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Social organisations and some political leaders demand the Inter-American Development Bank (IDB) debt cancellation for the poorest Latin American countries. However, upon conclusion of the 47th IDB Annual Meeting, the issue remains pending.

Following the International Monetary Fund and World Bank debt cancellation for four Latin American countries: Bolivia, Honduras, Nicaragua and Guyana, social organizations have pointed to the insufficient character of the measure, also evidenced by each government at the time of evaluating their budgets. The thing is that cancelled debts only account for an average 30 per cent of the total debt of these countries.

The IDB is the main source of financing for Latin American countries; therefore, a truly effective cancellation should include those debts owed by these countries to the institution. However, no sooner the issue was placed on the agenda than an internal debate was prompted with regards to financing possibilities.

Unlike what happens at the IMF and World Bank, Latin American countries hold 50 per cent of votes at the IDB’s decision-making bodies, and the Unites States is the country with the largest percentage of votes – 30 per cent - (and capital contribution), followed by Argentina and Brazil.

During the last IDB Annual Meeting, held in Belo Horizonte (Brazil), Governors discussed the issue and expressed their political will to approve the cancellation. However, there are still significant technical differences that have delayed a final decision. As expected, the problem of financing was the point of debate on which the positions of Brazil and Mexico became mainly confronted.

In view of this, the decision was to set up an “ad hoc” Committee of the Executive Board, chaired by Brasil’s Governor, Paulo Bernardo, to continue to analyse this issue and submit a specific proposal to the Board, detailing how the cancellation would be financed. This issue is of utmost importance, since in case the delivery of additional resources by G8 member countries was not approved, the cancellation would have effects on the IDB’s ordinary capital resources, capitalised by middle-income Latin American countries.

Civil society organisations gathered in Belo Horizonte and members of the different international networks monitoring the activity of multilateral banks, evaluated the political will expressed with regards to this issue as very positive, but believe that debate should be implemented in the quickest way possible in order not to further postpone this decision. As stated, resources to implement this measure should come from G8 member countries and not from Latin American countries themselves. The economies of countries such as Brazil, Mexico, Argentina and Venezuela should not be financing, neither direct nor indirectly, this decision since they also have domestic problems that require the allocation of significant resources to social spending as well as high poverty rates to be reduced.

On the other hand, they highlight their disagreement with a debt cancellation that would prevent the future flow of concessional resources to these countries since this would be further constraining the development of their economies; and least of all with a cancellation involving conditionalities or policy “recipes”. Recent decades have shown that neoliberal “recipes” have conspicuously damaged Latin American economies.

Finally, social organisations continue to advocate for debt cancellation as an instrument capable of alleviating the budgets of the poorest countries in order to be better positioned to achieve the Millennium Development Goals by 2015. Therefore, the list of countries included in this measure should be as inclusive as possible.

More information:

Intelligence update on IDB debt cancellation for Latin America

IDB has yet to decide and sets up a committee to study whether the debt will be cancelled

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