Inter-American Development Bank
This section draws from the Bank Information Center (BIC) website and from the Inter-American Development’s website.
Background
The Inter-American Development Bank (IDB) was established in 1959 as a multilateral development finance institution with the mission “to contribute to the acceleration of the process of individual and collective social and economic development of member countries in key areas of development”. The IDB is the largest multilateral public lender for Latin America. It provides the region’s governments and private sector with:
- Loans, grants and guarantees
- Equity investments (via two affiliated bodies)
- Technical cooperation (interest-free loans) and
- Technical assistance for planning and implementing development projects and policy and sector reform programs.
During the eighth replenishment the Governing Assembly agreed that the IDB should “prioritise social equality and the reduction of poverty, the growth of sustainable economy, the modernisation of the state and regional integration.” IDB together with other multilateral banks is considered a catalyst for sustainable social and economic development in Latin America.
However, in July 2008 the IDB has signed loans totalling 800 million US$ for the contested Camisea liquefied natural gas project in Peru. The loan follows an earlier loan of 135 million US$ in 2003 for the exploration, extraction and transport activities of the Camisea project. BIC reports that the project is located in one of the world’s most ecologically prized and pristine primary tropical rainforests, which happens to be home to numerous indigenous settlements, as well as to nomadic Amerindians known to be living in voluntary isolation. Exploration, extraction, and transport activities have already led to degradation and conversion of critical natural habitats and have opened the way to a potential influx of people and companies—including other extractive industries and forestry operations—that want to exploit the region’s natural resources.
The renewed loan underlines concerns of civil society about the negative impacts of IDB’s operations on environment, indigenous and traditional peoples, as well as on the prospects for genuine economic and democratic reform in the region.
Structure
The IDB is owned by 47 member states: 26 borrowing member countries in Latin America and the Carribean (all Latin American countries except Cuba) and 21 lending or non-borrowing countries, including the United States, Canada, Japan, South Korea, Austria, Belgium, Croatia, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland, the United Kingdom and Israel.
From the procurement and employment standpoints, non-borrowing members benefit as only suppliers from member states can provide goods and services for IDB-financed projects and the Bank can only employ citizens from those countries.
The board of governors has the highest authority of the IDB. Its members are usually finance ministers or presidents of central banks. The board of governors makes major policy decisions. The board of executive directors is responsible for the permanent work, they meet weekly to approve the projects and policies the IDB finances for implementation in the borrowing countries. The board is made up of 14 Executive Directors (EDs), each with an Alternate (Alt ED), who share among them the representation of all member countries. Voting power of each ED depends on the contribution to the IDB’s ordinary capital made by the member countries that the ED represents. By this calculation, among the Bank’s lending members, the United States is the single largest shareholder, with approximately 30 percent of the voting power, followed by Japan, 5 percent; Canada, 4 percent, other lending members combined, 11 percent. The 26 Latin American and Caribbean members collectively control 50.02 percent of the IDB’s shares.
Since October 2005 the president of the IDB is Luis Alberto Moreno. He is a Colombian national, who has served as Economic Development Minister in Colombia and for seven years as Colombia’s ambassador to the United States where he built support for passage in the U.S. Congress of “Plan Colombia,” which consisted of more than $4 billion in military and economic assistance programs for Colombia. He also lobbied hard for negotiations towards a Colombia-U.S. Free Trade Agreement. As bank president he announced his intention to pursue decentralization of headquarters-based staff, apparently in response to a drive at the Board level to find ways to bring the IDB “closer to its clients.” Moreno explained how this could look like at the April 2006 Bank Annual Meetings in Belo Horizonte: he intents to increase the Bank’s support for sub-national governments, such as provinces and municipalities, which in various countries have been taking greater responsibility for social services in the context of decentralization. When it comes to implementing the kinds of oversight mechanisms needed to account for the impacts of these and related changes, or to strengthening standards and systems for transparency and accountability at the IDB overall, Moreno’s intentions are much less clear.
Lending
In its own words, the IDB “assists its Latin American and Caribbean borrowing member countries in formulating development policies and provides financing and technical assistance to achieve environmentally sustainable economic growth and increase competitiveness, enhance social equity and fight poverty, modernize the state, and foster free trade and regional integration”.
