Source:
IFIs Latin American Monitor
Thu Jul 31 2008
The IDB recently published the document Evaluation of IDB Action in the Initiative for Integration of Regional Infrastructure in South America (IIRSA) carried out by the Office of Evaluation and Oversight (OVE) for the period 2000-2008. This evaluation approved by the Board after three months of debate, includes strong criticism of the Bank activity and the inability to prove its aggregate value in the 8 years it has joined the IIRSA initiative.
The report analyzes the IDB action in IIRSA in terms of:
A. the coordination and technical advisory of IIRSA
B. the bank as funding agent within the framework of IIRSA
C. the financing of IIRSA’s portfolio and the contribution of the IDB
D. the IDB’s internal organization challenges within the context of IIRSA
E. the reactivation of the portfolio of integration infrastructure
The IDB limitations identified in the report are being covered by other institutions, thus changing the foundations and strategic scope of the project. Such role has been particularly fulfilled by the Union of South American Nations (UNASUR). UNASUR has paid more attention to issues of sustainable social development than to regional competitiveness or the competitiveness of each country in particular, being this a fundamental difference to achieve the integration of the region.
Finally, the report presents some recommendations to improve the Bank activity in IIRSA. Among the most important ones is the need to carry out a strategic analysis of the region’s changing process of integration, and to develop tools and programs that should be adjusted to the peculiarities of the integration projects.
In response to this, the IDB President drafted a report entitled: "Chair Report on Evaluation of IDB Action in the Initiative for Integration of Regional Infrastructure in South America (IIRSA)", also available on the IADB website.
Some considerations contained on the Executive Summary
The lack of incentives for internal ownership of the Initiative has limited the Bank’s effectiveness in achieving IIRSA substantive objectives. The following findings back that affirmation:
a. The Bank has not set its own IIRSA objectives or goals or integration infrastructure priorities, thus narrowing its possibilities to focus, oversee and, if necessary, redirect its action.
b. The Bank has not taken active steps to mainstream or give prominence to the Initiative in its country and regional programming or within its operations departments.
c. The Bank has not advanced on the design and adoption of project appraisal methodologies that address issues (risks, asymmetries, benefits) specific to integration infrastructure projects.
d. The fact that a project was part of the IIRSA consensus portfolio has not meant that its preparation process has been more efficient. Operations processing times do not reflect any value added during the Indicative Territorial Planning exercise for IIRSA portfolio projects, so on average there is no difference in that regard between IIRSA projects and other IDB infrastructure projects.
The Bank’s value-added contribution to the Initiative has been modest in terms of development of new analytical tools and studies on regional integration. With the exception of the Fund for Financing for Integration of Regional Infrastructure (FIRII), the Bank has devised no financing products tailored to regional integration projects or special programs to address the multiple identified bottlenecks to regional connectivity and trade. Nor has the Bank created the kind of spaces for analysis of the political economy of integration processes that could add value to its coordination and management function, through an up-to-date vision of the integration process, monitoring of the attendant risks, and adjustment of incentives to achieve the IIRSA goals.
The single exception noted above, the US$20 million FIRII created in March 2005, is an important, novel financing support designed to meet integration-infrastructure project preinvestment needs. Various progress reports on the use of this regional fund and its prospects confirm it to be an excellent vehicle for the present phase of IIRSA and suggest that it should be enlarged. However, in OVE’s assessment it is still early to form a substantiated opinion on FIRII’s impact. Only two of the eight approved operations have begun disbursing and only four provide preinvestment support for IDB pipeline projects.
In the 2000-2007 span the Bank approved 14 loans totaling US$1,294.7 million for IIRSA portfolio projects and one US$60 million guarantee. Thirteen of the loans —US$944.7 million in all— were for transportation sector projects (37% of approvals for that sector), and one US$350 million loan funded an energy project (26% of 2000-2007 energy approvals). The Bank also furnished US$3.89 million for 12 nonreimbursable technical cooperation projects, and financed 8 preinvestment operations (US$8.25 million) through the FIRII.
The recent date of these operations and the absence of apposite indicators preclude any systematic evaluation of their regional integration impact. Only one of the 13 loans is fully disbursed; 5 are less than 50% disbursed and 7 have yet to begin disbursing. A further constraint for evaluating the integration-furthering effectiveness of the transport and energy infrastructure projects is that, while most of them do state some integration objective, none sets out specific benchmarks against which to measure their regional integration or regional trade impact, so their effective impact on those processes cannot be gauged.
The Bank has contributed a comparatively modest share of IIRSA-portfolio project financing. About 117 of the 351 IIRSA projects identified at the outset are being funded, for a total investment of about US$19.169 billion. The IIRSA countries’ national treasuries are supplying the bulk (64%) of financial support for the Initiative. The private sector is putting in about 21% of the total, mostly to finance concession deals and port and airport upgrades in various cities. According to the available data, the CAF is financing 8% of the IIRSA portfolio (19 projects) for a total of US$1,535.1 million and the IDB 7%, a total of US$1,294.7 million. The Fund for Development of the River Plate Basin (FONPLATA) has funded only two projects, for US$35 million.
A tally of IDB and CAF integration-infrastructure lending approvals (for IIRSA and non-IIRSA projects) shows that the CAF portfolio increased substantially but the IDB’s remained largely unchanged, or at least failed to rebound in the same proportion. It is not just that the CAF capitalized more assertively on the emerging finance opportunities to substantially boost its integration infrastructure investment lending; that agency also came up with new strategic programs or initiatives to address key emerging IIRSA issues, as tools to continue scaling up its integration infrastructure work.
Source: BICECA
Related Information:
* Chair Report on Evaluation of IDB Action in the Initiative for Integration of Regional Infrastructure in South America (IIRSA), June 24, 2008
* Full report by OVE, April, 2008
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