and Suriname.

In addition, the IDB disposes of resources through its trust funds and co-financing:

Trust Funds. There are 44 trust funds administered by the IDB that have been created by countries and groups of countries. These resources finance training, consulting services, project preparation, microenterprise and other projects. The largest donor for the trust funds is Japan, but new funds have recently been created by the Republic of Korea, Norway and Spain.

Co-financing resources: In recent years IDB operations have benefited from c0-financing resources from more than 15 multilateral institutions, including the World Bank group and some 20 bilateral agencies. Co-financing resources totaled $3.6 billion during 2006.

In 2007, the IDB approved $9 billion for project financing in the region, the largest volume since 1999.

Prior Annual Meetings

The members of the IDB Board of Governors have met 47 times prior to this year. The 2006 Annual Meeting was held in Belo Horizonte, Brazil and the 2007 Annual Meeting in Guatemala City, Guatemala. The theme of the 2007 Annual Meeting was “Let no one be left behind”, from the Popol Vuh, or the sacred book of the Maya. At the 2007 IDB annual meeting the following issues were discussed and agreed upon:

The need for greater and broader social inclusion in the region

The necessity of a more inclusive growth model

Attention to be paid to microeconomic aspects of growth

Critical nature of energy efficiency and of developing sustainable energy sources, including biofuels

Preparation needs for natural catastrophes

Priority work on development of the private sector

Additionally, a landmark agreement was reached at the 2007 annual meeting on debt relief for the region’s poorest, most heavily indebted countries. It was agreed that the Bank would refocus its attention on the needs of the middle-income countries in the future. Lastly, the Bank’s capital adequacy and the existence of excess equity were issues that needed to be examined. IDB members agreed that development should be viewed as a collective enterprise that did not depend just on the countries’ relationship with the Bank but also on coordination and harmonization of efforts with all of the development partners in the region (including the OAS).

Mandates for Areas of Work

The current areas of priority for the IDB’s work as approved by the Board of Governors are the following:

Private Sector Development

Modernization of the State

Poverty Reduction and Social Equity

Regional Integration

The Environment, including Sustainable Energy and Climate Change

The OAS carries out work in all of the above five areas of priority for the IDB.

The 2008 Annual Meeting

In 2008, the forty-ninth Annual Meeting of the IDB will take place in Miami (April 4th to 8th). The Bank and the host country will be sponsoring a series of seminars on topics of interest to participants prior to the opening of the meeting. This year's Annual Meeting will bring together thousands of participants to discuss the region’s most pressing economic and social issues. The keynote speaker for the opening session on “Philanthropy Investing in the Americas” will be Microsoft's founder Bill Gates, who will lead off the program together with IDB President Luis Alberto Moreno. This will be followed by renowned artists Ricky Martin and Juan Luis Guerra in a “Celebrities Forum”, who will launch an advocacy and social marketing initiative featuring artists as agents of change in strategic areas of development.

Other issues which will be featured in sessions during the three-day program from April 4th through 6thinclude:

Bridging the Infrastructure Gap: Challenges and Opportunities for Private Investment in Infrastructure

Ongoing Macroeconomic Challenges for Latin America and the Caribbean

Response and Preparedness for Natural Disasters

Transforming the Financial System to Reach the Poor

Innovations in Sustainable Energy and Climate Change

Mobile Services for Development

Applications of ICT for Social and Economic Inclusion (Mobile Banking)

Green Energy Scenarios

Enhancing Competitiveness in the Americas: Private Sector Forum

Engaging Youth as Agents of Change

The actual meeting of the Boards of Governors will take place on Monday and Tuesday, April 7th and 8th.

The Chair of the Organizing Committee of the IDB annual meeting this year is Jorge Arrizurieta, who has been instrumental in putting together the program and in soliciting interest and corporate sponsorship for the event. The meeting is being billed as one of the biggest business events ever to take place in South Florida, with as many as 8,000 attendees likely, including President George W. Bush, the Presidents of Mexico and Brazil. It is the first time the IDB meeting has taken place in the United States since 1987, or twenty years ago. The host committee aims to provide $7 million in cash and in-kind contributions for the event, with companies already having pledged the majority of this amount.

New Focus on the Part of the IDB

Under its new President Moreno, the IDB has been undergoing an organizational restructuring. It has also been shifting the focus of its work, seeking to boost the role of business and philanthropy to help develop economies of Latin America and the Caribbean. Increased importance is being attached to seeking out collaborative projects with the private sector and to obtaining business involvement in the IDB’s work.

As part of its new focus on engaging philanthropists, the annual meeting of the IDB will feature presentations by Bill Gates, whose Bill and Melinda Gates Foundation is partnering with the IDB to expand its work in the hemisphere, thus broadening its perspective from a previously exclusive emphasis on Africa. The Puerto Rican rock singer Ricky Martin will be featured as well, to highlight new programs that his Ricky Martin Foundation will be carrying out jointly with the IDB to fight human trafficking in Latin America and the Caribbean. Through these examples, President Moreno hopes to encourage greater philanthropy for Latin America through stimulating a feeling of solidarity for giving by firms not only in the U.S. and Canada but in Latin America as well. To encourage this, it will be important for governments to realize changes in the tax regimes in the region where in many cases philanthropic giving is not tax-deductible.

Ongoing Collaborative Projects between the OAS and the IDB

Among the projects which the OAS and the IDB are carrying out on a collaborative basis are the following:

  1. FTAA process: the OAS hosts the official FTAA website, while the IDB is responsible for hosting the FTAA Hemispheric Database. The two institutions cooperate for regional integration as members of the Tripartite Committee.
  2. Multidimensional Security: Joint Project on “Mock Trials on Money Laundering in Latin America” (Project number RG-T1196), through CICAD, to benefit the countries of Paraguay, Argentina, Uruguay, Bolivia, Chile, Brazil and Mexico

IDB contribution: US $147,000

  1. Corruption: Memorandum of Understanding between the OAS and the IDB to support the Implementation of the Inter-American Convention against Corruption and its Implementation Mechanism, signed in March 2007, on which basis an annual work plan and technical cooperative activities are to be developed.
  2. Electronic Government: Joint Project on “Improving Public Management through Best Practices for E-Government” (Project number BPR T1153) whose executing agency is the RED GEALC (Red de Lideres de Gobierno Electronico de America Latina y el Caribe ( IDB contribution: US $200,000
  3. Sustainable Development: The IADB holds a seat on the Management Board of the Inter-American Network for Disaster Mitigation (INDM) managed by DSD; the IADB, along with the OAS, IICA, CARICOM Secretariat and the Government of Guyana are signatories to an MOU signed in Guyana in August 2008, establishing the Caribbean Renewable Energy and Bio-fuels Program. Lastly, the IADB President serves on the Inter-American Committee on Natural Hazard Reduction, together with PAHO, PADF and the Inter-American Defense Board.

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