Latin America Bank Needs $80 Billion Capital Hike, Head Says
(Bloomberg) -- The top development bank for Latin America will need to cut lending by at least 25% from last year unless members approve a proposed $80 billion capital increase to help nations battered by the coronavirus, according to its president.
The Inter-American Development Bank lent a record $21.6 billion to the region in 2020 to deal with the pandemic by frontloading funding assigned to this year and next, President Mauricio Claver-Carone said in an interview on Wednesday. Lending will need to return to between $12 billion to $16 billion starting this year, even as the region continues to struggle, absent approval for more resources, with the largest part coming from the U.S., he said.
U.S. Senators Bob Menendez, a New Jersey Democrat, and Marco Rubio, a Florida Republican, in December introduced a bill to send $600 million to the IDB and authorize $23.4 billion in backup capital, which together would boost IDB capital stock by $24 billion over five years. That’s part of a plan for a total increase of $80 billion in resources adding the bank’s other 47 members.
It would be the Washington-based IDB’s first such capital increase since a 2010 accord. The U.S. is the bank’s biggest shareholder, with a 30% stake.
Latin America has been battered by Covid-19. The region has 8% of the world’s population and more than 25% of deaths. Nations are experiencing one of their worst economic contractions on record, with millions losing jobs or falling into poverty.
The IDB can play a key role in rebuilding, Claver-Carone says.
“The only Marshall Plan that exists for a region that so desperately needs it is the IDB capital increase,” Claver-Carone said, comparing the bank’s work to the U.S. aid program to rebuild Western Europe after World War II. “It comes at a great value proposition to the United States taxpayer.”
Claver-Carone plans to use the bank’s annual meeting next month to ask nations besides the U.S. to start the formal capital increase process, he said.
The institution’s priorities include an initiative to attract manufacturing and production to the region from overseas; digitalization; a boost to small and medium-sized businesses; fighting climate change; and working on gender inclusion and increasing women in the workforce.
Claver-Carone also said vaccination rollout in Latin America needs to improve. The IDB in December announced plans to mobilize $1 billion to help countries buy and distribute Covid-19 vaccines. Yet that’s still just a fraction of the $150 billion that Claver-Carone estimates the region needs for health care spending to deal with the Covid-19 pandemic, hurricanes and Venezuela’s refugee crisis.
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