New IDB chief distances Latin American bank from US-China dispute
The new head of Latin America’s top development bank is trying to stay out of the global competition between the US and China, avoiding the course of his predecessor, who sought to use the lender to counter Beijing’s influence in the region.
Ilan Goldfajn, who took over as president in December, said in an interview that the Inter-American Development Bank (IDB), which lent more than US$12 billion last year, is focused on integrating the region’s countries through infrastructure and energy projects and efforts to protect biodiversity.
This stance marks a departure from the approach taken by Mauricio Claver-Carone, the previous president and China hawk, who tried to regain ground Beijing had gained from years of lending to the region, including more than US$130 billion from state-owned banks.
“We have a mandate for regional integration,” Goldfajn said in the interview in his Washington office.
“The best thing we can do in a globally polarized world is to develop regional projects around regional integration,” the Brazilian said.
While the new chief wants to avoid publicly amplifying efforts by the United States, its largest shareholder, to counter China’s growing influence globally and persuade developing nations of the advantages of siding with Washington, he said the bank would continue to promote its “core” values of democracy and freedom of expression.
The growing competition between the US and China is most visible on issues such as the South China Sea, Taiwan, and the alleged spy balloon incident earlier this year.
But a quieter battle has been brewing over international financial institutions such as the IDB and the World Bank, which have traditionally been driven by US or European influence.
In recent decades, China has become a major lender and infrastructure developer in emerging markets, creating a parallel system of financing, debt, and influence.
China’s shareholding in the IDB is less than 1% – compared to 30% for the United States – but its membership allows Chinese companies to bid on infrastructure projects financed by the bank.
China also has 5% voting power in IDB Invest, a private lending arm, versus 15% for the US.
China is also an important source of trade and investment for many of the region’s countries, including Brazil and Argentina, the IDB’s largest shareholders after the US.
Goldfajn, formerly the International Monetary Fund’s top regional official and head of Brazil’s central bank, got the IDB job last year following Claver-Carone’s ouster over an alleged romantic relationship with a top female advisor, which he has denied.
As part of his focus on regionalism, Goldfajn highlighted a biodiversity initiative to promote the conservation of the Amazon, which spans eight countries, and projects to integrate infrastructure and electricity and share river resources.
Goldfajn also said in the interview that Latin American governments face demands for better education, healthcare, transportation, and social services while having less fiscal capacity in the wake of the pandemic and struggling with slower growth rates.
“You can see it on the streets; you can see it in the election results,” he said.
“There is less patience for better public goods, services, and social outcomes.”
He added that the bank expects more countries to seek debt-for-nature swaps after Ecuador completed a transaction that will generate more than US$1 billion in savings for the government while protecting the Galapagos Islands.
At IMF meetings last month, finance ministers from across the region asked how they could follow Ecuador’s example, Goldfajn said.
The IDB provided a US$85 million guarantee for the swap. He declined to name any countries.
The IDB is also working to prepare the region for climate change shocks, Goldfajn said, similar to efforts by the World Bank and IMF.
He said This includes mitigation and contingency financing to cope with catastrophes.
With information from Bloomberg
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