- Inter-American Development Bank
The Inter-American Development Bank (preferred abbreviation IDB, although sometimes found as IADB), was established and headquartered in
Washington, D.C., United States, in 1959to support Latin American and Caribbeaneconomic and social development and regional integration by lending mainly to governments and government agencies, including State corporations. The current president of the Bank is Luis Alberto Moreno, a Colombian diplomat who was elected to succeed Enrique V. Iglesiason July 27, 2005.
The IDB has four official languages: English, French, Portuguese, and Spanish. Its official names in the other three languages are as follows:
*French: Banque interaméricaine de développement;
*Portuguese: Banco Interamericano de Desenvolvimento;
*Spanish: Banco Interamericano de Desarrollo. In all three of the other languages, the Bank uses the acronym "BID".
The Bank is owned by 47 sovereign states, which are its shareholders and members. Of these, 26 are eligible to receive loans from the Bank and 21 are not.
How the IDB works
The IDB makes loans to the governments of its borrowing member countries at standard commercial rates of interest, and has "preferred creditor" status, meaning that borrowers will repay loans to the IDB before repaying other obligations to other lenders such as
The funds that the IDB lends are raised by selling
bondsto institutional investors at standard commercial rates of interest. The bonds are backed by (a) the sum of the capital subscriptions actually paid in by the Bank's 47 member countries, plus (b) the sum of the callable capital subscriptions pledged by the Bank's 21 non-borrowing member countries. Together these constitute the Bank's "ordinary capital", some US$101 billion. Of this amount, 4.3 percent is paid in, while the remaining 95.7 percent is callable.
The callable capital pledged by the 21 non-borrowing members, which include the world's wealthiest developed countries, therefore functions as a guarantee for the bonds that the IDB sells. This arrangement ensures that the IDB maintains a triple-A
credit rating, and as a result can make loans to its borrowing member countries at rates of interest similar to those that commercial banks charge their largest corporate borrowers. At the same time, the 21 non-borrowing countries are only putting up guarantees – not actual funds – so their support of the IDB's lending operations has a minimal impact on their national budgets.
In contrast with the
World Bankand other development banks, the developing countries that borrow from the IDB are the majority shareholders, and therefore control the majority of the decision-making bodies of the Bank. Each member's voting power is determined by its shareholding: its subscription to the Bank's ordinary capital. The United States holds 30 percent of the Bank's shares, while the countries of Latin Americaand the Caribbeancombined hold 50.02 percent [Data as of 2005.] . This arrangement is unique in that the developing member countries, as a group, are the majority shareholders. Though this arrangement was first viewed as risky, it is believed by some that strict peer pressure prevents the borrowers from defaulting, even when under severe economic pressure. However, Argentina did default in 2001; this was publicly announced in 2002.
Inter-American Institute for Global Change Research
Argentine economic crisis (1999-2002)
* [http://www.iadb.org/ Inter-American Development Bank (official site)]
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