IDB and the USA

Page 1

INVESTING TOGETHER IN THE FUTURE OF THE AMERICAS

THE UNITED STATES is the

Inter-American Development Bank’s (IDB) largest shareholder, having subscribed $1.3 billion in paid-in capital, and guarantees, or “callable” capital—equivalent to 30 percent of the IDB’s Ordinary Capital voting shares—as of December 31, 2010. In addition, the U.S. has contributed $5.0 billion, or 50 percent, to the Bank’s Fund for Special Operations (FSO). Under the terms of the Ninth General Capital Increase, the United States has pledged, subject to congressional approval, to provide an additional $510 million in paid-in capital to the IDB’s Ordinary Capital and an additional $237 million to the FSO, most of which has been made available to the IDB Grant Facility for the benefit of Haiti. In March 2011, the U.S. announced its intention to donate $5 million to a multidonor trust fund administered by the IDB to support regional infrastructure integration projects throughout Latin America and the Caribbean (LAC). The IDB, headquartered in Washington, D.C., is a member of the IDB Group which includes the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF). As the oldest and largest regional multilateral

development bank, the IDB is the main source of multilateral financing for economic, social and institutional development in LAC. The IIC focuses on support for small and medium-sized businesses while the MIF promotes privatesector growth through grants and investments. With the highest available rating (AAA), the IDB finances its operations with a combination of its own resources, which consist of retained earnings and paid-in capital from its 48 member countries, as well as from borrowings on the financial markets, trust funds that it administers and cofinancing ventures. The IDB’s new Capital Adequacy Framework, Asset and Liability Management Policy and Liquidity Policy, approved in 2010, ensure that capital requirements are in place for credit, market and operational risk, and stipulate the terms under which the IDB’s liquid investments portfolio is managed. From 1961, when the IDB began financing development projects, through the end of 2010, IDB investment loan disbursements to U.S. firms and consultants for the purchase of goods and services totaled $8.4 billion, approximately four times the amount disbursed to any other nonborrowing member country.

THE INTER-AMERICAN DEVELOPMENT BANK AND THE UNITED STATES

IDB USA


BUSINESS OPPORTUNITIES: PROCUREMENT

NEW BUSINESS opportunities for

firms and consultants from all IDB member countries are generated through the IDB’s lending to its 26 borrowing member countries. Each year, procurement processes, managed by borrowing country executing agencies and subject to IDB procurement policies, generate approximately 20,000 separate contract opportunities. IDB rules require that firms and consultants from all member countries be afforded an opportunity to bid on all procurement financed with IDB resources. The IDB insists on a bidder’s right to obtain an explanation of the outcome of a bidding process and reserves the right not to finance any activity in violation of its policies.

Dating back to 1961, U.S. firms and consultants have garnered 46 percent of procurement contracts for goods, works and services awarded to the non-borrowing member countries. Below is a sample list of disbursements for the 2006–2010 period. In addition to funds disbursed to U.S. suppliers for development projects in the region, U.S. firms also obtain significant benefits from corporate procurement, amounting to an annual average of $55.2 million from 2008 to 2010. During the same period underwriting fees paid to U.S. businesses for IDB bond issues averaged $8.4 million per year.

Contractor/Supplier

Sector

Amount

Open Link Financial Inc. Uniondale, NY

Financial management reform

$1,091,317

Dow Agrosciences Indianapolis, IN

Agriculture

812,757

Universal Trading and Engineering Corp. Doral, FL

Energy, sanitation

792,414

Motorola Inc. Schaumburg, IL

Judicial reform

633,480

Stanley Consultants, Inc. Muscatine, IA

Transportation

339,230

The Louis Berger Group Inc. Morristown, NJ

Rural roads

246,676

GreenLine Systems Arlington, VA

Fiscal Reform

217,868

DAH Consulting, Inc. New York, NY

Health

151,705

Dell Marketing L.P. Round Rock, TX

Land titling

135,564

Trade Beam Holding, Inc. San Mateo, CA

Trade policy development

120,000

Parsons Brinckerhoff New York, NY

Transportation

85,218


$1.3 BILLION IN TRADE ACTIVITIES

WITH ITS LOANS, grants and

technical assistance, the IDB plays a key role as a catalyst for prosperity and improved living conditions in Latin America and the Caribbean, helping shape the economic conditions necessary to deepen vital United States commercial ties with the region. This helps create jobs in the U.S. and strengthens stability across the hemisphere. Lowered tariffs and trade liberalization have resulted in increased imports of U.S. goods by many Latin American and Caribbean countries. Between 1998 and 2009, total U.S. merchandise trade with Latin America

