The proposal that Pedro Sánchez launched at the United Nations last September has finally prospered and Spain will host the IV International Conference on Financing for Development in 2025. It will be a unique opportunity to demonstrate whether the country has the capacity for initiative and the sufficient leadership to promote agreements of global scope.
The balance of the previous conferences is ambiguous.
To celebrate the first, the resistance of some countries that did not welcome these issues leaving the more controlled framework of the Bretton Woods institutions - the World Bank and the International Monetary Fund (IMF) - for the benefit of the United Nations had to be overcome.
The objective seemed well founded: to define a financing framework for the recently approved Millennium Agenda.
The Conference was finally held in Monterrey (Mexico) in March 2002. In advance, a commission prepared a valuable document to guide the debates.
Among its successes was adopting a comprehensive approach to funding sources, avoiding limiting the conference—as some intended—to international aid.
The second conference, held in Doha in 2008, had much less impact, with countries being more concerned about the impact of the emerging crisis than about making new commitments.
The panorama changes in 2015, when the third conference is convened in Addis Ababa with the aim of supporting a new agenda much more ambitious than the previous one: 2030 for Sustainable Development.
Also in this case there was previously an inspiring technical document.
The conference reaffirmed the comprehensive approach to development finance and emphasized the need to involve private actors, exploring the possibilities of public-private partnerships and blending
finance
.
Now it is up to Spain to influence the contents of this new appointment.
The timing is important: after two thirds of the planned path, we are far from meeting the goals of the 2030 Agenda. If we want to correct the trajectory, we will have to resort to new institutional arrangements to mobilize more resources and capacities than until now.
This is not a terrain suitable for improvisation.
Experience reveals that the chances of success increase when agreements are preceded by a study that outlines the path and indicates the strategic bets by which the event will be recognized in the future.
Multilateral development banking today constitutes an institutional resource that is insufficiently utilized.
Without setting myself that task, a first objective of the meeting should be to activate those resource mobilization mechanisms that are currently insufficiently used.
This is the case, for example, of special drawing rights, an important source of liquidity for the international economy, created by the IMF in the late 1960s. As the international economy progresses, it is reasonable for this asset to grow through sequential emissions (the last in 2021);
and it is a reasonable option that part of that financing can be used for objectives related to the provision of international public goods and the promotion of sustainable development.
The truth, however, is that this possibility has barely been used.
The refusal of the United States made it difficult to advance in the past, but today there are many who are committed to making better use of this source of financing, in a world that requires resources to move towards inclusive and decarbonized societies.
Multilateral development banks also constitute today an institutional resource that is insufficiently utilized.
Its waning weight in international financing is an exponent of the progressive dissociation between the functioning of these institutions and what countries demand today.
Multilateral banks are perceived as poorly resourced institutions, excessively bureaucratized, not very innovative and with limited tolerance for risk.
It is not strange, therefore, that countries look for alternative financing mechanisms, either in private capital markets or among new providers (institutional funds or sovereign providers like China).
However, multilateral banking is more necessary than ever, although to fulfill its function it should strengthen its capitalization and thoroughly review its mandate and business model.
In addition to putting partially wasted resources to use, the conference should analyze how to suture the resource drains suffered by developing countries.
The first generated by a tax system plagued by regulatory loopholes and in which there is no correspondence between the spaces for generating income and those for collecting taxes.
There has been some progress in international tax cooperation, within the framework of the BEPS initiative on taxation of multinational companies, proposed by the G20 and the OECD.
However, developing countries consider – rightly – that these advances are insufficient, that the distribution of the proceeds is not balanced and that the coordination body (the OECD) is not representative.
For this reason, last November the United Nations supported an African initiative to assume a more active role in tax cooperation, overcoming resistance from developed countries.
The Platform for Fiscal Cooperation, which includes the United Nations, the IMF, the World Bank and the OECD, is the first result of this change.
There is an imbalance between funds for mitigation, much better allocated, and those aimed at adapting to climate change or protecting biodiversity, despite the fact that the latter are crucial for poor countries.
The absence of an effective mechanism for dealing with sovereign debt crises constitutes another of the shortcomings that leads to an undue loss of resources for developing countries (although not only for them).
The issue is relevant, since as the IMF warns, the number of countries in a situation of financial stress has grown in the last decade.
Probably, the situation is not as serious as it was in the eighties, but, in return, the complexity of over-indebtedness situations has amplified.
Official debt has lost weight in favor of private debt and new actors (institutional funds and countries like China) have emerged as important creditors, making previous coordination mechanisms (such as the Paris Club) ineffective.
It is necessary, therefore, to look for new institutional responses that allow a quick, efficient and fair solution to these types of situations.
Finally, a third type of contribution from the conference would be to clarify the panorama and review incentives in strategic areas whose financing is far from desirable: this is the case of the environmental chapter.
On the one hand, there is a clear imbalance between the funds for mitigation, which are much better resourced, and those aimed at adaptation to climate change or the protection of biodiversity, despite the fact that the latter are crucial for poor countries.
On the other hand, donor activism has given rise to a rich architecture of funds and initiatives, with overlapping mandates: for reasons of visibility, a new fund has been preferred to improving the endowment of an existing one.
Finally, the additionality of the allocated resources is doubtful: on many occasions they are presented as new commitments, which is nothing more than a mere relocation of pre-existing items.
There will be many more possible topics for debate, but advancing on any of those indicated here would justify the opportunity of the conference;
And Spain has an important role to play in influencing that agenda.
José Antonio Alonso
is a professor of Applied Economics at the Complutense University of Madrid.
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