The 48th Annual Meeting of the Board of Governors of the IDB: A Civil Society Perspective

29 May 2007 | Washington DC

This article presents an in-depth analysis of the main themes of the 2007 Meeting of the Board of Governors of the IDB, including discussion about debt relief, new initiatives, the Sustainable Energy and Climate Initiative (SECCI), the Infrastructure Fund, in addition to a list of challenges and opportunities for civil society organizations to consider for future meetings.

En español

The IDB’s 48th Annual Meeting and the III Continental Summit of Indigenous Peoples and Nations were both held in Guatemala in March.  Both events were preceded by the controversial visit of President Bush in the penultimate leg of his five country Latin American tour.  The three events placed Guatemala as well as the country’s shameful human rights and development record in the international spotlight.

While the IDB’s Annual Meeting brings an estimated $20 million to Guatemala’s economy, beyond the taxi pool, few of this largesse will trickle down to the 8 million Guatemalans that live on less than $2 dollars per day and could not even get close to the “green zone” of hotels closed off by 15,000 security guards.  The Guatemalan economy, which works more or less the same way, was dressed up for the week in a disguise of smiling and dancing citizens greeting Bank officials with shirt sleeves rolled up.  The ritual charade was broadcast as a repeating 10 minute video around the clock on donated flat screen televisions mounted in conspicuous sight within most of four and five star hotels for weeks after the IDB officials had left.

The reality outside the IDB “green zone” was sanitized for

most of the participants.  Few learned about the murder of 3 Salvadoran Congressmen by undercover police just weeks earlier in a botched drug heist, or that the police had the killers silenced by sending in assassins into the prison to keep them from fingering higher ups.  Few celebrating Guatemala’s cultural traditions heard that the U.S. State department finally began advising interested parents not to adopt Guatemalan babies to the extremely high levels of extortion and trafficking.  Few heard from indigenous leaders in charge of the following week’s Continental Summit or Bishop Alvaro Rammazzini from the poor mining department of San Marcos that came to the IDB meeting to challenge the Bank’s empty rhetoric of “social inclusion.”  With IDB acquiescence, these national leaders were refused entry to the Annual Meeting on government grounds of “security” threats. 

The 2007 meeting was the third time the IDB chose Guatemala as its venue.  Prior meetings were held when dictators and death squads ran the country.  The IDB first convened Latin American governors in Guatemala in 1969, a year that followed the 1966-68 military campaign of the Johnson presidency, during which the Green Berets were sent to Guatemala to transform its Army into a modern counter-insurgency force and to conduct a Vietnam-style war there...Death squads, never before seen in Latin America, were started during this period. Army leaders, government officials and the businessmen, who supported and often bankrolled the death squads, had close ties with many US. administrations...Journalists, lawyers, teachers, members of opposition parties, and anyone who expressed sympathy for the anti-government cause was killed...American planes and pilots, flying out of Panama, dropped napalm on suspected targets. 

The IDB returned to Guatemala in 1977 – a year in which

U. S. President Jimmy Carter cut off overt military aid to the Laugerud García government as a result of international publicity which revealed a decade long pattern of torture and killing. Also, 1977 was a year of political tumult throughout Central America, as popular protest and state repression both escalated in part due to skyrocketing commodities prices and severe inequality. Not unlike the 2007 Annual Meeting, mining was a source of national tension.  It was the year that ended with the "Glorious March of the Miners of Ixtahuacán," involving Mam and Ladino workers from Huehuetenango who, after days of walking the Pan-American Highway, arrived in the capital accompanied by thousands of supporters. Precipitating what would escalate in the coming years as one of the most brutal regimes even by Latin America standards, the IDB had few qualms about convening it Annual Meeting amongst some of the worst human rights abusers in the hemisphere. 

Of all the civil conflicts in Latin America, Guatemala’s was one of the worst.  Over 100,000 poor, mostly indigenous people were killing in thirty years of conflict largely at the hands of state sponsored military or death squads.  While the Peace Accords were signed to end the civil war in 1996, many if not most see only cosmetic changes that have left untouched the structural asymmetries that fueled the war.

Few heard much if anything about these features of

 the IDB’s relationship with Guatemala (past or present) from Rigoberta Menchú, Nobel laureate and indigenous Presidential candidate, as an invited speaker in a feature dialogue with President Moreno on the first day of the Annual Meeting.  Even when prompted with direct questions about the hypocrisy of IFI double standards for indigenous people, Menchú said little to alter the image of the country that the IDB struggled to preserve.  In many ways, Menchú avoided the opportunity to challenge the IDB and push the Bank to live up to its rhetoric on indigenous people.  Instead, the dialogue was empty of any substantive discussion of indigenous rights

Managing for Results – From this point forward

Guatemala was the setting for a wave of new initiatives announced by the IDB over the five day meeting.  New initiatives included Opportunities for the Majority, a Clean Energy Initiative, a Water and Sanitation Initiative, an expansion of the InfraFund to finance more infrastructure feasibility studies, debt forgiveness to five IDB borrowing countries, subscriptions to a trade finance facility, among others.  The unceasing focus on optimism about the future behind these programs left some wondering why so little was said about the results of older programs launched with similar zeal at past Annual Meetings. 

