Latin America Development Bank Looks to Shift Loans Toward Virus
(Bloomberg) -- The Inter-American Development Bank will explore redirecting some of its $26 billion in approved lending as the top financial institution focused on Latin America helps countries deal with coronavirus.
Governments face the challenge of spending more on their healthcare systems at the same time that some of their poorest citizens suffer from the double hit of the pandemic and an economic slowdown. That will require everything from the purchase of more medical equipment and kits for testing to increased anti-poverty outlays, IDB President Luis Alberto Moreno said.
Moreno said that the quickest way for the lender to react is by working with countries to divert existing loans or accelerating their disbursement, pending the approval of the bank’s board.
“The examples of what’s happened in Europe have awoken a lot of our countries to learn the lessons of what not to do and how reacting in a very aggressive way sooner rather than later will prevent the spread of the virus,” Moreno said in an interview at the bank’s headquarters in Washington. “This is more a time for fiscal policy than monetary policy. You will see a lot of expenditures switching in countries.”
‘More Vulnerable Countries’
All the major countries in the region except Venezuela have confirmed infections, lead by Brazil, which has more than 70. On Wednesday, Colombia ordered travelers from China, Italy, Spain and France to self-quarantine for 14 days upon arrival. Peru delayed the start of its school year and imposed quarantines on travelers.
Argentina on Thursday took sweeping measures to slow the outbreak of the coronavirus pandemic, temporarily suspending international flights and large public events. El Salvador is imposing some of the world’s toughest controls even before it’s confirmd a single case of the disease, banning all visitors to the country via all ports of entry who aren’t residents or diplomats.
Moreno said he’s most worried about nations like Venezuela, Haiti, Honduras, “the more vulnerable countries, where today they have no reported cases, but they could very well be there and underreported because you don’t have the whole system in place,” he said.
Venezuela, along with Mexico, Colombia, Argentina and Brazil, among other significant oil producers, will face an economic hit from the drop in prices, which will hurt their exports and put pressure on their current account balances, Moreno said. The region is expected to grow 1.8% this year, less than half the projection for emerging economies, according to analysts surveyed by Bloomberg.
Coronavirus is the latest test for a region already challenged by economies marked by relatively low productivity and dependent on commodity exports, restraining growth in recent years, Moreno said. Latin America is the only region in the developing world that saw living standards fall over the past half decade, according to data from the International Monetary Fund.
The IDB this week postponed its own annual meeting in Barranquilla, Colombia scheduled for next week until the first half of September due to concerns about coronavirus. Moreno, who has led the IDB since 2005 and whose term ends this year, said that his bank will work together with the IMF and World Bank to coordinate response to the virus.
“This is the time for all hands on deck, for people to be working together,” he said.
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