IDB president Enrique Iglesias hopes to use the annual meeting to win approval from governors for a $38 billion New Lending Framework, which will cover the activities of the Bank over the next four years.
This is part of an ambitious agenda, which includes the closer economic integration of Latin America and Asia, promoting a more dynamic private sector in Latin America and accelerating progress on poverty reduction, Iglesias told Emerging Markets. The IDB president also hopes to see China join the Bank soon, although he acknowledges "political" difficulties.
According to Iglesias, the past 12 months have been historic for the Bank. "This has been a very special year in the history of the IDB because we have made important decisions in connection with flexibility of Bank policies," he says. The Bank has become "more open to new ways of lending money through a sector-wide approach, in which we try to be much more related to the results of loans and also more flexible in the way that we consider expenditures to be financed."
This new flexibility is expected to become apparent in coming years as the IDB steps up its total four-year lending commitments to $38 billion, compared with loan approvals totaling $23.5 billion between 2001 and 2004. The Bank, Iglesias says, will seek to achieve "quantitative targets" covering some $20 billion of investment loans, $10 billion of policy-based lending, a $6 billion provision for 'emergency lending' and $2 billion in concessional loans.
"The second issue, which is very important at this conference, will be Asia-Latin America," Iglesias says, noting that "several thousand" businessmen from Japan, South Korea and China joined the ranks of delegates this year. "This is very encouraging," says the president, adding that he expects to see rising investment from China, South Korea and Japan.
South Korea became the second Asian country (after Japan) to join the IDB in March this year. Now, the big question is what will happen to China's application to join. "Relations between Asia and Latin America became a major factor in improving Latin American growth last year," says Iglesias, citing China in particular in this respect. "China is becoming a major buyer of our commodities, improving access to money and pushing up prices."
Negotiations on China's entry will continue after the annual meeting sources close to the IDB told EM. Iglesias is due to travel to China shortly. "China's admission is under consideration by the Bank governors," the president says. "Everybody is for it but there are certain policies, particularly in the
US, which do not favour the entry of a country to a regional bank when it is still a borrower from the World Bank. This is a limitation for the time being [and] it will take some time to continue this negotiation."
Tokyo also has reservations over admitting China at a time when it is receiving official development assistance from Japan. China would probably contribute funds to the IDB in various forms.
The annual meeting provides an opportunity to decide whether "additional policy measures" are needed to help Latin America achieve the UN Millennium Development Goals, Iglesias adds. Some regional IDB members are "close to achieving them but others are very far away, particularly in the area of poverty. Poverty continues to be extremely high in Latin America, and also distribution of income is uneven. We want to highlight where we are in order to evaluate the targets."
The role of the private sector in Latin American will be the fourth main pillar of discussion at the annual meeting, Iglesias says. " Seven or eight Latin American countries will present their economic situations to the private sector. We are having a special session on the Panama Canal, which is very attractive to many investors in this part of the world, and you will also see an interesting approach in connection with the Central American countries."