IDB: 50 Years Financing Inequality
www.frentebid2009.org
Washington, Feb 23, 2009 – Civil society groups across the South American continent are criticizing the Inter-American Development Bank for investment portfolio losses totaling almost $2 billion as another example of its failure to reduce poverty and inequality and contribute to sustainable development in the region.
The huge shortfall for the public institution appears to derive from IDB President Luis Alberto Moreno urging the bank to invest heavily in risky securities, which as late as 2007 made up a full 50 percent of the bank’s $18 billion portfolio. The overexposure to “toxic assets” was made with little apparent oversight in spite of a 2005 public warning from the bank’s auditor general.
On the eve of its 50th anniversary meeting of the bank’s governors, the losses dwarf those of any other development bank and are the largest the IDB has ever suffered since it was set up in 1959 to promote Latin American and Caribbean social and economic development.
Senator Richard Lugar, chair of the U.S. Senate Foreign Relations Committee sounded the alarm in a letter to Moreno on February 5. “The reported scale of the IDB’s investment portfolio losses of $1.9 billion – 10 to 100 times higher than the losses of the other development banks – is of grave concern.” Lugar called for IDB accountability reforms to bring it up to industry standards.
“IDB mismanagement of portfolio funds and glaring lack of accountability calls into question its authority to advise borrowing member countries on how to face the global financial crisis”, commented Vince McElhinny from the Bank Information Center that monitors international development financial institutions to promote social and economic justice and ecological sustainability.
As the bank prepares to lavish tens of millions on President Moreno’s native Colombia to stage a celebration of its 50th Anniversary in Medellín on March 28th, many are questioning what there is to celebrate as the region descends to new depths of poverty and inequality. The bank, which is 30 percent owned by the U.S. Government, has a mandate of reducing poverty and promoting sustainable development – a mandate civil society groups assert the bank has failed to meet.
On the contrary, say civil society organizations, IDB-financed operations have contributed to widespread environmental and social damage, adversely affecting many of the region’s poorest and most vulnerable communities – the very groups on whose behalf the IDB claims to operate.
“Nearly $200 billion in IDB loans over the past half century have done little to reduce the highest levels of inequality with respect to income distribution in the world”, said Gabriel Strautman, an economist with Rede Brazil, a Brazilian network of non-profit civil society organizations. “In many countries, the per capita income of the richest 10 percent is up to 20 times greater than that of the poorest 40 percent”.
A consequence of the misconceived macroeconomic policies supported and financed by the IDB has been the exodus of tens of millions of Latin Americans seeking better futures for themselves in other countries. This has ironically contributed to one of the principle factors for the relief of poverty in Latin America and the Caribbean due to the millions of dollars in remittances that these ex-patriots send home.
“The emerging crisis of governance is another blow to an IDB management already under fire for a botched realignment”, said Héctor Moncayo, from the Colombian-based Instituto de Servicios Legales Alternativos (ILSA), which promotes a network of alternative community legal services in Latin America and the Caribbean. “A preference for image over substance has become the hallmark of the IDB leadership with the resulting costs now becoming more evident”
Regional grassroots movements and social organizations who question the bank’s policies have announced they will be present in Medellín to organize a series of alternative events in a campaign entitled “IDB 50: FIFTY YEARS FINANCING INEQUALITY IS ENOUGH!”.
For more information contact:
* Adriana Munoz Cabrales, Communications: Campaign IDB-50, Bogotá, Colombia, [email protected] (57-1) 312 574-2429 or 648-4229 – www.frentebid2009.org
* Héctor Moncayo, Instituto de Servicios Legales Alternativos (ILSA): [email protected] (57) 1 288 4772 or 288-4437
* Gabriel Strautman, Rede Brasil, Brasilia, Brazil: [email protected] (55) 61 33216108 or 33231266
* Joseph Mutti, Amazon Watch, San Francisco, CA, U.S.: [email protected] (415) 287-9600 x23, 510 566-4346 cell
* Rebecca Harris, Bank Information Center (BIC), Washington, D.C.: [email protected] (202) 737-7752
