The IDB sees strong support from the region to increase its capacity by 112 billion dollars

Ilan Goldfajn, president of the Inter-American Development Bank (IDB), is a great soccer fan.

This Wednesday, the first day of the annual meetings held by the Latin American Development Bank in Punta Cana (Dominican Republic) closed with a soccer game.

Goldfajn, who played a lot when he was young, did not wear shorts this time.

But a final is at play these days: the assembly that must certify the reforms it has been working on since taking office in November 2022. These reforms, as had already been announced, will increase the IDB's lending capacity by 112 billion of dollars (102,000 million euros) within a period of 10 years, as Goldfajn reiterated this Thursday at a press conference in Punta Cana. The president of the IDB sees “total support” in the region for the recapitalization of IDB Invest, the private sector investment arm of the bank, and the injection of funds into IDB Lab, focused on innovation and entrepreneurial capital.

Goldfajn wants the Punta Cana summit to remain engraved in the bank's memory for years or decades.

Let it be noted as a turning point in the institution and also help provoke that same turning point in Latin America.

“I think we are in a historic moment for the IDB group and we want this moment to also be historic for the region,” he insisted in a meeting with journalists this Thursday, reiterating the message from the day before.

The IDB simultaneously faces three changes that transform the bank.

The first is an institutional strategy that aspires to mark at least the next six years of a bank that went through a turbulent period under the previous president.

After a year of pacification and internal work, Goldfajn arrives with reform proposals that affect the bank's governance, but above all aspire to change the scale and impact of what he does: finance the development of the region.

Secondly, it proposes a recapitalization of IDB Invest with which to double its resources.

Goldfajn declined to confirm any figure pending its debate and approval by the assembly this weekend.

A new model and a new vision are also proposed to mobilize more private resources to invest in the region in projects of all types, from green hydrogen to lithium, through digitalization and many other areas.

“Our capital today is 3.1 billion dollars.

When the president talks about doubling, we can do the math, but more important than the capital we receive or not from our shareholders is what we do with that capital.

The key is to attract foreign direct investment and local savings to address the region's development challenges.

That can double or triple the impact,” said the head of IDB Invest, James Scriven.

The third reform directly affects BIDLab, with a more scalable, sustainable business model where more resources will also enter.

“The complementarity from the IDB Lab is to work directly with ventures, with

startups

and with entrepreneurial capital funds, with the

venture capital

industry to give a different response, testing new technologies, new business models, to the three challenges that the president mentioned: social inequality, climate and productivity,” explained Irene Arias, head of IDB Lab. “With the resolution that we are presenting, over the next seven years we could be investing at least 1.3 billion dollars in these ventures that They can make a big difference because they are small companies that can later become large unicorns.

“We have historically funded a third of the more than 54 unicorns in the region today,” she added.

Inflection point

“When you put it together, that's a very relevant turning point,” Goldfajn said.

“I think we are going to remember Punta Cana for many years and perhaps even for decades.

The region needs a transformed IDB.

The region is also facing a possible and potential change.

Because of the global situation, because of where we are in the world, for the first time we see that not only Latin America and the Caribbean need the world, but that the world also needs Latin America for the great milestones and the great global challenges such as climate change, the energy transition, food security or biodiversity, with the Amazon and other biomasses,” he added.

Goldfajn's idea is that if the idea that the region is facing a turning point sinks in, a kind of virtuous circle will be generated.

“It means that investment will begin to arrive and something that has not been changed in decades can be changed, which is the growth of productivity and the growth of income and jobs, improving people's lives.”

He would thus turn the “triple challenge” a little: a lot of social demand, few fiscal resources, and you don't grow to have more resources.”

“If you can grow and have more resources, you have more fiscal resources and you can better meet social demands,” she reasoned.

