Since becoming president of the Inter-American Development Bank in October 2005, Luis Alberto Moreno has appointed new managers, updated the bank’s lending policies and restructured the institution. He talks to Jane Monahan.
Q Is the ultimate aim of the Inter-American Develop-ment Bank (IDB)’s recent reforms to make itself more relevant to its clients? After all, IDB borrowers in Latin America now have other sources of development finance, with investments by China and India, large earnings from high-priced commodity exports, and the inauguration of the Bank of the South last December by seven Latin American presidents.
A We want the IDB to be more relevant and proof of this is last year’s lending of more than $9bn. In no other year in the bank’s history have we had this level of lending without emergency assistance. At the same time [last year], we began focusing on issues related to climate change and sustainable development, and small and medium-sized enterprises (SMEs), and [also] continued programmes in traditional social areas, such as education, and water and sanitation in basic infrastructure.
Q Since you became head of the IDB, the bank has begun vigorously supporting the expansion of biofuel production in Latin America as a way to combat climate change. But scientists now question the environmental merits of biofuels, and several UN agencies say biofuels are contributing to world food shortages and price increases, and even the reappearance of hunger in countries such as Mexico. What is your comment?
A First, the IDB was very involved in helping to develop the biofuel industry when it started in Brazil years ago. And we are doing a lot of research now on the real impact [of biofuels] on food and energy. There are countries in Latin America with large extensions of land that in the past were dedicated to sugar cane production and are now lying fallow. They could go on producing sugar as well as ethanol. It has been demonstrated that the most efficient biofuel is ethanol from sugar cane – the feedstock from corn is less efficient – so the matter has to be put in context. We are also supporting other renewable energy opportunities, such as wind and solar energy; and Latin America has a lot of hydro energy possibilities.
Q Under your management the IDB has launched a five-year, private-sector, multibillion dollar initiative designed to integrate Latin America’s poor majority of 360 million people into the market economy as producers or consumers. How is it doing this?
A We are leveraging projects the bank already has and measuring that scaling-up. For example, in Peru there is a rural road project and we saw the possibility of developing SMEs around it that could be scaled-up.
Another area where we are working is financial inclusion – increasing access to microcredit and microfinance. For example, in Mexico, a mass marketing company that delivers goods throughout the country has established some microfinance services in stores providing $100 to $200 credits to small entrepreneurs.
Q Responding to demand, the IDB has greatly increased its lending for large-scale infrastructure, especially for energy and transport projects that help to integrate Latin America. How important is such infrastructure development in making the region more competitive?
A It is fundamental. It has a tremendous bearing on competitiveness. With all the demands made on Latin America today related to increasing the export of commodities, there is pressure to develop infrastructure such as ports, roads and airports. But Latin America is investing only about 2.5% of its gross domestic product on infrastructure – a country like China is investing 9%.
Q Some IDB donors are concerned that, with increased large-scale infrastructure lending and the speeding up of loan preparation times [one of the bank’s reforms] as the IDB competes for business, there may be a weakening in the bank’s environmental safeguards.
A On the contrary, we have upgraded our environmental safeguards and we now have modern environmental standards, which are no different from [those of] other development institutions. We are not going to stop demanding compliance. There might be projects that, for whatever reason, don’t meet the safeguards, at which point we won’t do any kind of financing.
Q How is Latin America coping with the current international financial crisis?
A The crisis has not affected Latin America. In most Latin American countries, domestic financial systems are strong. Countries that have been able to move away from dollar-denominated debt to debt in local currencies, because of accumulations of reserves and also because of savings, have done so. Few countries have macro-economic problems anymore. The main area where reforms are needed is in the micro-economy. That is the road ahead.