In fact, the past was a no-show at the IDB showcase event and the stated goal of managing for results represents a work in progress for the newly formed, 90 person Development Effectiveness team that in two years since their formation has produced one traditional report on Bank projects in execution.  A simple calculation will show that unless Latin America reduces poverty by 2% annually, it has no chance of meeting the first Millennium Development Goal – that of halving poverty by 2015.[1]  With current poverty levels approximately what they were two decades ago, reaching the poverty MDG is an uphill climb. Buried in the fine print of the IDB Annual Report were warnings that unless the IDB’s the region’s leaders shifted fiscal, social and investment policies toward the poor, the current period of prosperity like the two decades of austerity the preceded it would also leave few significant results to report. 

For the IDB’s Annual Meeting, BIC worked closely with Amazon Watch, Environmental Defense, ECOA Brazil, DAR Peru, Sobrevivencia-Paraguay, AIDESEP Peru, Both ENDS, CEADESC Bolivia, and Fundacion Jubileo among others to position several issues in the media and among the participants.  For a small group, significant coverage was generated in the journals Emerging Markets and Latin Finance, as well as most of the daily print, television and radio media on several targeted themes.  These themes included: flagging IDB relevance to the region, Camisea and indigenous rights, biofuels, energy and transport infrastructure integration, concerns regarding Bank realignment for safeguard policies and debt forgiveness.   Civil society held three press conferences and met with ten Executive Directors, various Bank staff and several staffers for U.S. Congressional Representatives in attendance to discuss Camisea, IDB Relevance, Realignment and IIRSA, among other issues.  Guatemalan’s organized several press conferences outside the annual meetings and held a small demonstration. 

BIC produced and distributed about 150 print versions of a 120 page Media Briefing Book to Directors, Reporters, Bank staff and other participants at the IDB Annual Meeting.  This publication was the only alternative analysis of IDB issues available to the public with access to the event.  The Briefing Book was a collective effort that provided a compilation of expert analyses on a variety of issues including IIRSA, MDB finance competition, CAF & BCIE, water, IDB safeguard policies, and key contact information.

As noted in BIC’s prelude to the meeting, the IDB came to Guatemala to shore up its image as a relevant purveyor of cash and policy advice in an increasingly complex financial landscape.  The Venezuelan Finance Minister announced during the week that the newly inaugurated Banco del Sur would open its first office in Caracas by mid-year and had confirmed $1 billion in operating capital, which they expected to grow to $7 billion this year. 

A second major announcement was the U.S. decision to sign a memorandum of understanding paving the way for China’s accession to the Directorate of the IDB – a somewhat inevitable recognition of China’s growing influence in all aspects of Latin American investment and trade.  The Governor of the People’s Bank of China and President Moreno signed an agreement that provides a framework for negotiations toward China becoming the Bank’s 48th member and third Asian member after Japan and Korea.

Both announcements figured prominently in the lead stories of many publications that examined the IDB realignment as a response to somewhat unprecedented ideological and project finance competition.  IDB President Luís Alberto Moreno put on his best diplomatic face to assure anyone who would listen that his Bank remains the preferential option for most Latin American borrowers.  The decline in overall attendance and the general lack of major announcements on financial deals reinforces that chorus of doubt about such claims. 

President Moreno meets civil society – rebuffs concerns, calls it dialogue

Senior bank officials have made it a practice to meet with civil society representatives during the Bank’s Board of Governors meeting. This was the first such meeting chaired by the IDB president Moreno.  He was joined by newly appointed Executive Vice-President Dan Zelikow.  However, the increased civil society access to President Moreno has coincided with the perception among some civil society leaders of disinterest and being politically handled.  A credibility gap has expanded between Moreno’s rhetoric and actual practice of dialogue and consultation with civil society.  Guatemala was another step in the wrong direction.

In Guatemala, some twenty civil society representatives joined just as many Bank and government officials for two hours on Saturday, March 17.  Two reports were presented by handpicked spokespersons from San José and Caribbean Bank meetings with civil society.  Moreno made a short presentation, outlining the Bank’s achievements and opened the floor for about an hour of questions and answers. 

Rafael Toribio, Director of the Center for Governance and Social Management of the Instituto Tecnológico de Santo Domingo, of the Dominican Republic,

 noted that participants in the Costa Rican meeting called for the creation or consolidation by the Bank of civil society consultative groups in all of the countries of the region, and also for the creation of such a group at a regional level. He also referred to what he called the IDB’s “substantial advances” in institutional integrity and transparency, as well as to a plan to harmonize such policies among other multilateral banks.  The report from San José was also highly critical of the IDB for providing too little time for real dialogue, not distributing information in advance, which contributed to a very low attendance. 

The IDB’s headline later in the day was, “IDB President Moreno calls civil society “major ally” in providing opportunities to the majority in the region: Highlighted Bank moves to increase transparency and work with civil society groups.” [2]  Like much of what the IDB public relations committee publishes, the headline obscures a very different view of what actually happened.  The encounter was far less inviting.  In fact, no formal invitation to civil society was ever extended and most concerns were dispensed by Moreno with little satisfactory explanation. 