grew by 82 percent, compared with 72 percent for U.S. trade with Asia, 51 percent for U.S. trade with the European Union, and 64 percent overall. Mexico accounted for 11.7 percent of total U.S. merchandise trade in 2009, and is the United States’ second-largest export market. Even as Latin America’s economy has grown dramatically, however, the U.S. percentage of total exports to the region has decreased, as this new openness to the outside world has also spurred imports from other countries. Overall, the share of U.S. exports to the region dropped from 55 percent of Latin America’s total imports in 2000 to 32 percent of the region’s imports in 2009. The share of U.S. investments in the region has fallen from 25 percent to 17 percent of Latin America’s total foreign investment over the last five years, as the region’s trade with Asia has flourished. United States support of the IDB is a modest but powerful investment in promoting the type of economic growth and social advancement that raises standards of living across the region, creates new economic demand for U.S. goods and services and benefits stakeholders on both sides of the border.

22%

U.S. Merchandise Exports ($ billions) Country

2007

2010

$242.7

$302.1

Mexico

135.9

163.3

Brazil

24.2

35.4

Colombia

8.6

12

Peru

1.3

6.7

19.9

22

43

62.7

Latin America and the Caribbean

Caribbean Rest of the region

U.S. TIES WITH LATIN AMERICA AND THE CARIBBEAN

SUPPORTED BY THE TRADE FINANCE FACILITATION PROGRAM SINCE 2005


DEVELOPMENT THROUGH THE PRIVATE SECTOR

THE IDB GROUP works closely

with governments and with a broad range of private-sector players to advance the social and economic development of the region. While governments work with the IDB Group to improve the business and investment climate of the region, companies and financial institutions have opportunities to bid on consulting and procurement contracts, offer financing and gain access to grants. These firms range from microenterprises to large companies, and include partners such as mixed-capital entities and financial institutions. In 2010, the IDB’s Board of Governors approved raising the ceiling for private-sector (or “nonsovereign-guaranteed”) lending to 20 percent of all IDB commitments, paving the way for such lending to rise to nearly $2.5 billion annually.

HOW WE MAKE A DIFFERENCE •

Our networks enable us to build bridges and create partnerships. We can reconcile interests among different parties;

We hold ourselves to the highest international environmental, labor, health and ethics standards;

Our institution offers longer tenors, acts as a catalyst to mobilize additional financial resources from third parties and structures deals that meet the needs of individual clients;

We invest in new, innovative business models and projects—particularly those designed to improve living conditions of low-income populations—and improve capabilities of microenterprises and small businesses.

340,000 PEOPLE

SINCE 2006, MORE THAN IN LATIN AMERICA AND THE CARIBBEAN HAVE BENEFITED FROM PROJECTS FINANCED BY OUR STRUCTURED AND CORPORATE FINANCE DEPARTMENT


SINCE 1989, THE IIC HAS

OUR FOUR WINDOWS

The IDB Group’s four private-sector windows (MIF, IIC, SCF and OMJ) work in coordinated fashion to provide access to credit and technical assistance at each stage of a business’s life cycle. •

The Multilateral Investment Fund (MIF) has become one of LAC’s top providers of seed capital and advisory services for microenterprises and start-ups.

The Inter-American Investment Corporation (IIC) has pioneered the use of loans, grants and equity for small and medium-size enterprises (SMEs) for more than 25 years. The IIC focuses on providing medium- and long-term financing for these companies either directly or through local financial institutions.

NEARLY

The IDB’s Structured and Corporate Finance Department (SCF) specializes in large infrastructure projects, capital markets development, trade finance and support for financial institutions and mixed-capital entities.

The IDB’s Opportunities for the Majority Sector (OMJ) emphasizes pilot projects and solutions for those at the base of the economic pyramid: an estimated population of 360 million in the region who live on $3 a day or less.

4 MILLION ENTREPRENEURS

AND MICRO-, SMALL, AND MEDIUM-SIZED ENTERPRISES HAVE

IMPROVED THEIR CAPABILITIES, ENTERED NEW MARKETS, OR OBTAINED FINANCING THROUGH MIF SUPPORTED PROJECTS OVER THE PAST 17 YEARS

49,000 JOBS IN 2010, MORE THAN

WERE CREATED IN THE REGION’S FORMAL SECTOR

AS A RESULT OF PROJECTS FINANCED BY

THE IDB’S STRUCTURED AND CORPORATE FINANCE DEPARTMENT

DEVELOPMENT THROUGH THE PRIVATE SECTOR

BENEFITED MORE THAN 1.6 MILLION SMES


OPERATIONS

IDB GROUP LOANS and grants

help finance development projects and support strategies in key areas such as poverty reduction; expanding growth; promotion of sustainable energy and mitigation of climate change impact; increased investment in water and sanitation, infrastructure and education; and private-sector development.

