The Inter-American Development Bank: 50 Years of Financing Inequality and Unsustainability

Author: 
Jana Silverman

Civil society organizations from Latin America and the Caribbean are planning a counter-Assembly to visualize the human and environmental costs of the policies of the Inter-American Development Bank that have led to the extraction of non-renewable natural resources, the privatization of public services, and the construction of large-scale infrastructure projects.

This year, the Inter-American Development Bank (IADB) is celebrating a very important birthday – its 50th, with the corresponding festivities planned for the week of March 27-31 at the Annual Governors´ Assembly, which will be held in Medellin, Colombia. However, instead of celebrating, civil society organizations from Latin America and the Caribbean are planning a counter-Assembly to visualize the human and environmental costs of the failed “development” policies of the bank, which are largely focused on the promotion of ecologically damaging mega-projects that provide few benefits for disadvantaged local populations and fail to respect the rights of indigenous communities and other traditional ethnic groups.

The IADB was founded in December 1959 as a counter-balance to the demands for greater social development and democracy which were surging in Latin America in the context of the successful Cuban revolution, with an explicit mandate to “contribute to the acceleration of the process of economic and social development of the regional developing member countries, both individually and collectively”. Five decades later, the contributions that the Bank has made to achieve these goals, in the form of loans, grants and technical assistance, unfortunately have not had a significant impact in a region which still suffers from persistent poverty and the highest levels of income inequality in the world. Concretely, according to 2007 statistics, over 34% of Latin Americans still live below the poverty line, and in the majority of countries in the region, the per capita income of the richest 10% is close to 20 times greater than that of the poorest 40%.

Instead of ameliorating these social injustices through bottom-up development projects which empower local communities and spur economic and environmental sustainability, many of the IADB´s initiatives have had the opposite effect, as they involve the extraction of non-renewable natural resources, the privatization of public services, and the construction of large-scale infrastructure projects. For example, in 2003, the Bank approved the Camisea project to facilitate the extraction and distribution of natural gas in the Peruvian Amazon. This project has caused deforestation, soil erosion and a depletion of the native game and fish population, thus impacting the well-being of the indigenous communities that inhabit the region and threatening its rich biodiversity. In addition, the IADB is heavily financing the Initiative for the Integration of Regional Infrastructure in Latin America (IIRSA), a grand scheme which seeks to link transport, communications and energy routes throughout the continent in order to increase trade flows, and which civil society groups fear will cause mass displacement of rural communities and the destruction of fragile ecosystems such as the Amazon and Orinoco basins.

The current economic and financial crisis has proved the inadequacy of the neo-liberal development model the Bank pormotes; however, instead of using this opportunity to re-think its institutional mission, the Bank has decided to take advantage of the crisis to seek more debtors, with the creation in October of 2008 of an US$ 6 billion emergency liquidity fund that Costa Rica, El Salvador, and Jamaica are already dipping from. At the same time, the liquidity of the Bank itself is in doubt, with its portfolio losing over US$ 1.9 billion in value over the last 18 months due to its heavy investments in the “toxic assets” in the real estate sector that caused the downfall of so many other financial institutions, begging the question if the IADB will be come the first IFI to default as a result of the crisis.

Luis Alberto Moreno, President of the IADB, will use the 50th anniversary celebrations in Medellin to attempt to prove the solvency and relevancy of the institution. On the other hand, the numerous national and international civil society organizations and networks that will gather in Medellin two days before the opening of the official Assembly, will take advantage of the moment to call for a fundamental reform of the institution in light of the proven negative impacts to human, social and environmental rights that its projects have had. The “Peoples´ Assembly for Development Alternatives”, organized by a host of human rights, labor, environmental and community groups including Social Watch, will feature the testimonies of people directly affected by IADB projects as well as discussions led by experts and civil society activists on alternatives to the destructive development model propagated by the Bank´s projects. The aim of the counter-Assembly is to articulate and strengthen viable strategies to turn these alternatives into reality, so that workers, small farmers, women, indigenous people, and the poor of Latin America and the Caribbean do not have to suffer through another 50 years of widening inequality and environmental devastation, something that would truly be worth celebrating.

For more information on the “IADB 50 Years Financing Inequality” campaign and the program of the Peoples´ Assembly, go to: http://www.frentebid2009.org/.

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