President Moreno spent most of the time ignoring criticism of the San José meeting and diverting or rejecting hard questions regarding Bank involvement in large infrastructure projects such as Camisea, IIRSA and Plan Puebla Panama; the violation of indigenous rights in the Amazon and Central American isthmus, the clarification on debt relief and studies funded by the InfraFund, requests for evidence about the Development Effectiveness claims made by the Bank, and doubts about the utility of current system of civil society advisory councils.  In what the Bank euphemistically called a “town hall” format, Moreno would field several questions, delegate some and offer evasive or combative answers to many others.  Few meaningful commitments were made.  What in fact was more like a Presidential press conference provided no chance for follow up questions, making it impossible to have real dialogue.  Minutes of the meeting with President Moreno (Spanish).[3]

Juan Tiney, Director of CONIC (one of Guatemala’s largest

 Mayan farmer organizations) argued that the IDB’s investments in economic growth in Guatemala had actually increased indices of poverty and vulnerability for indigenous people, particularly in terms of security in access to food and water.  Tiney proposed a re-evaluation of the different Bank projects that privatize water and promote free trade.  Roberto Guimaraes, the Vice-President of the Peruvian lowland indigenous federation, AIDESEP, added that the IDB is not respecting the rights of indigenous people in the Amazon.  The Camisea oil and natural gas extractives projects in the Urubamba Valley has not only had little positive benefit for indigenous people, but has caused many problems.  Guimaraes also questioned whether the IDB’s new indigenous policy is being violated with the planned second phase of Camisea by its impact on indigenous communities living in voluntary isolation.  He proposed an independent social and environmental audit of the Camisea project with civil society participation, echoing doubts about the integrity of the ongoing audit commissioned by the Bank earlier in 2007 with little transparency and ignoring civil society concerns about the legitimacy of the chosen contractor.[4]

A representative Kuna nation from Panama about the perceived risks from the proposed linking of the Panamanian and Colombian electricity grids through the heretofore unpenetrated Darien peninsula as well a series of planned hydroelectric dams affected indigenous lands.  Kuna people have benefited little from these energy projects and stand to lose far more in terms of sovereign control of land and natural resources.  The construction firms often fail to respect the operation safeguard policies of the IDB and efforts to obtain more information from the IIRSA national office have achieved no concrete results.

Without a trace of doubt, Moreno quickly rebutted any and all claims about violations of the Bank’s indigenous policy with reference to Camisea, IIRSA or other noted IDB projects, stating blankly that he was unaware of any violation but assured indigenous leaders that it was preferable that the IDB be involved than not.  Speaking about an IDB $1.5 million impact study related to the Colombia-Panamá energy inter-connection, Moreno's commented, “You should thank God that the IDB is involved,” implying that the project would have been much worse without the IDB.[5]

On Camisea, Moreno suggested that he was unaware of any violation of IDB indigenous policy as it relates to uncontacted peoples, then cued Bob Montgomery, the project’s social and environmental specialist for detail.  Proposals for independent audits were rejected, with suggestions that the IDB’s report will be studied and disseminated upon release. 

To assuage the lack of positive benefits from IDB projects, Moreno repeated his refrain that infrastructure is solution to Latin American poverty, but announced a new $60 million fund to specifically alleviate the problems of indigenous and Afro-descendent communities.[6]  Few details about this new Fund were available and no response was given to the suggestion that the Fund should support the capacity of indigenous communities to monitor the implementation of the Bank’s safeguard policies in areas affected by large infrastructure projects.  The Kuna had not been consulted in the IDB’s hydroelectric impact study.  No commitment was given.

With respect to the realignment process, questions were raised about the motivation to accelerate infrastructure investments in the Amazon and the lack of safeguards or adequate research to guarantee the risks do not outweigh the benefits.  Alcides Faria of ECOA in Brazil suggested the wider application of strategic environmental assessments for any new projects in the Amazon, which depends upon adequate funding from the IDB and greater civil society participation.  Oscar Rivas, Coordinator of Sobrevivencia-Friends of the Earth, Paraguay added that the IDB’s recently approved indigenous and safeguard policies are important, positive advances for the Bank, but they have to be implemented well.  The IDB has yet to formalize its new inspection panel mechanism, which has foundered in the Board Policy sub-committee for several years.  Without an efficient, independent mechanism for investigating the complaints presented by communities affected by problematic IDB projects in execution, large, corporate driven infrastructure initiatives such as IIRSA can only be seen as threats.  The rapid completion is of a strengthened inspection mechanism policy at the IDB is an outstanding debt to civil society, according to Rivas.

A number of speakers touched upon the perceived weaknesses of the current structure of civil society advisory councils (CASCs) as inadequate for responding to the challenges facing the Bank.  The idea of a regional or thematic CASC was raised to address specialized regional issues, such as IIRSA.  A representative of the AFL-CIO Solidarity Center called on the Bank to do more to address the stagnation of salaries and the reversal of labor rights in the region, particularly in Colombia.  The AFL-CIO invited the IDB to revive the ORIT labor dialogue with the Bank, which had dissolved during the pitched battles over free trade agreements. On the debt issues, Juan Carlos Nuñez of Fundación Jubileo from Bolivia and the Honduran Association of Non-governmental Organizations (ASANOG) recognized the importance of the Bank’s decision to forgive the debt, but pointed to the risks of conflating this decision with poverty reduction.  The Bank was called upon to redouble its efforts to join civil society in monitoring and protecting against the new processes of unsustainable indebtedness.

