Inter-American Development Bank

The Inter-American Development Bank (IADB or IDB or BID) is the largest source of development financing for Latin America and the Caribbean. Established in 1959, the IDB supports Latin American and Caribbean economic development, social development and regional integration by lending to governments and government agencies, including State corporations.

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

In all three other languages the Bank uses the acronym "BID".

History
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. The IDB became a reality under an initiative proposed by President Juscelino Kubitshek 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.

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

Operations
The IDB is the largest multilateral source of financing for the Latin America and the Caribbean region. The IDB makes loans to the governments of its 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.

Governance
The IDB is governed by its Board of Governors, a 48-member body who regularly meets once a year. In March 2010, reunited in Cancun, Mexico, the Board of Governors of the Bank agreed on a $70 billion capital increase, along with full debt forgiveness for Haiti, its poorest member country, devastated by an earthquake that had destroyed its capital,Port-au-Prince, two months before.

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. 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. However, Argentina did default in 2001; this was publicly announced in 2002.

Joint venture with China
In March, 2012 the bank announced a joint venture with the Import-Export Bank of China to launch an equity investment fund to make loans in Latin America.

Vision
The IDB’s Education Division works in partnership with 26 borrowing countries in Latin America and the Caribbean to ensure that children and adolescents exercise their right to a quality education, achieve their potential, and reverse the cycle of poverty.

Mission
Given that education is a key to development and a prerequisite for a genuine equality of opportunity, and given its strategic importance to the region, the IDB has an Education Initiative that focuses its research and projects in three main areas: Early Childhood Development, School to Work Transition and Teacher Quality.

Early Childhood Development
The IDB supports readiness to learn interventions so that children can have access to quality programs within the region. Among the projects in this area are the Regional Project on Child Development Indicators (PRIDI), which provides high quality, policy-relevant, and regionally comparative data on the situation of young children and their families. These data will allow countries to benchmark progress on childhood development both within their borders and in the region, thus facilitating policy dialogue between governments on how to best address the needs of young children and their families. Participating countries include Argentina, Costa Rica, Ecuador, Nicaragua, Peru and Paraguay. The IDB also participates in the Support for a Seamless Education System Program in Trinidad and Tobago, which aims to improve the quality of early childhood care and primary education, and the Alliance for Children Initiative (Iniciativa Alianza por la Infancia), an initiative that seeks to foster collaboration between governments, families, civil society and the private sector to support innovative interventions in the field.

Teacher Quality
The IDB supports interventions to improve teacher quality in Latin America and the Caribbean and conducts research in the field. It supports the Aligning of Learning Incentives (ALI) in Mexico, a pilot program that provides monetary incentives to students, faculty and staff to improve student achievement in mathematics. Brazil also supports the tutoring program, Multiplying Knowledge, where academically successful students help children in the last years of primary school with mathematics. and the implementation and evaluation of Enseña Chile, a program that attracts outstanding college graduates to teach for two years in vulnerable schools. The Inter-American Development bank focuses on three main areas: incentives (with particular emphasis on teachers),supplies (with emphasis on teacher training and capacity building), and administration (targeting school management).

School to Work Transition
The IDB supports the development of knowledge, interventions, programs, and policies to improve the competencies and skills acquired by adolescents in the education system so they will contribute to a student’s successful transition between school and work. The projects for this field include supporting the government of Costa Rica to improve the English as a Foreign Language project in order to close the skills gap between the demand in the labor market and the supply of the education systems in the field. As part of its research agenda, the IDB conducted a survey of young students from Chile analyzing their educational labor trajectory while measuring certain cognitive and non-cognitive skills, relating them to the education and labor performance of adolescents. The IDB also implemented The Employers’ Survey of Mandatory Skills (ENEHD, Spanish Acronym), that investigated the twenty-first century skills demanded by entrepreneurs for people under 25.

Other Projects
The Bank also has interventions in other areas that affect children and adolescents in the region, such as education inputs, equity, and compensatory programs. The initiatives in these fields are support projects for the reconstruction of educational infrastructure in Haiti; a support project for the consolidation and expansion of the Plan Ceibal in Uruguay; a community education program in Mexico, which aims to raise quality of educational services for marginalized communities; a project to support the education plan in the Dominican Republic; the National Infrastructure Program for the universalization of education quality and equality in Ecuador; a program to support policies for the improvement of education equity in Argentina (PROMEDU); a project to improve education activities and learning quality in Mexico; and a comprehensive care program for children in Nicaragua, which contributes to the development of children living in extreme poverty within rural areas under 6 years old.

Capital Increase
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.

The Bank’s capital increase will be implemented through 2015 as parliaments in each of its member countries appropriate the necessary funds.

Haiti
After the Jan. 12 earthquake, the IDB pledged to provide Haiti more than $2.2 billion in grants over the next decade to fund its recovery efforts and long-term development plans, working closely with the Haitian government and the international community. The Bank’s Board of Governors also agreed to cancel all of Haiti’s outstanding debt.

President Preval also gave the Inter-American Development Bank the mandate to work with the Education Ministry and the National Commission preparing a major reform of the Education System in a 5 year plan.

Financial resources
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 47 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 US$101 billion. Of this amount, 4.3 percent is paid in, while the remaining 95.7 percent is callable.

Aside from its lending activities for its member countries, the IDB also has lending operations with private sector companies, both directly through its Structured Corporate Finance Department and Opportunities for the Majority Initiative, and by means of the Inter-American Investment Corporation (IIC), a multilateral lender created by the IDB member countries to help develop small and medium-sized companies in Latin America and the Caribbean. An affiliate of the IDB, the Multilateral Investment Fund (FOMIN), uses loans, grants and equity investments to support private projects seeking to bring innovation, boost entrepreneurship, or expand access to financing throughout the region. The Bank, the Corporation and the Fund constitute the IDB Group.

Criticism
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.