Bank revamp denounced
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Emerging Markets

Bank revamp denounced

The IDB’s much-vaunted “realignment” has been subject to scathing criticism by development economists and former senior staff interviewed by Emerging Markets.

The restructuring pushed through by bank president Luis Alberto Moreno last year, which led to the departure of about 300 staff, has damaged the bank’s knowledge base and corporate memory, it is argued. Some critics say development goals are being lost sight of.

Claudio Loser, former head of Latin America at the IMF, told Emerging Markets that the reorganisation had made the IDB “a weaker institution” and left staff “demoralised”.

The declared aims of the reorganisation were “increased development effectiveness” and “organisational efficiency”. There was a shake-up of senior positions and creation of new vice-presidencies, a decentralisation of bank functions, faster loan disbursement and an expansion of lending. Many staff had effectively to reapply for their jobs.

Loser, now senior fellow at the Inter American Dialogue think tank, said the IDB’s problems are partly “a function of circumstances”: less borrowing by larger countries, Washington’s negative attitude to the multilaterals and a corresponding distancing from them by Latin American governments. “But there is a problem of the flow of knowledge. In these shake-ups of personnel, you lose the equivalent of an oral tradition.”

He acknowledged that “there are demographics: people have to retire”. But when large numbers of people with 20-30 years experience leave an institution together, with no system in place to ensure continuity, problems are inevitable.

Between the 1970s and 1990s, the IDB “had the right mix of political knowledge and economic and financial knowledge”. Now that could be lost, and the organisation would be poorly equipped for future crises.

The turnover of senior staff under Moreno’s leadership has been widely questioned. Since Moreno arrived in October 2005, the bank has had three chiefs of staff, two executive vice presidents, three vice presidents for budget and finance and three advisers on external relations. “Look at the facts and draw your own conclusions,” a former senior staffer said.

An IDB spokesperson told Emerging Markets that the high turnover had to be seen in the context of last year’s reorganisation.

Turnover in middle management also evoked opposition. In May last year, the IDB staff association wrote to Moreno, protesting that, while staff supported his aims, the restructuring had been “conducted in an erratic, non participatory and obscure manner”. Staff were “not being treated with due respect” and conditions guaranteeing “transparency and integrity” had not been created.

Staff association president Mauricio Bertrand-Flores told Emerging Markets this weekend that after last year’s protest, the complaint about non-participation had been met and staff included in discussions on human resources issues.

Bank president Moreno acknowledged in an interview that mistakes had been made, but insisted that the restructuring had been necessary. “We made a deep change, a generational change, a lot of talented people moved up”, he said.

Asked about staff opposition to the change, Moreno added: “These processes everywhere are tough. Are they challenging? Absolutely. Were there sleepless nights? Yes there were. There’s a whole cadre of mistakes you shouldn’t do in a project like this. Did we make some of them? Of course we did. It’s human nature.”

But “the bank has to change”: cutting lending approval times was one thing, but “the more difficult part is once people move, to operate with a new business model. People want a bank that is in the direction that we’re going.”

Ciro De Falco, former executive vice president of the IDB, who left after last year’s annual meeting, commented: “Development is not about money. It’s about institution-building, about policy, about how to do things efficiently and effectively, and about transparency.” De Falco, who spent 19 years at the IDB, added: “If the institution believes development is all about financing the private sector, then it is missing the point.”

Liliana Rojas Suarez, senior fellow at the Center for Global Development, who chaired a working group on the IDB’s future, said she is “waiting to see” how the bank’s governance changes. “Will the procedures of the board be utilized?” Suarez, unlike some of the bank’s critics, believes that the relationship with the private sector is “moving in the right direction”

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