Distribution of Loans and Investment Grants by Sector, 2010

22% 42%

By the end of 2010, the IDB had approved $197 billion in loans and guarantees to finance projects with investments totaling over $420 billion, as well as $4.1 billion in grants and contingent-recovery technical cooperation financing. In 2010, the IDB approved $12.7 billion in loans and investment grants, along with an additional $952 million in grants (including the MIF). Loan disbursements totaled $10.8 billion. Social Sector $2,771.2*

Institutional Capacity and Finance $4,573.8*

36%

Infrastructure and Environment $5,360.1*

Total $12,705.1*

Loans and Guarantees by Country, 2010 and Cumulative Country

2010

1961-2010

Argentina

$1,165

$30,053

Bahamas

--

Barbados

2010

1961-2010

Haiti

$**

$1,164

495

Honduras

353

3,554

86

625

Jamaica

630

2,926

Belize

10

174

Mexico

3,040

28,847

Bolivia

201

4,381

Nicaragua

210

3,064

Brazil

2,260

39,899

Panama

340

3,825

Chile

69

6,555

Paraguay

170

2,843

Colombia

685

17,359

Peru

341

9,816

Costa Rica

92

3,490

Suriname

12

217

Dominican Republic

335

4,202

Trinidad and Tobago

140

1,362

Ecuador

510

6,251

Uruguay

88

5,066

El Salvador

435

4,294

Venezuela

890

7,093

Guatemala

305

4,471

37

1,218

Regional

60

3,637

Guyana

Country

* In millions of USD—totals may not add due to rounding. ** Since 2007, IDB support for Haiti has been exclusively in the form of grants. Grants to Haiti totaled $352 million in 2010.


mechanisms in place to ensure that its activities are free of fraud and corruption. In particular: In April 2011, new procedures for sanctioning firms and individuals found to have engaged in corrupt practices were put in place by the Office of Institutional Integrity. Sanctions range from a reprimand to cross debarment, either for a specific period of time or permanently. As shown on the IDB’s Web site, 110 firms and individuals have been sanctioned since 2007. IDB staff and the IDB’s Board of Executive Directors are subject to strict standards, spelled out in the Code of Ethics and Professional Conduct. Whistleblowers who raise allegations of fraud or misconduct—either employees of the IDB or outside parties—are protected from reprisal under IDB staff rules. The IDB’s new Access to Information Policy, effective January 1, 2011, presumes that all information produced by the IDB—including operational, financial and legal/institutional information—will be disclosed unless it is found in a narrow list of exceptions. The new Independent Consultation and Investigation Mechanism provides a forum for dealing with communities or individuals who claim to have been or might be adversely affected by operations financed by the IDB, and monitors compliance with IDB environmental and safeguard policies.

TRANSPARENCY AND ACCOUNTABILITY

THE IDB HAS numerous control


DEVELOPMENT EFFECTIVENESS

THE DEVELOPMENT IMPACT of operations financed by the IDB is measured at the project and country levels.

1,800 CLASSROOMS BUILT PER YEAR

The IDB’s effectiveness will be measured through the Results Framework 2012–2015 (www.iadb.org/results), adopted as part of the Ninth General Capital Increase. This framework lays out the following lending targets for 2015: 50 percent of project approvals by volume for poverty reduction and improved equity; 35 percent for small and vulnerable countries; 25 percent for operations related to climate change, renewable energy and environmental sustainability; and 15 percent to support regional cooperation and integration.

For more reporting on results, see the 2010 Development Effectiveness Overview (www.iadb.org/DEO2010).

IDB KEY CONTACTS EXECUTIVE DIRECTOR FOR THE UNITED STATES Gustavo Arnavat | Exd/006@iadb.org | Tel.: (202) 623-1031 PUBLIC INFORMATION CENTER pic@iadb.org | Tel.: (202) 623-2096 | www.iadb.org/picform BUSINESSES: http://www.iadb.org/businesses CIVIL SOCIETY: http://www.iadb.org/civilsociety RESEARCHERS AND ACADEMICS: http://www.iadb.org/en/academia

www.iadb.org

Printed 06/2011

By 2013, all of the 26 IDB Country Strategies for the borrowing member countries will contain a series of indicators for measuring results. Under the Ninth General Capital Increase, all sovereign and non-sovereign guaranteed loans must meet a minimum evaluability threshold.


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