As time ran out, Moreno offered several vague commitments that welcomed any effort by civil society to monitor public debt, to strengthen the CASCs within each respective country strategy, to convene a meeting in Washington D.C. to address the issue of CASCs in greater detail, and to fully implement the Bank’s safeguard policies.  No commitments were given on labor rights coordination, except to reference the White Books on labor rights capacity building commitments that the IDB coordinated for Central America.  However Moreno responded with particular umbrage to the example of the murder of unionists in Colombia.  “Many people are killed in Colombia, Moreno emphasized, “unionists are only one part of the many innocent victims of the terrorist groups.” 

Moreno then exited the meeting to a hallway press conference where he presumably extended the invitation for civil society to join the Bank in its alliance to build opportunities for the majority. Most of the civil society participants in the meeting left with most of their concerns in tact and no incentive to return to similarly structured Q&A demonstrations.  Without the opportunity to enter into greater depth by asking follow-up questions or rebutting Bank claims, the meeting left most issues at a highly superficial level.  However, even had there been more time, there is a growing understanding that the gap between the Bank’s agenda for civil society and civil society’s own agenda may be unbridgeable.

Debt relief

The lead announcement at the IDB Annual Meeting was the Board resolution on Multilateral Debt Relief and Concessional Finance Reform, which provides $4.4. billion debt relief to the five Fund for Special Operations (FSO) countries, while at the same time, ensuring the sustainability of the FSO and Intermediate Financing Framework (IFF) window.  The IDB pardoned $1.4 billion for Honduras, $1 billion for Bolivia, $984 million for Nicaragua, $467 million for Guyana.  The plan also included $525 million in relief for Haiti beginning in 2009 after the country meets a series of technical requirements. 

As the details of the debt decision became known, some criticism mounted.  Bolivian Minister Luís Arce, finance minister of Bolivia, pointed out that his country had to repay $300 million up front so that the annual debt relief amounts to an additional flow of $40-$50 million. 

Arce also emphasized what the IDB press release did not

report that that debt deal reduced FSO countries eligibility to the Bank’s most concessional funding.  Bolivia would now borrow only 70% in FSO funds and 30% in more expensive IFF funds.  The 70/30 shift from full FSO eligibility is a form of forced graduation that some FSO countries view a premature.  With the slowness in Bank responsiveness to a flooding reconstruction project and foot-dragging in finance of new state development Bank, Bolivia has questioned whether continued dependence on the IDB is really a fair exchange the debt deal.  Unsurprisingly, the Bolivians have thrown their influence in support of the Bank of the South.

The debt relief package does not ensure the long-term financial viability of the Fund for Special Operations.  The U.K. Director stated, “We are also concerned over the sub-optimal debt deal for the five FSO countries and the way that the FSO continues to subsidize the ordinary capital operations through excessive charges for administrative services. We hope that this deal does not have negative repercussions for the FSO countries in the future so we shall be closely monitoring its implementation.”[7] 

Concerns were voiced about monitoring new indebtedness and to prevent new re-accumulation of unsustainably high levels of debt.  To assuage such concerns the IDB announced the application of a Debt Sustainability Framework for future grant and loan levels and its assurance that the IDB will cooperate with other MDBs and creditors on this issue.  The Austrian Director noted that the IDB Board did not approve an adjustment mechanism in case of an economic downturn that would then require a higher level of concessionality.[8] Analysis of the FSO replenishment and future demand projections will be ongoing and the implementation of the debt sustainability and performance-based allocation framework will be reviewed in 2009.  The debt sustainability allocation mechanism is intended to provide the opportunity for assessing the actual financing needs of the FSO.  Future discussions on different possibilities to replenish the FSO are expected.

Even though Haiti has reached the decision point in the Heavily Indebted Poor Countries (HIPC) Initiative, and even though within IDB the country is eligible for debt relief, that relief will not become effective for two years at the earliest, after Haiti has reached the completion point.

Opportunities for the Majority – Old Wine, New Bottles?

In his opening remarks, President Moreno pointed to the lessons of the Popol Vuh, the Mayan creation myth, which sets forth rights and obligations for society. “Among its most important laws,” stated Moreno, “is that ‘no one will be left behind’.”  Moreno then suggested that these principles were reflected in Latin American public policy.  The region was congratulated widely for having achieved the highest 3 year rate of growth since the 1970s.  

While many of the macroeconomic fundamentals are healthy, the regional poverty rate has barely changed, outbound migration glorified by the return flow of remittances continues unabated, and criminal violence has reached epidemic proportions in many of the region’s largest cities.  In Guatemala alone, the homicide rate for the past year of 6,000 topped many of the worst years of the civil war.

The Bank’s own research demonstrates that extremely high inequality is one of main reasons why five more years of high economic growth could fail to lower poverty.  The recent research on climate change suggests that this gap between rich and poor will only grow as the wealthy are quickly investing in individual solutions, leaving the poor majority to shoulder the much higher costs of not having achieved a collective solution. 

