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LATIN AMERICA:
Half Century of Failed Development Policies
- NGOs
By Humberto Márquez
CARACAS (IPS) - As it gets ready to
commemorate its 50th anniversary at an
assembly in Medellín, Colombia, the
Inter-American Development Bank (IDB) has
come under heightened criticism from civil
society groups which argue that its
financing often goes against sustainable
development and effective measures to
overcome poverty.
"The 50th anniversary could become a rough
draft for a future death certificate,"
Héctor Moncayo, with the Colombia-based
Latin American Institute for Alternative
Legal Services (ILSA), one of the 42
organisations involved in the "IDB 50 Years
Financing Inequality" campaign, told IPS.
The campaign is holding a "Peoples' Assembly
for Development Alternatives" in Medellín
parallel to the 50th annual meeting of the
IDB and the 24th annual meeting of its
affiliate, the Inter-American Investment
Corporation, to be held Mar. 27-31.
The IDB is also under fire because its
portfolio lost 1.9 billion dollars in value
over the last year and a half due to its
investments in "toxic assets" backed by
subprime mortgages – a huge obstacle to the
Bank’s hopes of shoring up its solvency in
the midst of a global economic crisis.
The portfolio losses gave rise, ahead of the
IDB assembly, to a back and forth of letters
between influential U.S. Senator Richard
Lugar, the top Republican on the Senate
Foreign Relations Committee, and Luis
Alberto Moreno, the Colombian economist who
heads the IDB.
Of the IDB’s 48 member states – China is the
newest member – 23 are net donors, the
biggest of which is the United States. The
Bank has been working hard to increase
member donations in order to approve at the
assembly 18 billion dollars in loans for
2009.
"We still need development banks with
sufficient resources to meet normal
requirements and to address needs at times
of crisis," Mexican economist José Rivera,
secretary of the Latin American Economic
System (SELA), remarked to IPS.
The IDB has disbursed six to nine billion
dollars a year over the last five years,
most of which has gone towards strengthening
infrastructure and export competitiveness in
Latin America and the Caribbean.
The private sector received 920 million
dollars for 20 projects in 2006 and 2.3
billion dollars for 29 projects in 2007.
The Bank proudly points to initiatives that
have helped reduce poverty and social
inequality and have defended the
environment, like contributions to
children’s orchestras in Venezuela, the
strengthening of the primary health system
in Argentina, or expanding access to basic
services for indigenous people along the
Urubamba River in Peru.
But the "IDB 50 Years Financing Inequality"
campaign declaration states that "Over its
fifty-year history, a good part of the
social and economic policies promoted
through loan policy conditionalities by the
IDB have proven to be a failure in achieving
a ‘developed and egalitarian’ Latin
America."
Social Watch, a Uruguay-based international
watchdog taking part in the campaign said
the counter-assembly would be held "to
visualise the human and environmental costs
of the failed ‘development’ policies of the
bank, which are largely focused on the
promotion of ecologically damaging
mega-projects that provide few benefits for
disadvantaged local populations and fail to
respect the rights of indigenous communities
and other traditional ethnic groups."
"Considering that the main objective since
the creation of the IDB (in 1959) was to
accelerate the sustainable development
process, it makes sense to wonder: how can
we still have alarming rates of poverty,
extreme poverty and inequality after 50
years of work?" said Diego Rodríguez, an
Argentine activist with Ciudadanía y
Justicia Ambiental (Environmental
Citizenship and Justice).
In the search for who is responsible for
this situation, "perhaps crises and problems
cannot be attributed to one single cause or
institution," Argentine economist Alfredo
Calcagno, with the United Nations Conference
on Trade and Development (UNCTAD),
acknowledged.
"But one major factor is the industrialised
countries, which have not dealt with the
economic problems of the rest of the world
in reasonable, responsible terms, and have
recommended that other states follow
prescriptions that they themselves have not
applied," Calcagno told IPS.
Moreno, like his predecessor, Uruguayan
economist Enrique Iglesias, has insisted on
poverty reduction as one of the IDB’s
central goals.
In 2007, Moreno stated that the region was
proving that economic growth is still
indispensable for combating poverty, which
he said shrank from 36.5 percent in 2006 to
35.1 percent in 2007, and extreme poverty,
which went down from 13.4 to 12.7 percent in
that period in Latin America and the
Caribbean.
In absolute terms, the number of poor went
down from 194 to 190 million from 2006 to
2007, and the number of extreme poor from 71
to 69 million. The IDB reported that these
were the lowest rates seen since the 1980s,
and that they reflected 87 percent progress
towards achieving the first Millennium
Development Goal (MDG): halving the
proportion of people living in extreme
poverty by 2015, from 1990 levels.
For his part, Gabriel Strautman with the
Brazilian Network on Multilateral Financial
Institutions said IDB member countries
should not fork over more money to banks
"that have caused irreversible
socio-environmental damages throughout their
lives."
Another reason to halt the flow of funds,
said political scientist María José Romero
at the Third World Institute in Uruguay, is
"the limited effectiveness of mechanisms for
civil society participation in
decision-making and the lack of respect for
the rights of indigenous people."
From another angle, Senator Lugar asked IDB
president Moreno to "please chronicle the
decisions that led to the IDB’s massive
loss" of 1.9 billion dollars.
He also asked how the losses impacted "the
present and future commitments of the bank,"
and what reforms were necessary to ensure
that the losses did not recur.
Moreno responded that he understood that
Lugar "would want assurance that these
portfolio losses do not put in jeopardy the
IDB’s mission to further the economic and
social development of Latin America and the
Caribbean."
But he said the assets involved in the
losses were classified as AAA (extremely
unrisky) at the time of purchase, and that
"Nearly all the losses are on assets that
are still performing (paying principal and
interest on schedule)…"
He also noted that for 2008, estimated
losses amounted to 1.6 billion dollars, and
that when "offsetting interest income of
more than 600 million dollars is figured in,
the IDB’s estimated net income loss for the
year was less than one billion dollars."
In Calcagno’s view, "it may be that it was
difficult for the IDB to stay on the margins
of the general financial euphoria (the real
estate bubble that triggered the current
crisis). But what it should have done, if it
had surplus funds, was to lend them to the
region for development projects."
Rivera drew attention to the emergence in
the region of new development financing
alternatives "which we look kindly on," like
the regional development bank set up by ALBA
(the Bolivarian Alternative for Latin
America, made up of Bolivia, Cuba, Dominica,
Honduras, Nicaragua and Venezuela) and the
BancoSur or Bank of the South.
The BancoSur was first proposed by Venezuela
as an alternative to borrowing from the
International Monetary Fund (IMF) and the
World Bank and was created by that country
along with Argentina and Brazil. The three
countries have pledged two billion dollars
each. Bolivia, Ecuador, Paraguay and Uruguay
will also furnish smaller amounts of initial
capital.
"The current context is a historic
opportunity to propose radical alternatives,
because the crisis has brought about a
collapse of the international financial
architecture made up of institutions like
the IDB," said Moncayo. "This is the time
for new, unprecedented strategic alliances."
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