Analysis: Colombian heads development bank

By ROLAND FLAMINI, UPI Chief International Correspondent  |  Aug. 5, 2005 at 9:55 AM
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WASHINGTON, Aug. 5 (UPI) -- Last week's election of Luis Alberto Moreno as president of the Inter-American Development Bank puts a savvy diplomat from Colombia in charge of the biggest single source of development for borrowers in Latin America and the Caribbean -- bigger than the World Bank and much more so than the small U.S. foreign aid program. Last year, the Washington-based institution loaned $6 billion to governments and individuals for projects that had some social significance, such as education, the environment, or infrastructure, but it has a lending capability of $8 billion.

Unlike the World Bank, where Paul Wolfowitz, the former deputy secretary of Defense, was picked by the Bush administration behind fully closed doors, the aspiring head of the IDB is chosen from candidates put forward by their respective governments, and is elected by the combined votes from the bank's clients and its main international lenders. The election follows the retirement of Enrique V. Iglesias, who has been president since 1988.

The Bush administration was known to favor Moreno over the other four candidates respectively from Brazil, Nicaragua, Peru and Venezuela. As Colombia's savvy ambassador to Washington Moreno had made a name for himself by selling the government and the U.S. congress on Plan Colombia, the multimillion dollar project in American aid to combat narco-terrorism in his country.

With a 30 percent share of the regional vote as the bank's main contributor, the United States can block a candidate it doesn't like, but can't elect one. In effect, the aspiring candidate needs to clear two hurdles. He needs a majority of the votes from the countries of the Hemisphere plus the United States -- Canada, Latin America, and the Caribbean. Moreno received 20 out of a possible 28 regional votes. Then the candidate must also get a majority from the representatives of the non-regional bank members, including Japan, Israel, France, Britain, Portugal, etc., and there Moreno scored a comfortable 57 percent.

In the latter group France, Portugal, Slovenia, and Croatia voted for the Brazilian candidate, Joao Sayad, a senior IDB vice president. Japan confounded predictions that it would vote with the United States by abstaining. One bank insider said the Japanese decision surprised staffers and observers. "Japan is a key member of IDB, with more voting power than most members: not voting is indecisive and shows a disappointing lack of will," said the insider.

Moreno's first challenge is expected to be to repair any damage caused by the election, according to observers. The Brazilian government is said to deeply disappointed by the failure of its candidate to win the election. Brazil and Argentina are the bank's biggest borrowers.

"Sayad will go, but he's certain to be succeeded by another Brazilian," the insider said. "Moreno must use his skill as a diplomat to reshuffle the posts so as to ensure continuity."

A more significant problem facing the new president, says Nancy Birdsall, a former IDB executive vice-president, is that borrowing is declining, partly because the bank needs to become more imaginative in its lending policies. The IDB, Birdsall wrote in the Los Angeles Times Thursday, "relies almost entirely on the plain vanilla loan -- with little attention to the kinds of instruments that would catalyze private-sector flows, for example. If these countries (Brazil, Argentina, Mexico) were to gradually withdraw, the United States would lose too, because the bank is a more effective regional forum that the more overtly political Organization of American States."

Many analysts see a financial crunch hovering on the horizon in Latin America as the commodity boom that has generated the current modest growth peters out. Brazil, with its still-heavy debt load and high interest rates is likely to be hard hit, and will turn for help to the IADB.

"Moreno will need all his political smarts to persuade the U.S. Treasury to approve big, quick IDB lending, and to bring in the International Monetary Fund and the World Bank," Birdsall says. "The Washington institutions are still embarrassed and aggrieved over the chaos and loss of credibility that Argentina's 2000-2001 collapse brought."

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