21 June 2010
Though the nominations process for president of the Inter-American Development Bank closes on June 26th, no one has yet opposed incumbent Luis Alberto Moreno. In a letter, members of the IDB staff allege that through political horse trading, Moreno has secured his reelection.
The IDB Board of Governors will be electing a President for the Bank on July 6th 2010. So far, no one has been nominated to run against the deeply unpopular Luis Alberto Moreno, and nominations close June 26th. This is despite the many more qualified candidates that have surfaced to replace him: former Central Bank Governor and Ministers of Finance Guillermo Ortiz, Andres Velasco, Juan Jose Daboub, even former Presidents Oscar Arias and Michele Bachelet, and most recently, Finance Minister Juan Alberto Fuentes of Guatemala. Staff and managers have been hoping for at least two years that the shareholders would replace Moreno and end the mismanagement, chaos and failed leadership at the Bank, which has already led to so many departures of qualified people who have devoted their lives to the institution. We had high hopes when the Obama Administration gave Moreno a cold reception, because the US has a veto on his re-election, and most people in the US administration recognized that Moreno was an example of another incompetent appointment of George Bush. We took further comfort from the open opposition of the Brazilian Government, the Bank's second largest shareholder, which, as recently as February, was making clear that it would push for change in a press conference with the Bank's 3rd largest shareholder, Argentina, as reported by Reuters:
Brazil, Argentina say IADB failing Latin America
Fri, Feb 05 15:09 PM EST
BUENOS AIRES, Feb 5 (Reuters) - Brazil and Argentina called on Friday for reforms at the Inter-American Development Bank, saying the regional lender had failed to understand the needs of Latin America during the global financial crisis.
"Our joint assessment is that the IADB hasn't had a satisfactory performance in the region," Brazilian Finance Minister Guido Mantega told a news conference. "We will propose that the IADB has a new management that is more efficient and beneficial for the region."
Argentine Economy Minister Amado Boudou said Latin American countries are the bank's main stakeholders and "should also be the main beneficiaries of its credit policies."
"We believe some key changes are needed," he added.
But for much of the past couple of months, Brazil is actively pushing Moreno's candidacy, and others have either been bought off with promises or see the inevitable and have fallen into line. Why did Brazil change its position? Now we know: Moreno traded a key job at the Bank to the same person responsible for casting the votes of the outgoing Lula Administration. Here's the internal announcement that was circulated last week:
From: Office of the President
Sent: Wednesday, June 16, 2010 12:19 PM
Subject: Nombramiento / Appointment
Tengo el agrado de comunicarles el nombramiento del señor Alexandre Meira da Rosa como Gerente del Sector de Infraestructura y Medio Ambiente, a partir del 15 de julio de 2010.
El señor Rosa, ciudadano brasileño, se desempeñó como Secretario de Estado en la Secretaría de Asuntos Internacionales del Ministerio de Planificación, Presupuesto y Gestión de Brasil. Anteriormente, fue Subsecretario de Estado en la misma Secretaría y Asesor Económico del Ministro de Planificación, Presupuesto y Gestión. Su experiencia profesional incluye también el cargo de representante del Gobierno Federal en los Directorios Ejecutivos de Banco Popular do Brasil y Furnas Centrais Elétricas S.A.El señor Rosa posee una Maestría en Economía del New School for Social Research de Nueva York y una Licenciatura en Leyes de la Universidad Federal de Minas Gerais.
Aprovecho esta oportunidad para agradecer al Sr. Federico Basañes por su excelente gestión al frente del Sector de Infraestructura y Medio Ambiente como Gerente interino.
-Luis Alberto Moreno
I am pleased to announce the appointment of Mr. Alexandre Meira da Rosa as Manager of the Infrastructure and Environment Sector, effective July 15, 2010.
Mr. Rosa, a Brazilian national, was the Secretary of State of the Secretariat of International Affairs in the Ministry of Planning, Budget and Management of Brazil. Prior, he was Assistant Secretary of State in the same Secretariat and also Economic Advisor for the Minister of Planning, Budget and Management. His professional experience includes also tenures as representative of the Federal Government on the Management Boards of Banco Popular do Brasil and Furnas Centrais Elétricas S.A.
Mr. Rosa holds a Masters degree in Economics from the New School for Social Research of New York, and a Bachelor’s degree in Law from the Federal University of Minas Gerais.
I take this opportunity to thank Mr. Federico Basañes for his excellent contribution as interim Manager of the Sector of Infrastructure and Environment.
-Luis Alberto Moreno
In his current job, da Rosa is the Alternate Governor for Brazil at the IDB. He's on the IDB's website in this role. On July 6th, he will cast Brazil's votes for Moreno. On July 15th, he starts working for Moreno. Because of the obvious conflict of interest, there are clear rules against IDB Executive Directors and their staffs going to work in staff or management jobs at the Bank without a cooling off period. For Governors and Alternative Governors, the conflict is much worse, especially because they have the responsibility for determining who is the President and are about to vote on this issue. If that isn't bad enough, Mr da Rosa, who is regarded by many at the Bank as a young, capable, international affairs bureaucrat, has no obvious qualifications for one of the most important technical job at the Bank, responsible for the Bank's work on energy, transportation, water and sanitation, environment, agriculture and climate change. The job has been held vacant for 18 months, despite its obvious importance. Moreno refused to have an open competition to fill it, as would be the normal practice. Now we know why: he wanted to use it to trade for votes. And will the other shareholders do or say anything about this obvious conflict of interest and abuse of principles of sound governance (and management)? Apparently, Moreno doesn't think so, because he didn't even wait the three weeks until after his re-election to announce it!
