Civil Society Organizations submit a letter to President Moreno after his re-election

27 July 2010

Civil Society Organizations sent a letter to President Moreno to remind him that the mandate of his next Presidential term at the Bank will rest on three fundamental challenges: an Evidence-based Results Management, Institutional Governance, and a Social and Environmental Sustainability vision for the region. This in despite of controversial management style and consequent Bank performance over the last five years under his Presidency.

Luis Alberto Moreno, as the only candidate for IDB Presidency, was reelected this month as the Bank contemplates the optimal strategies for delivering on the Cancun Declaration where Bank’s governors approved a $70 billion increase of capital conditioned by 13 “key reforms” to ensure the effective use of new funding.  In this regard, the Cancun Declaration also includes an accountability clause suggesting that the final 20% of the proposed capital increase agenda will be contingent upon achieving the “better bank” plan. 

In this context, once again several civil society organizations sent a letter to President Moreno to remind him that consistent with their recommendations to the Bank during the capital increase process, CSOs believe that the mandate of the next Presidential term at the Bank will rest on three fundamental challenges: an Evidence-based Results Management, Institutional Governance, and a Social and Environmental Sustainability vision for the region.

In addition, the letter also declares CSO’s support of the broad goals established in the Cancun Declaration and upon which President Moreno’s second term must inevitably rest, and look forward to furthering CSO/IDB mutual interests in seeing these goals achieved.  However, as the Bank contemplates the optimal strategies for delivering on this agenda, CSOs took the opportunity to ask President Moreno how the future business model will reconcile increasing demands for sovereignty by borrowing member governments without trading off weaker safeguards?  Will the region see an IDB that is not as dependent on the lending fees to the largest Latin American clients in the near future?  What would a business model that had Latin American donors look like?  How would future capital increases and governance arrangements change in this scenario? How will the Bank exercise leadership on climate change not just in front of the borrowing countries but also in front of its donors?

A response from the IDB's Vice President, Roberto Vellutini, was received. A copy of this letter can be found below.

Download the letter in pdf format:

Download the response in pdf format:

Read the complete letter:

21 July, 2010

Luís Alberto Moreno

PresidentInter-American Development Bank

1300 New York Ave.

Washington, DC 20577

 

Dear President Moreno

At the height of the financial crisis in March of 2009, the current IDB administration requested $200 billion to recapitalize and retool the IDB to face the challenges ahead for Latin America.  The Bank’s governor’s approved a much smaller $70 billion increase conditioned by 13 “key reforms” to ensure the effective use of new funding.  The Cancun Declaration accountability clause suggests that the final 20% of the proposed capital increase agenda will be contingent upon achieving the “better bank” plan.

The trepidation among some at the Bank to approve the initial, higher capital increase request was due in part to the controversial management style and consequent Bank performance over the last five years under your Presidency.  The institutional reorganization that your administration authored fell short of its promise of reforming the Bank, requiring significant new reforms by 2013 as a condition for a pared down capital increase.  The Bank’s financial losses in 2008, due in part to poor internal risk management and in part to under-estimated realignment costs, reflect persistent governance problems.   Heavy increases in lending in response to the financial crisis has enabled the Bank to suspend doubts of relevance to Latin America, although ramped up lending was preceded by the Bank’s recognition that proper accountability for development effectiveness was lacking.

Unopposed as the only candidate for IDB President, the election reflects support in the continuity of leadership at the Bank as the best opportunity to deliver on the challenges subscribed to in Cancun.  The next five years will depend on clear and verifiable progress in delivering on the “better bank” accord that the region needs.  Consistent with our recommendations to the Bank during the capital increase process, we believe that the mandate of the next Presidential term at the Bank will rest on three fundamental challenges:

Evidence-based results:  Success at the IDB can only be based on the demonstration of evidence-based results that go beyond the annual volume of lending.  The Bank has the historic opportunity to accompany a period of sustained growth in much of the region, albeit a cycle that is heavily dependent on primary product commodity based exports.  With the new Development Effectiveness Framework, the commitments are now in place at the IDB to deliver those results and use this unprecedented empirical performance assessment to better allocate the budget and ensure loan quality.  The true test of increased accountability will be public knowledge of the Bank’s achieved development outcomes  The public that matters most are the populations directly impacted by Bank financed projects, and who should benefit first.   Here greater investment is necessary to guarantee in two-way communication as well as greater direct involvement in the monitoring and evaluation aspects of the project costs and benefits will be required. 

Governance: As perhaps the greatest unstated challenge in the Bank’s future, governance is also the least clearly defined goal.  Often cited is the fact that the IDB is governed by a simple majority of borrowing countries through its Board of Directors – the only MDB to boast this core democratic trademark.  Yet, the practice of democracy is not limited to the presumption of democracy by this fact, and is often in question by the largely non-transparent deliberations of appointed representatives of the Bank’s 48 member countries.  Governance reforms must extend from greater transparency and accountability of Board functions to the day to day commitment to transparency and participation in all stages of the programming cycle. 