Millions are left farther behind everyday in Latin America.  Beyond the gratuitous gesture to the indigenous guests invited to the IDB Annual Meeting, Moreno’s citation of the Popul Vuh was intended to frame the Bank’s ambitious social inclusion strategy called Opportunities for the Majority.  Launched in June of 2006, the IDB set for itself ambitious targets of increased lending to small and medium enterprises ($1 billion), to increase its lending for job training by 50 percent to $2 billion for the five-year period and to double the financing for basic infrastructure projects benefiting low-income communities to $1 billion a year by 2011.[9]  Lessons learned through pilot projects in basic infrastructure, internet connectivity, support for small and medium size businesses, and financial democracy in 2006 and 2007, ranging from $5 million to $15 million, would be used to launch expanded programs. The IDB expects to gradually increase the number of such projects to around 100 a year (or $1 billion per year, nearly 20% of annual lending).

In Guatemala, the Bank re-announced a watered-down US$250 million Opportunities for the Majority Financing Facility (OM) and the US$60 million Special Program for Employment, Poverty Reduction and Social Development in Support of the Millennium Development Goals.  The “Majority” is defined as the 360 million Latin Americans surviving on $280 per month.  The initiative is intended to offer incentives for the private sector companies such as CEMEX, Grupo Nueva, Banco Santander, Grupo ICA, Pepsi Centroamérica, Wal-Mart, Home Center, Intel and Hewlett-Packard to innovate, create employment and target investment in the poorest.[10]  The initiative is intended to produce as of yet unstated, measurable results in five years (by 2011) in priority areas of citizen identification, financial democracy, job creation and entrepreneurship, basic infrastructure services, information and communications technology, and housing.[11]

Is OM just old wine in new bottles?  The Bank’s results in the areas of shifting more investment toward poverty reduction and social equity have been disappointing in 2006, with only about 35 percent of total lending going to these categories.  A major activity funded by OM is yet another initiative to describe the shameful levels of poverty and inequality in Latin America - a somewhat ritualistic activity of the IFIs that then has little bearing on the performance indicators of major operations.  The IDB has repackaged conventional social development loans for water and sanitation, SME finance, digital connectivity and housing as “new” OM operations.  OM press releases have tended to conflate as helping the majority almost every new initiative the IDB is financing such as clean energy.

The IDB is taking a voluntarist approach by providing additional incentives for private sector actors to reduce poverty and inequality – something that they have refused to do until now.  This well intentioned effort is likely to have little long-term impact, unless there are penalties for not making progress on the goals of OM.  Rather than empowering the “dead capital” of the majority, as Hernando De Soto has advised, the IDB’s fixation on remittances suggests that the OM initiative is a disguised means for the leading financial institutions to win control over the projected $100 billion in annual flows – an amount far higher than the levels of foreign direct investment.

The OM initiative has also reportedly faced major political hurdles at the Board level.  One Director reported that the manager of the OM initiative, Ana Mica Betancúr had to return to the Board on nine different occasions to answer Board questions about the plan.  The U.S. has reportedly blocked and then reduced the initial $1 billion in streamlined funding for the Initiative on counsel from the USTR that the projects funding would represent an unfair trade advantage for Latin American firms.  The initial proposal to have a rapid approval process of OM project proposals was also blocked by those in the Bank not willing to give President Moreno that much control over what could be perceived as discretionary funds.

Despite the fanfare, the first year has seen the flagship initiative whittled down to the conventional ensemble of social projects.  In the speech of the Belgian Director, “Obviously, the Bank should do better.”[12]  Beyond new project announcements, mid-term results for OM should be evident by the next Annual Meeting in Miami or the IDB’s 50th Anniversary Governor’s Meeting in Cartagena (2009).

SECCI

Many have applauded the Sustainable Energy and Climate Initiative (SECCI) as the IDB’s response to the G8’s Gleneagles Plan of Action on the Climate Change Investment Framework.  President Moreno said the Banks’ private sector department is preparing a green energy-lending program that will provide at least $300 million in lending and technical assistance for renewable energy and energy efficiency projects throughout the region—with an emphasis on small-scale investments.

SECCI is the IDB’s contribution to an overall MDBs effort to offer greater leading for sustainable energy. The Clean Energy Investment Framework coordinated by the World Bank, the EBRD’s Sustainable Energy Initiative, the IDB’s Sustainable Energy and Climate Change Initiative and the Asian Development Bank’s Clean Energy and Environment Program (CEEP) are among the efforts undertaken by all MDBs to address energy efficiency, mitigate and adapt to climate change and secure the access and use of clean energy. 

The new IDB initiative will help to clear away roadblocks to the generation and use of renewable energy and work to develop mechanisms through which entities in industrialized countries receive credit in exchange for financing projects that reduce greenhouse gas emissions in the countries of Latin America.  Energy demand in Latin America is expected to increase 75 percent by the year 2030, and electrical generating capacity will need to increase 144 percent. Studies indicate that non-hydrocarbon energy sources such as wind power, hydroelectric and geothermal power could provide from 23 percent to 47 percent of the region’s electricity demand by that same date.

The challenge for the IDB in energy efficiency and renewables is the lack of research and pilot projects that will continue to bring down the prices of energy alternatives and draw complementary investment to scale up these alternatives to fossil fuels.  SECCI provides resources for some of these studies and pilots. 

