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U.S. to Press Latin
American Lender to Take on
More Risk
Japan
Latin America
U.K.
April 1 (Bloomberg) -- The U.S. will join Latin
American countries in pushing the Inter-American
Development Bank to take on more risk and
increase lending to some of the region's smaller
companies, a Treasury Department official said.
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The Washington-based lender, set up in 1959 to
provide financing to Latin American countries, is
limited to lending 10 percent of its total capital to
private companies. The bank is in a position to
expand that financing as the region's economies
grow, said Clay Lowery, the Treasury Department's
assistant secretary for international affairs.
Increasing financing to smaller businesses and
entrepreneurs is necessary to help keep the bank,
known as the IDB, relevant as regional
governments, benefiting from a surge in export tax
receipts, turn less frequently to multilateral lenders
such as the International Monetary Fund and World
Bank. The IDB holds its annual meeting in Belo
Horizonte, Brazil next week.
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``One of the reasons you have something like this
is to take some risks,'' Lowery said in a March 28
interview in Washington. ``Why do you have a
multilateral development bank that is not going to
take risk?''
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The IDB is owned by its 47 members, with
borrowing members holding about 50 percent of
total votes and non-borrowing members holding
the other half. The U.S., with a third of the votes,
is the biggest member. The bank has capital of
about $101 billion, according to its Web site.
Jose Carlos Miranda, the international affairs chief
at Brazil's Budget Ministry, said the countries will
make it a priority at next week's meeting to
persuade the bank to ease lending conditions and
ramp up loans to smaller companies.
http://www.bloomberg.com/apps/news?pid=10000086&sid=axiQTWRoV4q4&refer=latin_america (1 of 3)4/3/2006 7:26:22 AM
Bloomberg.com: Latin America
Losing Clout
The IMF, World Bank and IDB are losing their clout
in the region as borrowers repay loans early, said
John Williamson of the Institute for International
Economics. Venezuela and Argentina are among
members seeking to sever ties with multilateral
lenders altogether.
Brazil in December tapped into a surge in its
foreign reserves to pay back the remaining $15.5
billion it owed the IMF. Argentina followed suit days
later and repaid the $9.8 billion it owed the lender.
Latin American nations' hard currency reserves are
climbing, helping governments repay foreign debt,
amid a surge in the price of commodities the region
exports, such as oil, copper and gold.
Colombia repaid $1.25 billion it owed to the IDB early, because of the government's improved finances, Public
Credit Director Felipe Sardi said in an interview from Bogota.
``The current liquidity situation for most countries in the region justifies relaxed conditions for loans,'' Brazil's
Miranda said in a March 27 interview.
Local Currency Loans
Brazil has repurchased $4.2 billion in bonds this year, Afonso Bevilaqua, the central bank's chief economist, said
this week. That amount, plus the country's $15.4 billion repayment to the IMF ahead of schedule in December,
means Brazil has eliminated about 19 percent of its total foreign debt since the end of November.
Miranda said he will also urge the IDB to give loans denominated in local currencies because companies are often
reluctant to borrow in U.S. dollars.
IDB managers have commissioned multiple reports over the past five years, including a 2002 report called ``The
Challenge of Being Relevant -- The Future Role of the IDB,'' which concluded the bank needed to ``significantly
expand and augment the bank's activities in support of the private sector.''
Liliana Rojas-Suarez, a former economist for the IDB who now is a fellow at the Center for Global Development
in Washington, said lending standards shouldn't be relaxed too much.
``Nobody goes to multilaterals during good times,'' she said. ``In bad times, the remaining weaknesses in Latin
America are going to show up and then no one will be discussing the relevance of multilaterals anymore.''
The U.S.'s Lowery said countries also will look at canceling the IDB debt of the poorest nations in Latin America.
``We want to see a proposal that is aimed at giving a fresh start to the poorest countries in the region through
100 percent debt cancellation and a new proactive focus on debt sustainability,'' Lowery said.
Last Updated: April 1, 2006 11:33 EST
http://www.bloomberg.com/apps/news?pid=10000086&sid=axiQTWRoV4q4&refer=latin_america (2 of 3)4/3/2006 7:26:22 AM