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Inter-American Development Bank

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Inter-American Development Bank
AbbreviationIDB/BID
Established1959
TypeInternational organization
Headquarters1300 New York Avenue NW
Washington, D.C.
United States
Membership48 countries
Official language
English, French, Portuguese, Spanish
President
Ilan Goldfajn
Main organ
Board of Governors
StaffAbout 2,000
Websitewww.iadb.org
IDB flag.

The Inter-American Development Bank (IDB or IADB) is an international development finance institution headquartered in Washington, D.C., United States of America. It serves as one of the leading sources of development financing for the countries of Latin America and the Caribbean.[1][2] Established in 1959, the IDB supports Latin American and Caribbean economic, social, and institutional development and regional integration by lending to governments and sub-national agencies[3], developing new financial tools, creating enabling conditions for private-sector-led growth, convening and aligning countries around common interests, and bridging the region with the rest of the world.

The IDB also provides extensive technical assistance[4] to its borrowing member countries. It works across a range of sectors, including infrastructure, health, education, energy, citizen security, environmental sustainability, trade, transportation, housing, and small businesses.

It works in conjunction with IDB Invest[5], which pursues development by supporting the region's private sector through lending, mobilization, and advisory services. IDB Lab[6] is the Bank's entrepreneurial innovation and venture-capital arm.

History

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At the First Pan-American Conference in 1890, the idea of a development institution for Latin America was first suggested during the earliest efforts to create an inter-American system.[7] The IDB became a reality under an initiative proposed by President Juscelino Kubitschek of Brazil. The Bank was formally created on April 8, 1959, when the Organization of American States drafted the Articles of Agreement establishing the Inter-American Development Bank.[8]

Operations

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Main building of the Inter-American Development Bank headquarters at Washington, D.C.
Inter-American Development Bank headquarters at Washington, D.C., left, the 1300 New York Ave NW building and right, the 1350 New York Ave. NW, Washington D.C. The Enrique V. Iglesias Auditorium is in the middle.

The IDB is one of the largest multilateral sources of financing for the Latin America and the Caribbean region.[9] The IDB provides loans to borrowing member countries at standard commercial rates of interest, and has preferred creditor status, meaning that borrowers will repay loans to the IDB before repaying other obligations to other lenders such as commercial banks.

The IDB has four official languages: English, Spanish, Portuguese and French. Its official names in the other three languages are as follows:

Language Name
Spanish Banco Interamericano de Desarrollo (BID)
Portuguese Banco Interamericano de Desenvolvimento (BID)
French Banque interaméricaine de développement (BID)

Governance

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The IDB is governed by its Board of Governors, composed of representatives of the Bank's 48 member countries. The Governors are usually finance ministers or other senior economic officials. The Board gathers at an Annual Meeting in March or April to review the Bank’s operations and make major policy decisions.

The developing countries that borrow from the IDB are the majority shareholders, and therefore control the majority of the decision-making bodies of the Bank. Each member's voting power is determined by its shareholding: its subscription to the Bank's ordinary capital. The United States holds 30 percent of the Bank's shares, while the countries of Latin America and the Caribbean combined hold 50.02 percent, with another 20% held by member countries in Europe and Asia. This arrangement is unique in that the developing member countries, as a group, are the majority shareholders. Though this arrangement was first viewed as risky, it is believed by some that strict peer pressure prevents the borrowers from defaulting, even when under severe economic pressure.

Presidents

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Name Years of Tenure
Chile Felipe Herrera 1960–1970
Mexico Antonio Ortiz Mena 1971–1988
Uruguay Enrique V. Iglesias 1988–2005
Colombia Luis Alberto Moreno 2005–2020
United States Mauricio Claver-Carone 2020–2022
Honduras Reina Irene Mejía [es] (acting) 2022
Brazil Ilan Goldfajn 2022–present

Mauricio Claver-Carone was removed by the governors of IDB after an ethics investigation found that he had an affair with a subordinate and gave her a pay raise. The affair allegedly occurred during Claver-Carone's tenure on the National Security Council during the Trump administration.[10]

Ilan Goldfajn of Brazil was elected on November 20, 2022, and assumed his responsibilities as president on December 19, 2022.[11]

Mission

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The Bank's mission and slogan is "improving lives." At its 2024 Annual Meetings, the IDB Board approved a new institutional strategy, predicated on boosting the impact and scale of the Bank's development work through reforms[12]. The strategy's three core objectives are reducing poverty and inequality, addressing climate change, and bolstering sustainable growth.[13] The Board also approved a doubling of IDB Invest's capital and a new business model, "originate to share," that aims to significantly increase its ability to mobilize private capital for development projects.[14] IDB Lab reforms and a replenishment were also approved. The three major approvals have been dubbed "IDBImpact+" by the Bank.[15]