Several important reforms mark an opportunity for deeper commitment to improved institutional governance, including revisions to the disclosure policy, approval of a new Inspection Panel mechanism (ICIM) and the unprecedented effort to consult on the capital increase process and other policies.

The IDB remains today an institution that is not fully committed to these democratic principles in practice.  The IDB is not an open space for debate of all development perspectives.  The Bank’s annual meetings and many other public events continue to be carefully orchestrated activities that include only a subset of the prevailing development wisdom, in turn misrepresenting the range of development thinking that is transforming the region.  The Bank must fully open its doors to new ideas, new experimental approaches to problem solving, and new proposals for how to implement the “better bank” agenda.  The evidence of this openness should be reflected in the wider range of ideas and perspectives that are invited and debated at this critical moment in the Bank’s history and leaving behind the practices of secrecy that prevent the timely access to information upon which the generation of new ideas and perspectives is often based.

One potential source of these new ideas, the civil society advisory committees that were mandated by you to function in July 2007, remain three years later an unfulfilled promise in most countries.  The apparent delay in formalizing this critical mechanism for adding value to Bank operations only serves to undermine the relationships that the IDB needs to have to ensure good governance.  We urge you to make good on this promise by demonstrating proper functioning civil society consultative group (ConSoc) mechanisms in all 26 of the Bank’s regional member countries.

The Future IDB Business Model:  The relationship between Latin America and the world has changed, and so too should the IDB.  For more than half a century, the IDB has labored to promote growth and integration in the region, to reduce poverty and inequality.  More recently, the IDB has placed a greater premium on the environmental sustainability of growth.  The urgency for achieving these goals has never been greater as the gap between Latin America and the industrialized countries of the world continues to widen. 

It is striking to reflect that none of the 26 member countries in the 51 year history of IDB cooperation have shifted from borrowing member to a donor member status.  The prevailing business model at the Bank seems to be premised on indefinite growth in lending operations primarily to a small group of middle income countries that foresee no borrowing countries making this transition soon. 

As an increasing number of Latin American economies achieve investment grade, diversification of development finance forces the IDB to redefine its services.  In this process, there is pressure to reduce the use of the Bank’s safeguard policies evident in increasing reliance on new instruments and services that shift key responsibilities to the client.  We strenuously argue that achieving the mandates laid out in the “better bank” agenda depends on the non-dilution of the Bank’s safeguard policies, and by this, the application to the full portfolio of services.  In alignment with other multilateral development banks, we urge the IDB ensure for every operation financed, under any modality, that the environmental, social, cultural and economic rights of affected populations are guaranteed.

As the Bank contemplates the optimal strategies for delivering on this agenda, we would like to know how the future business model will reconcile increasing demands for sovereignty by borrowing member governments without trading off weaker safeguards?  Will we see an IDB that is not as dependent on the lending fees to the largest Latin American clients in the near future? What would a business model that had Latin American donors look like?  How would future capital increases and governance arrangements change in this scenario? How will the Bank exercise leadership on climate change not just in front of the borrowing countries but also in front of its donors?

As always, we remain supportive of the broad goals established in the Cancún Declaration and upon which your second term must inevitably rest, and look forward to furthering our mutual interests in seeing these goals achieved. 

Respectfully,

 

AMAZON WATCH, Estados UnidosBIC, Estados UnidosCEADESC, Bolivia CEDHA, ArgentinaCEDIA, Centro para el Desarrollo del Indígena  Amazónico, Perú

CENTRO PARA LA SOSTENIBILIDAD AMBIENTAL - Universidad Peruana Cayetano Heredia, Perú

CENTRO DE DERECHOS HUMANOS TEPEYAC DEL ISTMO DE TEHUANTEPEC, A. C., Mexico

DAR, PerúGRUPO FARO, Ecuador

CORPORACIÓN ECOLEX, Ecuador

FUNDACIÓN ALTOTROPICO, Ecuador

ECOA, Brasil

EADHAP, Escuela Amazonica de Derechos Humanos de la Amazonia Peruana

ESCUELA DE DERECHOS HUMANOS DE LA AMAZONIA PERUANA, FECONBU – AIDESEP, Peru

FARN, Argentina

FEDERACION DE COMUNIDADES NATIVAS FRONTERIZAS DEL PUTUMAYO, PERUFUNDAR, México FUNDACIÓN PROTEGER, Argentina

GAP, GOVERNMENT ACCOUNTABILITY Project, Estados Unidos

IEB, Brasil

ILSA, ColombiaITeM, UruguayINESC, Brasil

INTERNATIONAL RIVERS

LIDEMA, Bolivia

PUENTE ENTRE CULTURAS, Bolivia

PLATAFORMA SUR DE ORGANIZACIONES SOCIALES, Huila, Colombia

PLATAFORMA DE  DERECHOS HUMANOS, DEMOCRACIA Y DESARROLLO, Capítulo Bolivia

RED DE ORGANIZACIONES SOCIALES Encarnación, Itapua, Paraguay.

REDE PANTANAL, Brasil

Alfredo Novoa Peña, Ingeniero, Perú