IDB Chief Shields LatAm’s Development Bank Against US-China Feud

Ilan Goldfajn said in an interview that the bank, which lent more than $12 billion last year, is focused on integrating the region’s countries through infrastructure and power projects

IDB President Ilan Goldfajn.
By Eric Martin
May 22, 2023 | 03:34 PM

Bloomberg — The new head of Latin America’s top development bank is trying to steer clear of the global US-China competition, avoiding the course of his predecessor who aimed to use the lender to counter Beijing’s influence in the region.

Ilan Goldfajn, who became president in December, said in an interview that the Inter-American Development Bank, which lent more than $12 billion last year, is focused on integrating the region’s countries through infrastructure and power projects, as well as efforts to protect biodiversity.

The stance marks a difference from the approach taken by Mauricio Claver-Carone, the previous president and China hawk who sought to retake ground Beijing had gained through years of lending to the region, including more than $130 billion from state-run banks.

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“We have a mandate for regional integration,” Goldfajn said in the interview in his office in Washington. “The best we can do in a globally polarized world is to develop regional projects around regional integration.”

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Although the new chief wants to avoid publicly amplifying efforts by the US, its largest shareholder, to counter China’s rising influence globally and persuade developing nations of the benefits of siding with Washington, he said the bank will still promote its “core” values of democracy and freedom of speech.

The Treasury Department, which leads the US government’s engagement with the IDB, declined to comment.

Increasing competition between the US and China is most visible over issues including the South China Sea, Taiwan and the alleged spy balloon incident earlier this year. But a quieter battle has been brewing over international financial institutions such as the IDB and World Bank, which have traditionally been driven by US or European influence.

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In recent decades, China has emerged as a major lender and infrastructure developer across emerging markets, creating a parallel system of finance, debt and influence.

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China’s shareholding at the IDB is less than 1% — compared with 30% for the US — but membership allows the nation’s companies to bid for infrastructure projects funded by the bank. China also has 5% voting power in IDB Invest, a private-lending arm, compared with 15% for the US.

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China is also an important source of trade and investment for many of the countries in the region, including Brazil and Argentina, the IDB’s largest stakeholders after the US.

Goldfajn, previously the top regional official at the International Monetary Fund and Brazil’s central bank chief, won the IDB job last year after Claver-Carone was removed over an alleged romantic relationship with a top aide, which he has denied.

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As part of his focus on regionalism, Goldfajn highlighted a biodiversity initiative to promote conservation of the Amazon, which is spread across eight countries, as well as projects to integrate infrastructure and electricity and share river resources.

Goldfajn also said in the interview that governments in Latin America are facing demands for better education, health, transportation and social services, while also having less fiscal firepower after the pandemic and struggling with slower growth rates.

“You can see it in the streets, you can see it in the election results,” he said. “There is less patience to obtain better public goods, services and better social outcomes.”

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He added that the bank expects more countries to seek debt-for-nature swaps after Ecuador completed a transaction that will generate more than $1 billion in savings for the government while protecting the Galapagos Islands.

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At the IMF meetings last month, finance ministers from across the region asked about how they could follow Ecuador’s example, Goldfajn said. The IDB provided an $85 million guarantee for the swap. He declined to name any countries.

The IDB is also working to prepare the region for climate-change shocks, Goldfajn said, similar to efforts by the World Bank and IMF. That includes both mitigation and contingency financing to deal with disasters, he said.

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