The Barceló Bávaro Convention Center, in Punta Cana (Dominican Republic), where the Annual Meeting of the Assembly of Governors of the Inter-American Development Bank is held, on March 5, 2024.CHELO CAMACHO

The IDB has defined its strategy in a very selective way, with three objectives: social, which is the core of what the IDB does, and includes the fight against poverty, the development of public goods such as education and health;

energy transition and climate change, including adaptation to increasingly frequent adverse climate phenomena, such as drought in Argentina and Uruguay, fires in Chile, or hurricanes in the Caribbean and Central America, and, thirdly, productivity growth and growth momentum: “We have to abandon the lost decades and find the inflection to greater growth in the future,” Goldfajn said.

The president of the IDB poses the challenge twice: to have impact and to have scale.

To have an impact, he wants to analyze the success stories, but also those that go wrong, and draw lessons from them.

And to make an impact, he's pointing in multiple directions to lend more.

Among the financial innovations are portfolio changes to diversify risks, insurance and guarantees, in all cases in order to have more lending capacity.

It has also presented a proposal to the International Monetary Fund (IMF) so that countries can use the special drawing rights (SDR, the Fund's currency) in the IDB, where they count as reserves, and be able to leverage them to give more loans.

He knows it won't be easy: “Whether that's going to work out or I don't know, but we're working,” he said.

He has to convince the IMF, which is already analyzing the proposal, and then the countries, to make those deposits.

“Toso that means scale.

And with this scale, the capitalization that I told you about, the transformation of IDB Invest, the transformation into IDB Lab, and with the help of the guarantees we will be able to increase our capacity to lend by up to 112 billion dollars in the next 10 years , about 11 billion more each year in addition to what we do today.

And that is quite significant,” added Goldfajn, who also recalled the agreements with the World Bank on three fronts (Amazon, Caribbean and digitalization) as another way to increase impact and scale.

Among other alliances, he also pointed out that the IDB has just signed another with the Andean Development Corporation (CAF) in terms of security, and added that it also works with the CAF in the financing of large infrastructure projects.

Asked how the IDB can help with the region's migration challenge, Goldfajn said: “If we give the population living conditions, if we put roots in the sense that they have education, they have health, transportation does not It takes you three or four hours to get to work, if you generate employment, which means you have to provide the skills, which are things that the IDB does, that keeps people.

And then there is the impact of the consequences of migration.

We have an immigration fund where we receive resources.

It is important to help them where the migrants go.”

The head of IDB Invest, James Scriven, also influenced this matter: “Both BIDLab and IDB Invest are here to support companies in their development.

The answer is in formal employment.

The majority do not want to emigrate from their own country.

They do it because they are pressured by economic issues, climate issues or security.

What we try to do is generate formal jobs in the countries in which we operate, in the 26 countries, and avoid migration.

The regrouping of global value chains, much closer to Latin America and the connection it has with the United States and Canada, provided an enormous opportunity for the private sector throughout Latin America,” he indicated.

More scale to have more impact is what the IDB is playing for these days.

“If we have more resources, we will be able to do more and if we are very focused and very selective, people will notice the difference, they will feel that something different is happening,” Goldfajn concluded.

Solidarity with Haiti

Ilan Goldfajn pointed out in the press conference that the IDB is very aware of the situation of instability that Haiti is going through.

"The first point we have to make clear is that the humanitarian problem comes first. I want to express our solidarity with the people of Haiti and those who are suffering the impact on their lives. That is the first thing, solidarity in a very difficult time "said the president of the IDB, who stressed that the development bank has been working with the country for many years and that in its stage it has been placed again in the fully concessional window, where the bank approved 160 million dollars of donations to use over there.

"The program is to use it in humanitarian causes, in food, in distribution of resources, in health, in education, sometimes directly and also with NGOs and the United Nations. The situation is more critical now and we have to think together with the other agencies about how we are going to react to that and the IDB is going to be part of a group that we are going to participate in. We have been there for many years, we are intensifying the effort, we are working and we are going to reevaluate whether the scale of what we are doing is enough for the new reality," he explained.

Goldfajn insisted that for these purposes the reestablishment of the rule of law "conditions everything."

"We are going to continue working as we are doing today, but a broader resolution of security and those processes is also needed, that is important," he said.