The IDB’s financial additionality to the clean energy is in question when it pursues conventional hydrocarbons projects like Camisea that have triggered a feeding frenzy for petroleum speculators in the Peruvian Amazon.  In the past two years, the percentage of the Peruvian Amazon auctionable for oil exploration increased dramatically from 13% to over 70%.  The IDB and Camisea are viewed as largely responsible for giving the green light to further extractives investment. 

Within the SECCI program, biofuels have generated the most dynamic short-term response.  President Moreno announced a $3 billion target for private sector lending in biofuels projects.[13]  The IDB’s Private Sector Department announced financing for three Brazilian ethanol production projects that will have a total cost of $570 million. The department’s Brazil pipeline also includes loans for five Biofuels transactions or projects with Biofuels components that will have a total cost of nearly $2 billion. These investments will contribute to Brazil’s goal of tripling annual ethanol production by 2020, according to Moreno. 

“The IDB is also eager to support the Brazilian government’s goal of becoming a global center of excellence for research and development in biofuels,” IDB President Moreno stated. The Bank is holding discussions with senior Brazilian officials with a view to facilitating technology transfer and technical assistance, so that other countries in the region can benefit from Brazilian know-how.  The IDB’s biofuels initiative has provoked acceleration of African palm-based biodiesel operations in like Colombia and Central America.  The IDB is also financing feasibility studies and technical assistance in areas such as regulation, market development and public education, to help both governments reach their target of replacing 10 percent of domestic gasoline consumption with ethanol.

Many have reacted with concern that the rapid expansion of biofuels will not necessarily have net positive environmental impacts, much less the favorable distributional outcomes for poor people touted by the IDB.  Alcides Faria, Director of ECOA, warned the IDB in Guatemala that the biofuels boom driven by the expansion of sugar cane and soy cultivation will almost certainly increase deforestation in the Amazon.[14]  Critics of inefficient corn based biofuels projects have challenged the IDB to ensure the rosy outcomes behind expanded initiative.

IDB programs to promote renewable energy and energy efficiency opportunities are reported to play a growing role in Central America in the context of the Plan Puebla Panama (PPP) and in connection with the Initiative for the Integration of Regional Infrastructure in South America (IIRSA).  However, the track record for PPP and IIRSA has been to promote large infrastructure projects.  In the list of “renewable” projects, the IDB included the Campos Novos and Caña Brava two 400 MW and highly problematic hydroelectric dams in Brazil. Like Opportunities for the Majority, unless the IDB funds significant new investments in clean energy, SECCI runs the risk of misrepresenting the wrong energy policy choices.

Research on global warming increasingly shows that climate change tends to exacerbate existing inequalities.  The poor are already paying a disproportionate share of the cost of not reducing greenhouse gases and that future policy choices will continue to have significant impacts on existing inequality.  Besides the casual associations between the SECCI and OM initiatives, the IDB has been criticized for not incorporating a greater equity focus in its clean energy program.   Closer attention to the relationship between Latin American inequality and efforts to promote energy alternatives is urgently needed.

SECCI is a promising start for the IDB for which there is real demand in Latin America.  The initial test for SECCI will be whether there are concrete changes in the IDB’s lending portfolio.  Lending for hydrocarbons extraction now far outweighs funding for energy efficiency and renewable energy.  With a pressure to lend, the Bank will have difficulty convincing borrowers to absorb the higher transaction costs of more numerous, smaller energy projects.  The Bank currently lacks the in-house expertise to broker North-South and South-South dialogue on energy alternatives – a challenge for the ongoing realignment. 

Clear indicators are needed of the IDB’s commitment to promoting clean energy – including benchmarks for change in Bank’s current lending portfolio, the introduction of policy based lending operations that promote clean energy and an increasing number of smaller energy operations that are most suitable to poor communities.  To live up to its discourse, the IDB will also need to report more systematically on its commitment to sustainability on an annual basis, including an analysis of the net carbon emissions of its entire portfolio. 

The IDB currently has no updated energy policy.  A policy review has been ongoing since 2004.  Without a clear operational policy that encompasses SECCI and addresses some of these conceptual issues, there is no accountability at the Bank that any of the promising announced clean energy commitments.

Infrastructure Fund – A regional fund for development a requirement for economic integration

Regional infrastructure development is a necessary step toward economic integration, the Inter-American Development Bank's (IDB) president Moreno, has repeated since taking over in 2005.  According to Moreno, there are many unmet needs in contracts and incentives related to infrastructure development. The IDB claims that infrastructure investment has declined to a third of what it should be to remain competitive.  In remarks at the Annual Meeting, Moreno alluded to Mexican highway bonds offered years ago that ended up failing to perform as expected, leading the highways to be offered under concession.[15] 

In September 2006, the IDB launched Infrafund, a $20 million source of grant support for the preparation and development of sustainable infrastructure projects.  The popularity of Infrafund among Latin American governments has encouraged the IDB to replenish it, with the goal of stimulating investment in the Bank’s goal of $12 billion in infrastructure projects over the next five years.  This is the equivalent of $2 billion per year – a significant increase over the $1.3- 1.5 billion per year trend in IDB financed infrastructure over the past decade.  The IDB has set a US$5bn budget for 2007, of which 50% is expected to finance infrastructure projects.   An estimated US$80 billion needs to be invested in Latin American infrastructure construction, rehabilitation and maintenance in 2007.[16]

The IDB has created Infrafund to finance studies and determine the feasibility of projects to promote public and private investment in infrastructure. Projects that involve targeted measures to change the national and regional investment climates are also eligible for support. (legal, regulatory reforms, public opinion).  Projects that mobilize public-private partnerships are preferred, and sub-national infrastructure projects are a rapidly expanding focus of the new fund. 

