Development

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Development in Latin America the
Caribbean Partnering with the IDB
40th Felaban Annual Assembly
Joaquim Vieira Ferreira Levy Vice President for
Finance and Administration Inter-American
Development Bank November 14, 2006
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International and Regional Context for IDB
Support

• 1980s, 1990s significant structural reforms to
  facilitate economic growth and development in LAC
• Multilateral negotiations suspension of WTO
  trade talks
• Proliferation of bilateral and regional trade
  agreements 40 LAC agreements since 1994
• Trade liberalization as an engine for growth
  needs management and complementary policies to
  increase competitiveness and compensate
  transition costs
• Multi-polar integration strategy regional focus
• PHYSICAL AND COMMERCIAL INTEGRATION

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IDB Action
Environmental Safeguards
Physical Financial Infrastructure
Policy Framework
Capacity Building
Opportunities for the Majorities
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IDB Group
Bank
PUB
PRI
IIC
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Physical and Financial Infrastructure
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Physical Infrastructure

• IDB has traditionally supported investment
  in infrastructure projects,
  plus technical cooperation grants
• Between 1995-2005, Bank approved loans and
  guarantees for 131 infrastructure projects,
  totaling some 8.4 billion
• Focus on REGIONAL INTEGRATION SIEPAC and IIRSA

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Integration of Electricity Markets

• SIEPAC -Central American Electricity
  Interconnection System
• Guatemala, El Salvador, Honduras, Nicaragua,
  Costa Rica Panama

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• Initiative of Regional Infrastructure in South
  America- IIRSA

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Initiative of Regional Infrastructure in South
America IIRSA

• Forum to create common agenda of projects and
  actions aimed at physical integration in
  transportation, energy and communications
• Portfolio of 355 integration projects with
  investments of over US 37 billion
• 31 PRIORITY PROJECTS/US 5.8 billion
• Goes Beyond Public Works Comprehensive approach

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Contribution IDB to IIRSA

• Support of Technical Committee
• Developing Project Management Tools for Country
  Coordinators Planning Tools for Comprehensive
  Strategy Development
• Study social economic linkages of infra
  structure projects
• Reduce cost, implementation delays and
  environmental impact
• Financing Projects
• Publics, e.g., lending for Rota 14 in Argentina
• Private, e.g., guarantee for PPP in IIRSA-Norte
  in Peru
• Financing viability studies on non-reimbursable
  bases

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Environment and Safeguards Policy

• Environmental and social risk assessment
• Monitoring to ensure compliance with Bank
  safeguard policies
• A partner to countries to develop energy
  efficiency and leverage their strengths in
  helping address climate change (LAC contributes
  with 4-8 of world carbon emissions only, and
  are developing innovative ways to preserve their
  natural resources)

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IDB Strategy for Infrastructure

• Fund for the Financing of Technical Cooperation
  for Initiatives for Regional Infrastructure
  Integration (FIRII) US20 million
• Infrastructure Project Preparation Fund
  (Infrafund)-US20 million

IDB goal is to lend 12 billion for
infrastructure during the next five years
Enhanced Infrastructure is an important factor
to level opportunities in LAC
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IDB Strategy for Infrastructure

• Improved Governance and Macroeconomic Outlook
  favor an across-the-board increase in investment
• Financial innovation can open new opportunities,
  avoiding pitfalls of the first generation of
  project financing and multiplying the effect of
  multilateral lending

PRIVATE SECTOR
Conditions are ripe for an acceleration in
infrastructure investment
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Financial Integration

• Private-Sector financial clearing of
  intraregional trade (netting of exposures)
• Opening of Pension Funds to invest in Regional
  Securities
• Micro/meso finance recycling of remmitances
• Harmonization of terms of issuance of Regional
  Local Currency Debt

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Financial Support to TradeTrade Financing
Program - TFFP

• Counter-cyclical role for providing risk
  mitigation during times of economic difficulty
• Catalytic role in broadening LAC banks funding
  base in international markets
• Mitigation mechanism for country risk concerns of
  international banks on their LAC counterparts
• A scheme fully consistent with leveling the
  playing field for regional integration and global
  integration

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Program Description
TFFP Main Structural Features
() Due to the uncommitted nature of the credit
lines with LAC banks, no aggregate limit has been
established for approved credit lines.
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Steps to success
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Main Achievements
Building a comprehensive bank network

• Issuing Bank Network (June 2006)
• 18 Issuing Banks in 10 LAC countries
• Approved credit lines totaling US413 million
• 70 Confirming Banks from 25 countries around the
  world

Ecuador Honduras Nicaragua Panama Peru
Argentina Bolivia Brazil Colombia Dominican
Republic
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Main Achievements
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Policy Framework
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Improved Creditworthiness
but a way to go
Source ING
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Business Environment

• Competition
• Transparency
• Regulations
• Stability of taxes
• Incentives for Human Capital Accumulation

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Policy Framework

• Financial Sector
• Establishing credit bureaus
• Easing regulations for microenterprise
  development and expansion
• Strengthening financial supervision
• Facilitating risk management (Basel II)

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Policy Framework

• Trade
• Reduction in intra regional barriers
• Harmonization of regulatory frameworks (including
  energy telecommunications)
• IDB PRODUCTS TO SUPPORT POLICY IMPROVEMENT
• Policy-Based Loans PBLs
• Technical Cooperations
• 2.6 billion in 2005 3.7 billion in 2006 (54
  operations)

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Capacity Building
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IDB Investing in People
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Public Sector Capacity Building
IDB Actions Debt Management Education Environment
Financial Sector Health Science Tech Taxes Trade

• Strengthening Institutions for Trade
• Trade Ministries through Trade Facility Loans in
  9 countries
• Customs Modernization Loans in 11 countries

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Trade Facility Loans

• Peruvian Ministry of Trade (US5 million)
• On-the-job training of negotiators
• Expertise in different trade disciplines
• Impact studies on
• trade liberalization
• Strengthen
• consultation
• mechanisms with
• private sector and
• civil society

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Customs Modernization

• Nicaragua comprehensive modernization of customs
  administration paperless system of tracking
  transit of goods
• Single window approach to service
• Inspections system
• based on risk
• management

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Technical Support

• Technical and Financial Support in the Process
  of Trade Negotiations, Implementation and
  Adjustment

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Empowering the Majority to Participate
Effectively in Economic Life
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Support to Private Sector

• Projects in Multilateral Investment Fund Cluster
  for Facilitation of Trade and Investment
• - Regulatory Development Harmonization of
  Standards
• - Support to SMEs to identify and take
  advantage of export niches
• - Support new economic opportunities to
  native people and majorities
• Outreach activities and awareness building
  preparing for new competition

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Empowering the Majority
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ACCESS TO FINANCIAL SERVICES
IDB ACTIONS
CHALLENGES for MAJORITY

• Intensify IDB actions to help develop new
  products, improve regulatory environments, and
  strengthen institutions for micro-finance
  lenders
• Spurring private market to increase micro-finance
  from 5 to 15 billion annually by 2011.

• The Majority does not benefit from formal
  financial system
• Only 10 of micro-entrepreneurs have access to
  credit.

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40th Felaban Annual Assembly