Financial resources

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The callable capital pledged by the 22 non-borrowing members, which include the world's wealthiest developed countries, therefore functions as a guarantee for the bonds that the IDB sells. This arrangement ensures that the IDB maintains a triple-A credit rating, and as a result can make loans to its borrowing member countries at rates of interest similar to those that commercial banks charge their largest corporate borrowers. At the same time, the 22 non-borrowing countries are only putting up guarantees – not actual funds – so their support of the IDB's lending operations has a minimal impact on their national budgets.

The funds that the IDB lends are raised by selling bonds to institutional investors at standard commercial rates of interest. The bonds are backed by (a) the sum of the capital subscriptions actually paid in by the Bank's 48 member countries, plus (b) the sum of the callable capital subscriptions pledged by the Bank's 22 non-borrowing member countries. Together these constitute the Bank's ordinary capital, some $101 billion. Of this amount, 4.3 percent is paid in, while the remaining 95.7 percent is callable.

According to the IDB's 2023 Annual Report, the Bank approved 92 sovereign-guaranteed  loan  projects  for  $12.7  billion  in  total  financing that year.[16] According to IDB Invest, it had a "record year" in 2023, with total activity surpassing $10 billion, including $5.3 billion in mobilized resources from private investors.[17] In 2025, IDB President Ilan Goldfajn announced the intention to increase financing capacity by an additional $130 billion over a decade.[18]

According to the IDB's own measurements for 2024, 76% of IDB loan approvals, 94% of IDB Invest commitments and 96% of IDB Lab approvals supported sustainable economic growth in Latin America and the Caribbean.[19]

Country status

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Borrowing members in green, non-borrowing members in red

The Bank is owned by 48 sovereign states, which are its shareholders and members. Only the 26 borrowing countries are able to receive loans.

Borrowing Non-borrowing
 Argentina  Austria
 Bahamas  Belgium
 Barbados  Canada
 Belize  People's Republic of China
 Bolivia  Croatia
 Brazil  Denmark
 Chile  Finland
 Colombia  France
 Costa Rica  Germany
 Dominican Republic  Israel
 Ecuador  Italy
 El Salvador  Japan
 Guatemala  South Korea
 Guyana  Netherlands
 Haiti  Norway
 Honduras  Portugal
 Jamaica  Slovenia
 Mexico  Spain
 Nicaragua  Sweden
 Panama   Switzerland
 Paraguay  United Kingdom
 Peru  United States
 Suriname
 Trinidad and Tobago
 Uruguay
 Venezuela

Latest capital increases

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On July 21, 2010, the Board of Governors agreed to increase the Bank's ordinary capital by $70 billion, the largest expansion of resources in the Bank's history, and to provide an unprecedented package of financial support to Haiti. The agreement also includes a replenishment of the Fund for Special Operations, which finances operations in the region's poorest nations.

A recapitalization and new, pro-mobilization business model for IDB Invest was approved in 2024.[20]

Priority areas

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According to the Bank's latest institutional strategy, it works in seven focus areas: 1. biodiversity, natural capital, and climate action; 2. gender equality and inclusion of diverse population groups; 3. institutional capacity, rule of law, and citizen security; 4. social protection and human capital development; 5. sustainable, resilient, and inclusive infrastructure; 6. productive development and innovation through the private sector; 7. regional integration.

Criticisms

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There are claims that operations funded by the IDB may have adverse impacts on local environments and indigenous peoples. According to the Bank Information Center (BIC), "civil society groups have long been concerned about the negative impacts the IDB's operations have on the environment and on indigenous and traditional peoples, as well as on the prospects for genuine economic and democratic reform in the region". The BIC cites environmental and social damage funded by the IDB as adversely impacting local economies, contrary to IDB's stated goal of fostering social and economic prosperity.[9]

Poverty reduction

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Governments of developing countries are not equipped to reduce poverty due to heavy responsibility to build and maintain infrastructure, as well as meet payroll and debt obligations. Tax revenue is often weak or non-existent. Poverty reduction depends largely on business investment in global markets to create sustainable jobs for economic empowerment of individuals. International companies need funding, and difficulty lies on the inability of the investment banks to overcome regulatory obstacles.[citation needed]