The new fund is hoped to lower the perceived risk and thus accelerate the Bank’s direct support for Plan Puebla-Panamá, which covers transport and energy infrastructure, a number of road and highway projects, and the South American infrastructure integration initiative (IIRSA). 

Yet little is known about just what types of projects are receiving support from Infrafund.  The Bank reports that since its initiation, Infrafund has received more than 50 infrastructure proposals in different sectors from nearly 20 countries.  Of these, five were approved by the end of 2006 for Brazil, Argentina, Colombia, Panamá and Guatemala for $3.9 million (or nearly $800,000 per feasibility study).  One of these was an umbrella joint fund between the IDB, BNDES in Brazil and the International Finance Corporation to fund the preparation of infrastructure projects in Brazil.  These five Infrafund investments are expected to generate over $1 billion in infrastructure investment alone, with IDB participation of course.[17]

Under an elevated stature within the IDB realignment, a new Vice-President for Private Sector and Non-Sovereign Lending will be charged with ramping up the Bank’s private sector projects from the current 3-4% of total portfolio stock to the 10% limit.  The PRI Senior advisor Hans Schulz, recently promoted to Manager of Corporate Finance in the newly created Vice-Presidency of Private Sector and Non-Sovereign Operations put it, “we want to move quickly from having only 26 private sector clients to 500-600, to turn projects around in 3 months.” [18]  The InfraFund will clearly facilitate this planned expansion of Private Sector projects. 

The representative for InfraFund, Federico Basañes, made several vague references to infrastructure studies are underway, including a $4 million highway study, a Central American Mezzanine subregional Infrastructure fund, expansion of a Colombian airport, and several projects in the Hydrocarbons extractives sector.  Other announced studies include:

• Colombia -- US$1.5 million to prepare an environmental management plan for the Bogotá River Basin
• Argentina -- US$300,000 for solid waste management and disposal in tourist municipalities.
• Panama   --  US$289,880 to support the development of an 80MW private wind project to harness alternative renewable energy

However, Basañes was careful not to reveal details about the projects under review, holding to a long-standing IDB practice of sharing little information about private sector projects.  Other megaproject feasibility studies likely being financed by Infrafund include El Diquis Hydroelectric Project in Costa Rica, the Panamá Canal Expansion, and a Central American petroleum refinery, among others.

Next steps after Guatemala:

In addition to the more immediate challenge of engaging the IDB on various aspects of the realignment, planning is already underway for the IDB 2008 meeting in Miami as well as the 50th anniversary in President Moreno’s home turf – Cartagena.  The next year is a critical one for civil society as the Bank attempts to remain relevant among its largest borrowers.  Several opportunities might be emphasized for civil society.

1. Civil society participation – regroup or withdraw:  The attendance of civil society representatives at the Guatemala Annual Meeting as well as the San José Civil Society dialogue with the Bank was significantly below prior years.  Does this decline in civil society participation signal a loss of interest in the IDB, parallel to the competition the Bank is facing to find borrowers?   Particularly for those organizations that have engaged the Bank formally over the past decade (since Cartagena in 1997 or earlier), a strategic discussion is necessary to decide how to communicate this decision.  A few groups can do little to effectively occupy conquered space within the IDB Annual Meeting or the Annual Dialogue with civil society.  The quality of engagement in both spaces is deteriorating rapidly under the administration of President Moreno.  If the retention of such a space is desired, a strong statement must be sent soon to President Moreno about the principles for engagement and the demand of civil society to improve the quality of dialogue beginning with the next Civil Society Meeting with the Bank.

2.  Travel Support:  Civil society attendance is down at most IFI meetings in recent years, which could be due in part to the shortage of travel funding and lack of security in making plans in advance.  The most effective planning for the IDB and other IFI meetings can only be done if travel support has been secured months in advance.  This issue should be explored in greater depth to understand the underlying factors.

3.  Proposals for Engagement on IDB Realignment: The timetable for the realignment is accelerating.  The IDB is in final negotiations with the three remaining Vice-Presidents and several other key officials in the new operational structure.  President Moreno has committed that the new organizational structure will be in place by July 1, 2007.  However, the full implementation of the realignment may take as much as two years.  

At this decisive moment as the super-structure of the realigned IDB is being set, (between now and July), civil society must be heard regarding our specific concerns.  A policy brief by BIC highlights some of these concerns related to the IDB’s commitments to sustainability (safeguard compliance, environmental risk assessment, mitigation and proactive environmental operations).  This is only one of several paramount concerns that civil society should have with the implications for the Bank realignment.  Two additional problematic areas of the IDB realignment identified in Guatemala for civil society are development effectiveness and civil society participation.  Specific proposals are needed in both of these areas soon.

