What is the Inter-American Development Bank?

Brendan McGuigan

The Inter-American Development Bank, sometimes referred to simply as the IDB, or occasionally as the IADB, is a group meant to bolster development in Latin America and the Caribbean. It lends primarily to governments or government organizations, although there are some exceptions to this. The Inter-American Development Bank has been around since 1959, and is one of the strongest drivers of economic funding for the region.

Switzerland is a non-borrowing member of the Inter-American Development Bank.
Switzerland is a non-borrowing member of the Inter-American Development Bank.

Funds are raised by the Inter-American Development Bank through the issuance of bonds, which are sold at standard interest rates. These bonds are largely guaranteed by member nations which include some of the wealthiest countries on Earth. Because of this strong guarantee, the Inter-American Development Bank maintains a steady triple-A credit rating, allowing the bank to offer interest rates to nations in Latin America and the Caribbean that are competitive with the best interest rates private banks offer the private sector.

It should be noted that while the powerful nations that guarantee the funds of the Inter-American Development Bank are taking responsibility for the bonds should defaults occur, they are not actually putting up capital to lend to the countries. This means that membership in the Inter-American Development Bank has a minimal impact on the countries themselves, since their budgets are not affected. And although their budgets would be affected should a large-scale default occur, this is unlikely to occur, even in fairly dire circumstances.

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There are 48 states that collectively own the Inter-American Development Bank, and of these 48 states, 22 are non-borrowing members who are members only to affect policy and to guarantee the bonds. These 22 non-borrowing members are Spain, Switzerland, the United States, the United Kingdom, Norway, Italy, Israel, Japan, the Republic of Korea, the Netherlands, China, Belgium, Croatia, Austria, Canada, Slovenia, Sweden, France, Finland, Germany, Portugal, and Denmark. The remaining 26 nations are members who can borrow funds from the bank to support government projects, and they are Brazil, Mexico, Argentina, Chila, Columbia, Venezuela, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Peru, Panama, Paraguay, Uruguay, Bolivia, Belize, Costa Rica, Guyana, Suriname, Trinidad and Tobago, the Bahamas, Barbados, Haiti, the Dominican Republic, and Jamaica.

The bank has a total ordinary capital of just over $100 billion US Dollars (USD). Of this, just over 4%, or $4 billion US Dollars (USD) is actually paid in. The remaining 96% is callable capital, pledged by member states as capital subscriptions. This working capital goes to a number of different projects governments and governmental organizations wish to pursue, and in some cases may find its way to companies in the private sector via the Inter-American Investment Corporation, or IIC, or directly through the Inter-American Development Bank.

In theory, the bank exists to help promote economic prosperity in the Latin American and Caribbean countries it funds, and through this economic prosperity is meant to support social good. The group is subjected to a great deal of criticism, however, for its investments, which many see as being counter to these goals. Many watch groups accuse the Inter-American Development Bank of fostering economic policies that are destructive to both the general environment and the rights of indigenous peoples in the regions it is active.

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