IDB Agrees to Reforms, But NGOs Will Keep Up Pressure

Although social organisations in the region got the Inter-American Development Bank (IDB) to agree to a process of internal reforms, there are still doubts about how the changes will be reflected in the multilateral lender's new strategy.

At the end of the IDB's annual meeting Tuesday in the southeast Mexican resort of Cancún, delegates from the institution's 48 member countries agreed to a general capital increase of 70 billion dollars, greater transparency in the allocation of funds, and a stronger focus on climate change.

"The capital increase shows that donors do not have the confidence to commit more to the bank, and that they aren't satisfied with the levels of efficiency or the process of allocating resources," Paulina Garzón, policy director for the San Francisco-based Amazon Watch, told IPS.

The IDB had been seeking a 180 billion dollar increase in capital, as the governors of the Bank - usually finance ministers or central bank directors from the member countries - had agreed at the last annual session in Medellín, Colombia in March 2009.

But 110 non-governmental organisations (NGOs) from 22 countries of Latin America and the Caribbean objected to that sum, arguing that the IDB had not justified that amount, had refused to share a draft of its replenishment proposal, and had failed to provide responses to recommendations for reforms.

The civil society spokespeople who were in Cancún this week for the IDB assembly demanded more transparency in the Bank's operations, improved accountability and greater attention to issues like climate change.

"The decisions taken are a positive step. But we want to see our proposals reflected more clearly in the final document on the replenishment of capital," María Romero, with the Uruguay-based Third World Institute, told IPS.

The Cancún Declaration adopted by the IDB governors says the general increase in capital demands "successful, timely, and complete implementation of specific reforms on which we all agree, and which are necessary for improving both the focus of the Bank's activities and the effectiveness of the Bank's lending."

The IDB management and board of directors now have 60 days to finalise the report on the general capital increase, by including the 13 recommendations from the Cancún Declaration in the specific details on the replenishment, which will be the first carried out since 1994 and the biggest since the IDB was founded in 1959.

The capital increase must then be submitted to the IDB governors for approval.

The general capital increase forms part of the new strategy of the IDB, which focuses on sustainability, the fight against climate change and efforts to foment clean energy sources.

In 2009, the IDB loaned Latin America 15.3 billion dollars, including 3.1 billion to Mexico, followed by Brazil (2.9 billion) and Argentina (1.6 billion), according to figures from Mexico's finance ministry.

With the capital increase, the Bank's lending capacity will be boosted to 12 billion dollars by 2020, according to IDB estimates.

"A bigger bank is not necessarily a better bank," said Garzón. "We want a commitment to a methodology for evaluating projects to ensure that they are environmentally sustainable."

During the annual assembly of governors that began Friday, Mar. 19, representatives of NGOs held a meeting with the IDB's senior management and President Luis Alberto Moreno, to express their concerns about how the new strategy is being designed.

In the Cancún Declaration, the governors agreed to establish clear institutional and sector priorities, strengthen project quality "through strict adherence" to standards on development and poverty reduction, improve "the results measurement framework," increase accountability and transparency, and ensure that "risk management practices and capabilities meet international best practice standards."

The reforms must be completed by March 2013, according to the timetable outlined by the Cancún Declaration.

Of the 70 billion dollars approved, 1.7 billion will be "paid-in capital to be contributed by the various members of the Bank over a five-year period, or 20 percent of their respective contribution obligation each year," the nine-page document says.

Once the general capital increase has its final approval from the IDB governors, it will be up to the legislatures of the member countries to give a green light to the contributions and the contracting of new loans.

But NGOs were hoping for a more precise statement by the meeting in Cancún on the evaluation of the results of IDB policies and the strengthening of the Bank's Office of Evaluation and Oversight (OVE).

"We're going to continue expressing our concerns, until the Bank incorporates them," Romero said.

The IDB also decided to cancel 479 million dollars in debt owed by Haiti, in the wake of the Jan. 12 earthquake. The IDB debt was the largest portion of the impoverished Caribbean island nation's 1.2 billion dollar debt.

The Bank also approved two billion dollars in grants for Haiti over the next decade.

In addition, the IDB launched a new contest for environmental and social sustainability projects, as part of its "beyondBanking: banking on global sustainability" programme, aimed at both the public and private sectors.

The IDB was founded to promote development and reduce poverty in the region, although civil society has long questioned whether it lives up to that mandate.

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