4.  CASCs – an unfulfilled promise:  As part of the realignment, President Moreno made the commitment that civil society advisory councils would be functioning in each of the 26 borrowing countries by July 1, 2007.  Anecdotal evidence in 5-6 Latin American countries suggests that delivering on this promise will either be impossible or lower the bar for what the concept “to function” means.  Efforts to solicit more detailed information about the CASCs from the Bank’s civil society unit have failed.  Proposals to the Bank to create a mechanism for joint civil society – Bank analysis of CASC performance have been refused.  As noted above in terms of the civil society dialogue with President Moreno in Guatemala and during the prior month in San José, Costa Rica – discontent is growing with the Bank’s unsatisfactory efforts to create meaningful mechanisms of participation for civil society. 

Unless civil society organizations act as watchdogs of IDB CASCs in their respective countries and make proposals about alternative mechanisms, the Bank will declare victory on July 1 as the unrepresentative, unaccountable, non-transparent, and until very recently non-existent CASCs in each country are held up as evidence of compliance with Moreno’s promise.  Moreover, suggestions that thematic CASC’s (around IIRSA or the 4 newly formed Regions) can not advance.  Some thought is required about how to insist on a fundamental change in the rules for civil society – Bank dialogue.  A proposal for restructuring the Annual Civil Society Meeting was mentioned in Guatemala as one possible tactic for establishing this type of shift.  BIC offered to outline a proposal for giving civil society greater control over the next IDB meeting with Civil Society.

5.  Expand Parallel Institutional Spaces:  The crisis of relevance for the IDB is clearly driven by greater competition.  The expansion and legitimation of alternative decision making spaces and institutionalities, particularly in South America, such as Banco del Sur, Fondo del Sur, the Community of South American Nations, and the growing articulation of social movements should all become priority targets of civil society engagement.  This means more careful and systematic engagement and documentation of these processes prior to key political moments in 2007. 

6.   Deepen dialogue with accountable, internal allies at the IFIs: Few Latin American countries are able or willing to withdraw from the World Bank and IMF following Venezuela’s lead.  Neither Venezuela nor any other Latin American member government has declared their intention of abandoning the IDB or the CAF.  We should cultivate more closely coordinated alliances with “dissident” executive directors in the IDB, World Bank, CAF and Banco del Sur to open this newly available political space within the IFIs.  Civil society requires the WTO equivalent of the G-21 mechanism within the IFIs, to provide regular briefings of the donor strategies and early alerts about possible strategic opportunities. 

7.  Results – the uninvited guest in Guatemala.  As the IDB approaches its 50th anniversary as the primary multilateral lender to Latin America, Guatemala revealed that the Bank has surprisingly little to say in terms of actual results for $120 billion in cumulative lending to the region.  Regional poverty and inequality levels remain much higher than most would expect for Latin America’s comparative advantages.  Currently, the IDB lacks a monitoring and evaluation system to permit this accountability.  The suggested investments in development effectiveness also lack what is likely needed to be able to talk about concrete results in Miami or Cartagena.  Civil society might focus on how to pressure the Bank to be more accountable for the results of past lending in Latin America at future Annual Meetings. 

[1] The MDGs in Latin America and the Caribbean: Progress, Priorities and IDB Support for their Implementation (August 2005) http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=591088

[2] IDB Press Release, March 17, 2007. http://www.iadb.org/news/articledetail.cfm?artid=3687&language=En

[3] The minutes are unofficial, produced by BIC.  No official minutes of the March 17 meeting between President Moreno and civil society representatives have been released by the Bank.

[4] See IDB Social and Environmental Audit and Pipeline Integrity Analysis, released on May 17, 2007.  http://www.iadb.org/NEWS/articledetail.cfm?artid=3855&language=En

[5] See http://www.iadb.org/projects/Project.cfm?project=RS-T1241&Language=English

[6] Follow-up to confirm the existence of a $60 million indigenous and afro-descendent fund found none in the IDB pipeline.  A $3 million scholarship fund for Indigenous and Afro-Latino students was approved by the Board on April 18, 2007.  http://www.iadb.org/projects/Project.cfm?project=RG-T1262&Language=English

[7] Tamar Bello, Temporary Alternate UK Director speech, http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=591088

[8] Elisabeth Gruber, Temporary Alternate Governor from Austria speech http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=934881

[9] IDB President Sets Goals for New Development Initiative, June 14, 2006, http://www.iadb.org/news/articledetail.cfm?artid=3130&language=En

[10] IDB Calls on Private Sector to Help Close the Economic and Social Gap in Latin America and the Caribbean, March 17, 2007, http://www.iadb.org/news/articledetail.cfm?artid=3684&language=En

[11] Opportunities for the Majority website, http://www.iadb.org/om

[12] Speech by Franciscus Godts, Alternative Governor of Belgium, March 20, 2007 http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=935055

[13] IDB targets $3 billion in private sector biofuels projects, April 2, 2007, http://www.iadb.org/NEWS/articledetail.cfm?Language=En&parid=2&artType=PR&artid=3779

[14] Emerging Markets, March 17, 2007

[15] IDB President Moreno was speaking at the World Economic Forum on Latin America in Santiago, Chile in April 2007

[16] http://www.bnamericas.com/story.jsp?idioma=I&sector=5&noticia=390594

[17] IDB 2006 Annual Report, pg. 34.

[18] PRI presentation by Hans Schulz, IDB Annual Meeting, Guatemala, March 19, 2007