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The Ninth General Capital Increase of the IDB was in the agenda of the 50th Annual Assembly of Governors held in March in Medellin, Colombia. Since then, civil society organizations (CSOs) involved in monitoring IDB policies have requested information and made various proposals. The pressure exerted through successive papers, letters to the Governors and constant communication with Bank officials both at national and international level, resulted in the convening of a consultation process with the region’s civil society organizations, an unprecedented move in the history of the recapitalization processes of multilateral financial institutions.

On September 15, 2008, with the collapse of Lehman Brothers investment firm, an economic and financial crisis broke out that soon hit the rest of the world. In response to the crisis, North and South countries had to implement incentive policies in order to mitigate the impacts and contribute to the recovery of their economies. Multilateral financial institutions, including the Inter-American Development Bank (IDB), made available various packages and lines of credit.(1) The IDB financing in 2009 totaled a record $ 15.9 billion, representing an increase of 42% compared to financing approved in 2008 ($ 11.2 billion) (2) The decisions of the G20 summits in Washington and London legitimized the activity of these institutions, with the promise of additional resources.(3) As a result, multilateral development banks initiated their processes of recapitalization in a context in which it gathered strength the idea that traditional recipes for development had not obtained the expected results.

The Ninth General Capital Increase of the IDB was in the agenda of the 50th Annual Assembly of Governors held in March in Medellin, Colombia. During the assembly, the IDB management introduced an application for a capital increase of around $ 180 billion, representing the largest increase in the Bank’s history, four times more than any previous application. The governors adopted a resolution authorizing the immediate beginning of an evaluation to determine the nature and size of the demand for long-term financing, i.e., the need for a capital increase of the Bank, the first since 1994.

Since then, civil society organizations (CSOs) involved in monitoring IDB policies have requested information and made various proposals. It was understood that the Bank lacks an adequate evaluation system based on the results of its management and that a capital increase without the necessary and indispensable accountability of the Bank before its member countries would result in more borrowing for developing countries and in an increase of the socio-environmental costs of its policies. The idea was to take the request for recapitalization as an opportunity to evaluate the role of the IDB, in its attempt to promote the region’s development. The pressure exerted through successive papers, letters to the Governors and constant communication with Bank officials both at national and international level, resulted in the convening of a consultation process with the region’s civil society organizations, an unprecedented move in the history of the recapitalization processes of multilateral financial institutions. It is worth noting the importance of this instance in a context in which, as noted, there was a clear need to review concepts already established on how to promote development in the region.

The consultation process consisted of seven face-to-face meetings in different cities (Washington, Bogota, Guadalajara, Paris, Kingston, Lima and Montevideo) with Guatemala, Costa Rica, Paraguay and Brazil participating through videoconference. In some of these occasions and through specific notes, several CSOs made concrete proposals, including:

• Managing for Results based on evidence: with tools to evaluate the IDB’s impact on the effective development of the region
• Climate Change – Sustainability: a call to develop a strategy for the Bank’s role in general and not just for specific projects.

According to the Bank, the consultation aimed at “conveying to the Governors contributions from the public consultation so that they can be taken into account in the decisions regarding capital increase”. However, in order to meet this goal and ensure a space for real participation, the Bank should have provided sufficient information so that CSOs could make a substantial contribution. In this regard, CSOs were faced with repeated refusals to share some minimum documents such as the Results Framework of the Bank, in its updated version, the basic document requesting the capital increase in the versions introduced and discussed in Santiago, Chile, and Madrid, Spain, in 2009, the evaluation documents of the 2007 Bank reorganization or more information on the incentive structure for Bank employees, who are ultimately responsible for decisions taken regarding projects.

Therefore, the ability to bring inputs from civil society was clearly diminished by the lack of access to the minimum necessary information. More importantly, the consultation lacked an essential part to any such process: feedback and monitoring. After consultations and communications with the various proposals developed by CSOs, the Bank merely uploaded documents and summaries of meetings of the overall process, which prevents the possibility of building spaces for critical reflection. The Bank’s satisfaction regarding the outcome of the consultation process, measured almost exclusively by the amount of social representatives involved, contrasted with the frustration of many CSOs because of what they considered a void process, a “dialogue of the deaf”.

Less than a month from the Annual Assembly of Governors in Cancun, CSOs are sidelined after having invested time and resources in strengthening a process that was intended to open up spaces for dialogue. Most of the documents requested are still restricted, there is no institutional response or a hint of dialogue and no information about the “conveying to the Governors contributions from the public consultation” was indeed carried out.

In these circumstances, the Bank seems to have lost the opportunity to rethink its role of ensuring an effective promotion of development. Also it seems that the consultation processes are understood as legitimacy instances much more than as opportunities for exchanging ideas and enhancing decisions that will affect the entire region. Unfortunately, these failures will have a direct impact on the development policies promoted by the Bank.

Notes:

(1) In October 2008, the IDB announced new lines of fast disbursement of $ 6 billion to help countries “protect economic growth and employment in view of the credit crunch.”
(2) IDB reaches record approvals, disbursements in 2009
(3) In April 2009 the G20 announced that it would triple the resources for the IMF and the Multilateral Development Banks; the leaders of this group promised “at least an additional $ 100 billion over 3 years.”

This article was first published at "IDB Watch", a publication coordinated by Amazon Watch for the IDB Annual Meeting. (Spanish language)

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