This is just the latest in a long line of abuses by Moreno and his inner circle, who treat the Bank like a personal piggy-bank for his own politicized agenda and ignore the Bank's development mission:
- In 2007, he lent Ecuador $70 million to buy two executive jets for the military-owned airline and for Correa's own use. (see IDB's website on "TAME" loan)
- In 2008, he lent $400 million to the Bachelet Government so that they could avoid going to the Chilean Congress which had demanded accountability for the Transantiago public transport system disaster. He ordered disbursements on that loan 3 times for a total of $300 million, even though the loan was in default, and against the advice of all of his managers, including the Bank's General Counsel and its Chief Risk Officer. It is no accident that Moreno's Chief of Staff was a Vice Minister in the Lagos Government's Transportation Ministry when the poorly conceived plan was created. (see "El Mecurio's" coverage throughout 2008-9). The loan was repaid just after the Chilean elections.
- He lent more than $500 million to Ecuador in 2009, and has proposed billions more, even though Correa had defaulted a few weeks before on billions of dollars of eurobonds under totally made-up pretenses so that the Government could buy them back cheaply, using IDB money. The financial press pointed out that Correa's market manipulation would have been an imprisonable felony if done under the legal jurisdiction of US courts or most other countries.
- In 2009, he lent $850 million to pay for massive cost-over-runs incurred constructing Venezuela's Tocoma hydro-electric dam, over-runs which were directly attributable to Venezuela's over-valued exchange rate. A few months later, Venezuela devalued. Now Venezuela wants even more for this spending fiasco.
- In 2009, he lent another $850 million for a "social safety net" loan, following the direct intervention of President Christina Kirchner. This loan had been resisted by our staff for many months because the cash transfer program it supports is at the core of her political machine in the country's urban barrios.
- He promised Mexico $3 billion in lending in 2009 and again in 2010, and now staff are scrambling to invent operations to shovel so much money to that country.
Information on every one of these loans is available on the IDB website.
Moreno has created a big problem for the United States, the IDB's 30% shareholder, and the only country with the votes to block his re-election. The US committed itself to a $70 billion capital increase at the Bank's annual meeting in Cancun in March. The problem for the US (and other big shareholders) is that it will then have to ask Congress for a big check for the IDB when everyone in Washington knows -- including many in Congress -- that the IDB, under Moreno's leadership, prioritizes Moreno's political standing more than development objectives. The Bank has committed to do many things under the capital increase, but few if any of these commitments were screened by the Bank's professional staff for their viability. It didn't matter to Moreno. The capital increase itself is only important to Moreno as a platform for re-election. In fact, the capital "increase" is actually a capital "decrease", because more money will be granted to Haiti than will be paid in by shareholders during the next 10 years. This is good for haiti, but not for the Bank's borrowing shareholders, which is why so many were disastified with the result.
When Moreno was elected almost five years ago, he was opposed by most Finance Ministries for lack of qualifications. Instead, as he is doing now, he took the political road by having President Uribe appeal directly to George Bush and other Presidents in the region to support his candidacy. After five years on the job, his lack of development vision and substantive qualifications is more obvious than ever. But this time he's using the Clintons to push his name with the Obama administration. Moreno's incompetence and mismanagement ($2 billion in investment losses; rapid turnover within the Bank's senior management (4 and 5 times in some key jobs, including his own chief of staff); gross over-spending ($120 thousand car for his Lexus limo for his personal use; $12m PR budget; $500 thousand departure packages for favored staff); and love for hanging out with celebrities and their lifestyle (including Bill Clinton) is so well known in the US Government that his re-election would make it impossible for the Americans to say that it favors "merit-based selection" of key jobs in the international financial institutions. The problem for the US Government is that it doesn't want to pay the political cost of being the bully that pushed Moreno out. Bill Clinton has intervened on Moreno's behalf -- Clinton has already characterized Moreno as an "inspirational leader". So the Obama Administration was hoping that one of the big Latin countries will push him out. But they didn't plan on Moreno buying off all the big borrowers. Now, due to its failure to act early and actively enough, the US can only use its veto to stop the inevitable, which it knows could hurt its reputation in latin america.
The Bank is in turmoil and most people are resigned to 5 more years of getting worse. We understand that writing a letter like this may seem very disloyal. But most of the career staff like us are very pessimistic for the future if Moreno is re-elected. Anyone who can is looking to leave the IDB to go to the World Bank or other institutions that are better run. Our only hope is that if these issues are exposed, the shareholders will have no choice but to force a change for the better. Time is running out.
--A group of IDB managers and staff