The Inter-American Development Bank (IDB)

Updated September 2005

1. Facts

The IDB, which is the principal source of multilateral financing in Latin America and the Caribbean, provides loans to qualifying member countries from the following two windows:

• Ordinary capital To finance this part of its lending activity, the IDB obtains resources in world capital markets through bond issues. The size of its capital base, to which all member countries have contributed according to their standing in the world economy, has given the IDB a high credit rating, enabling it to borrow on very good terms. The IDB provides loans to middle-income countries on the same low terms, with the addition of a ½ point interest rate margin, which normally gives a much lower lending rate than these countries would be able to obtain in the capital markets. These loans are provided to national governments and to lower-level governments and institutions with a government guarantee.

Loans 2004 (disbursed): 36,5 billion

Biggest borrowers (2004): Brazil, Colombia and Argentina

Norwegian share of capital base: 0.17 per cent

• The Fund for Special Operations (FSO) provides loans on concessional terms to the poorest member countries, which are unable to meet the terms of ordinary loans. Lending capital is contributed by the non-borrowing countries as development assistance, through replenishments negotiated at three-year intervals. FSO funds are lent at 1 per cent for the first ten years and two per cent thereafter, with a 10-year period of grace and a repayment period of up to 40 years. These loans are provided to national governments and to lower-level governments and institutions with a government guarantee.

Loans 2004 (disbursed): NOK 3,3 billion

Biggest borrowers (2004): Honduras, Guyana and Nicaragua

Norwegian share of contributions to FSO: 5 per cent

Lending profile: Most new loans granted in 2004 went to the social sector followed by competitiveness and modernization of the state.

2. Ways and means

Involvement on the Executive Board

The Board of Executive Directors is the IDB’s executive authority and is responsible for conducting Bank operations. The Nordic countries work closely together within their constituency, holding weekly telephone conferences and sending joint instructions to the constituency office. The active collaboration of the Nordic countries gives Norway a greater opportunity to gain acceptance for its views. According to the rotation scheme, Norway will not be represented in the Office until 2006 then by a counsellor.

Replenishment negotiations

The eighth replenishment in 1994 was intended to be the last (the IDB was supposed to become self-financing in the sense that repayments on loans would finance new loans). Responding to the financial crises of recent years, the IDB has provided short-term balance-of-payments support, which has eroded its capital base. If the need for crisis lending continues, further replenishment may have to be considered.

The eighth – and so far the last – FSO replenishment was concluded in 1998 by converting existing lending funds which had been paid back in local currencies in the borrowing countries. There are no plans as yet for any further replenishment, as only four countries (Honduras, Nicaragua, Guyana and Bolivia) qualify for this facility.

Co-financing

Our co-financing involvement in the international development banks is a channel by which we seek to influence these institutions according to Norwegian foreign and development policy. Norway has contributed around NOK 12 – 15 million per year in recent years to the IDB, mainly to three priority areas: gender mainstreaming and gender focussed programmes or projects, microenterprises, innovative measures in the social sector and social inclusion and finally ethics and development. We have also supported individual projects, chiefly in democracy building, strengthening civil society and peace efforts. Special initiatives such as an international round table in Washington to discuss the regional dimension of the UN’s International Conference on Financing for Development held in Monterrey, Mexico, have also received support. In future, more long-term and strategic interventions will be given priority, preferably in collaboration with other donors. Norway has initiated the Bank’s first multi donor fund on Social Inclusion, which also United Kingdom has joined. The Fund builds on and supports the implementation of IDB’s Action Plan and research, mainstreaming of the perspective in the Bank’s regular work and capacity building constitute the main activities. The second phase of the Ethics and Development Initiative was initiated in the fall of 2004 with a focus on good governance, anti-corruption and human rights. Support to the Bank’s implementation of its Gender Mainstreaming Action Plan is part of the Gender Mainstreaming Fund.

3. Norwegian priorities

Through our engagement in the IDB – our work under the Executive Board, negotiations, co-financing and in other ways – we will promote central Norwegian development policy objectives as they are formulated in the Action Plan for Combating Poverty. Our contribution to the achievement of the Millennium Development Goals, including their implementation at national and regional levels, is a fundamental aspect of our international development policy, and our IDB involvement reflects this. Coordination on all levels is an important element, with the national development strategies and poverty-reduction strategies (PRSs) given a central place. Coordination of efforts, standardization of procedures and consolidation of resources are therefore essential in our efforts vis-à-vis the international development banks, and is given priority. The banks have become more result-oriented, and we support the increased focus on results and development impact as formulated in IDBs Medium Term Action Plan for Development Effectiveness, approved at the IDB Annual Meeting in Okinawa March 2005.

The IDB’s extensive analysis and policy development efforts have has a major impact on the formation of regional and national development policies and the IDB plays a central role in coordinating assistance through its leadership of the consultative group (CG) meetings.

Our priorities in our work with the IDB is to:

• Integrate poverty and social disparity issues in all phases of the IDB’s operative efforts (policies, programmes, technical assistance and other activities). Strengthening the poverty focus in private sector efforts is also an important objective of our membership in the Inter-American Investment Corporation (ICC).
• Promote national ownership of projects and programmes financed by the bank, and improve donor coordination, including through active participation in the formulation and follow-up of national development strategies and participation in SWAPs.
• Promote more systematic integration of cross-cutting issues such as gender equality, good governance and environmental sensitivity. Gender mainstreaming in particular will be given priority by the Nordic countries through policy dialogue with the bank, monitoring of the lending portfolio and co-financing funding for the women and development unit and the operational departments/country offices for the purpose of strengthening institutional capacity in this area.
• Strengthen the IDB’s capacity to manage by results and evaluation capabilities by introducing a performance-based lending system to apply to the full range of its lending activities (not just the FSO) based on the willingness and ability of borrowing countries to implement reforms.
• Promote further improvements in the IDB’s internal management systems (more transparent personnel policies, upgrading the role of country offices though competence building and delegation of responsibility) continue and expand contact with civil society, greater transparency and country-level participation.
• Urge the IDB to proactively target the HIV/AIDS pandemic in its dialogue with borrowing countries, and include HIV/AIDS components in its lending and technical assistance portfolio, particularly in the health and education sector.
• Strengthen regional integration through the development of regional lending instruments.
• Continuing and expanding cooperation on the issue of ethics and development focussing on good governance and human rights.