The IDB is an important source of development assistance for the 26 borrowing countries; for example, its average annual lending over the last five years exceeds World Bank average lending to Latin America over the same period by 25 percent.
In the 2005 financial year (FY), the IDB approved US$7.1 billion in loans and guarantees to finance projects involving a total investment of more than $15.5 billion. In cumulative terms, by the end of 2007, the Bank had approved US$156 billion in loans and guarantees to finance projects with investments totaling US$353 billion, as well as US$2.4 billion in grants and contingent-recovery technical cooperation financing.
Over the time of lending the majority of the loans went to reform/modernization of the state, energy, social investment, transportation, agriculture and rural development, sanitation and industry. (approved loans by sector/subsector)
Policies
To guide its operations the IDB has strategies, policies, and regulations in place. This includes its social and environmental safeguard policies, several of which have been under revision since 2003. The first revised version is the policy on the Disclosure of Information.
In January 2006 the Board approved the IDB’s revised Environment policy. The new policy, entitled “Environment and Safeguards Compliance”, became effective in July 2006. The IDB says it “brings together a number of directives that will steer the Bank’s work toward mainstreaming environmental considerations across sectors, safeguarding the environmental quality of all IDB operations and making the Bank socially and environmentally responsible within its own facilities” and describes the contents of the new policy as follows:
- Emphasizes early identification of challenges and opportunities with borrowing countries in the course of establishing country strategies and priorities for Bank support.
- Shifts emphasis from identifying environmental impacts to managing risks in a sustainable way, identifying project risks and opportunities and proactively managing them in partnership with borrowing nations.
- Establishes a robust procedure for effective management of environmental, social and cultural risks.
- Requires early and ongoing engagement with communities affected by a project and seeks community support before financing large projects.
- Quantifies and monitors a project’s greenhouse gas emissions.
- Analyzes policy-based loans for sustainability risks and opportunities.
- Supports biodiversity by focusing on transboundary areas, conservation and protection from all significant threats to biodiversity.
- Fosters sustainability initiatives as part of the new emphasis on going beyond impact mitigation to seek opportunities to achieve the maximum value of investments.
The policy is made out of two sets of directives: Environmental Mainstreaming and Safeguarding Directives. The document can be downloaded from the IDB’s website.
In February 2006, the Board also approved an entirely new policy on Indigenous Peoples. This policy, which came about largely in response to pressure from NGOs, has turned out to be less forceful in substance than it might have been. Yet as a statement of binding policy, at least, it represents a step forward for an institution still struggling to deal with a legacy of support for projects that have caused measurable harm to indigenous cultures and landscapes across the region. This policy is part of IDB’s sector policies, which include among others policies on forestry development and mining, they can be found on the website of the Inter-American Development Bank.
Civil society organizations have long expressed concerns that the IDB’s policies are not exclusive (in that they do not state operations the IDB will not finance, that is to say, the Bank’s no-go zones). Also, they tend to be vaguely worded, with such general provisions that that it is extremely difficult to prove non-compliance with policies. The strategies and strategic frameworks are not binding and can be changed by Bank management, without a vote by the Board. Because of this there are serious civil society concerns about how to ensure that important points such as the designation of no-go zones are permanently embedded in the binding policies and safeguards that guide Bank operations.
Complaints
Of importance are the changes that both the IDB and civil society actors have been trying to effect in the Bank’s main vehicle for operational accountability, the Consultation and Compliance Review Mechanism (CCRM). The CCRM was created as the Independent Investigation Mechanism (IIM) in 1994 to allow people who have been negatively affected by IDB-sponsored projects to seek formal redress from the Bank. Following public consultations in the spring of 2005, in which CSOs presented their suggestions and comments on the mechanism, the IDB Legal Department undertook to enhance key aspects of the functioning of the CCRM. However, the mechanism’s current design is still weaker than that of analogous bodies at the World Bank and the Asian Development Bank, and there is little evidence of the IDB’s intention to make further improvements any time soon. Part of the improvements is that the IDB intends to set up a Roster in support of the Independent Investigation Mechanism. The Roster will be composed of 15 individuals from member countries of the Bank, nationals of no fewer than ten countries (preferably no more than two of the same nationality). Candidates will be nominated by the President of the Bank and approved by the Board of Executive Directors. The non-renewable term of appointment is for five years.
Civil society organisations working on the IDB