Small business entities are largely responsible for improving lives, as they play an inherent role in raising the socio-economic status of families, making it possible to combat poverty in the long range, as employed heads of household are in better positions to finance the education of children for a better future. Hence, empowering institutions, such as, the World Bank, IFC, the IDB, and others can exercise their due diligence to fit those promising entities in their projects with eased regulatory restraints, as certain regulations that work in developed nations are obstacles to progress in developing nations.[citation needed]

Member state comparison table

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The following table are amounts for 20 largest countries by subscribed capital stock, voting power, and FSO contribution quotas at the Inter-American Development Bank as of December 2020.[21]

The 20 largest countries by subscribed capital and voting power at the Inter-American Development Bank
Rank Country Ordinary capital subscribed capital
stock (millions US$)		 Rank Country Voting power
(% of total)		 Rank Country FSO contribution
quotas (millions US$)
World 176,754.0 World 100.000 World 10,239.9
1  United States 54,237.1 1  United States 30.006 1  United States 5,076.4
2  Brazil 19,740.9 2  Brazil 11.354  European Union 1,315.2
3  Argentina 19,718.7 2  Argentina 11.354 2  Japan 623.3
 European Union 16,322.5  European Union 9.207 3  Brazil 573.2
4  Mexico 12,678.4 4  Mexico 7.299 4  Argentina 532.2
5  Japan 8,877.5 5  Japan 5.001 5  Mexico 346.4
6  Canada 7,025.0 6  Canada 4.001 6  Canada 328.9
7  Venezuela 5,988.8 7  Venezuela 3.403 7  Venezuela 315.3
8  Chile 5,425.9 8  Chile 3.119 8  Germany 241.3
9  Colombia 5,423.0 8  Colombia 3.119 9  France 232.8
10  Italy 3,480.1 10  Italy 1.965 10  Italy 227.2
11  Spain 3,479.2 10  Spain 1.965 11  Spain 226.4
12  Germany 3,368.7 12  Germany 1.896 12  United Kingdom 183.9
13  France 3,364.2 12  France 1.896 13  Chile 166.1
14  Peru 2,646.3 14  Peru 1.521 14  Colombia 161.2
15  Uruguay 2,115.9 15  Uruguay 1.219 15  China 131.1
16  United Kingdom 1,744.8 16  United Kingdom 0.964 16  Peru 84.0
17  Bolivia 1,588.3 17  Bolivia 0.913 17  Switzerland 67.1
18  Dominican Republic 1,061.3 18  Dominican Republic 0.610 18  Uruguay 58.7
19  Ecuador 1,056.6 19  Ecuador 0.608 19  Bolivia 51.1
20  Guatemala 1,005.2 20  Guatemala 0.577 20  Belgium 44.6
20  Jamaica 0.577

See also

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References

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  1. ^ About the Inter-American Development Bank – Inter-American Development Bank Archived 2018-02-01 at the Wayback Machine. Iadb.org. Retrieved on 2010-12-14.
  2. ^ "What Does the Inter-American Development Bank Do?".
  3. ^ "Investment Lending".
  4. ^ "Technical Cooperation".
  5. ^ "IDB Invest".
  6. ^ "IDB Lab".
  7. ^ "40 Years: More than a Bank".
  8. ^ "AGREEMENT ESTABLISHING THE INTER-AMERICAN DEVELOPMENT BAN". Organization of American States. Retrieved 7 April 2011.
  9. ^ a b "Inter-American Development Bank". Bank Information Center. Archived from the original on 2008-12-16. Retrieved 2008-12-14.
  10. ^ Gawel, Anna (27 September 2022). "Devex Newswire: Sex scandal at IDB and climate denial at World Bank". Retrieved 27 September 2022.
  11. ^ "Ilan Goldfajn Elected IDB President | IADB". www.iadb.org. Retrieved June 12, 2023.
  12. ^ "The New Inter-American Development Bank Institutional Strategy Commits to Ambitious Reform".
  13. ^ "Institutional Strategy".
  14. ^ "2024 Annual Meetings Business Forum - Originate to Share".
  15. ^ "IDB Monthly Newsletter - April 2024".
  16. ^ "IDB Annual Report 2023".
  17. ^ "IDB Invest Annual Report 2023".
  18. ^ "BID aumentará su capacidad de financiamiento a 38 mil mdd anuales".
  19. ^ "IDB - Measuring Results".
  20. ^ "IDB approves $3.5 billion capital increase for investment arm".
  21. ^ "Inter-American Development Bank Annual Report 2020: The Year in Review" (PDF). Retrieved June 12, 2023.

Further reading

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Media related to Inter-American Development Bank at Wikimedia Commons


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