As multilateral institutions attempt to respond to today’s unprecedented global challenges, one that already works well is the Inter-American Development Bank (IDB). Established in 1959 and headquartered in Washington DC., the IDB is widely recognized for its important role in supporting efforts to reduce Latin American poverty and inequality in a sustainable way and facilitate inter-American economic cooperation. Yet President Trump’s unprecedented effort to place an American in the presidency of the IDB risks alienating the region and politicizing this successful institution. Sixty years of tradition—of Latin American leadership of the IDB—should not be overturned in the Bank’s presidential elections, currently scheduled for mid-September.
As the largest source of development financing to our hemisphere, the Inter-American Development Bank channels some $12 billion a year in loans to Latin American and Caribbean countries to support well-reviewed projects in infrastructure, state modernization, education and social programs. Annually, the IDB finances more projects in Latin America than any other multilateral development bank, including the World Bank, and has built relationships and a reputation for problem-solving and public-private partnerships that contribute importantly to the region’s development. The Bank’s significance, moreover, should be even greater in the future, as Latin America copes with the triple whammy of COVID-19 (with 28% of the world’s fatalities so far), the steepest economic downturn of any developing region (projected as negative growth this year of 9.4%), and major social upheavals in many countries, fueled by the deep frustration of the middle class returning to poverty and precariousness.
That is the context for the Trump administration’s unprecedented nomination this month of a US citizen – a White House aide — to serve as the IDB’s fifth president, and the first from the United States. The surprise US announcement has provoked a storm of negative reaction in Latin America. Five recent Latin American presidents—Fernando Henrique Cardoso of Brazil, Ernesto Zedillo of Mexico, Ricardo Lagos of Chile, Juan Manuel Santos of Colombia and Julio Sanguinetti of Uruguay—all outstanding statesmen and warm friends of the United States, issued a strong statement in opposition. Just this week, conservative President Sebastian Piñera of Chile called for a delay in the election until 2021. And the European Union is lobbying its member countries who are IDB shareholders also to support a delay.
The Trump administration is pressuring Latin American governments to go forward in September and to support the nomination, dangling the carrot of the Bank’s upcoming capital renewal and brandishing the stick of withholding post-pandemic relief, in the effort to secure votes. Yet opposition to this nomination is building, especially in Argentina, Mexico, and Peru, with Chile already announced.
This is not about President Trump’s nominee, who brings relevant background in economic, financial and foreign affairs, though unlike the current and past presidents of the IDB, he has not served as a cabinet ministerand would not bring that gravitas. But the main objection to his nomination is that it disregards a 60-year commitment and practice, begun under President Eisenhower’s auspices, providing that the Bank would be headquartered in Washington, its president would be Latin American, and its executive vice-president (COO) would be a US citizen. This formula has worked well for six decades, years in which Latin American countries have increased their capital contribution and sense of ownership, and have made the Bank’s loans and programs ever more effective.
The US is the largest single contributor to and shareholder in the IDB, but President Eisenhower’s decision to agree to Latin American leadership of the bank is consistent with the traditional post-war US approach to multilateral organizations that he championed – influence yes, but one-country dominance, no.
Some may think that the Trump administration’s unprecedented effort to place an American in the IDB presidency is a way to counter growing Chinese influence in Latin America. The right way to restrain Chinese clout, however, is not to hijack a successful multilateral institution, but rather to reinforce meaningful inter-American cooperation to meet economic and social needs. Naming an American as head of the IDB shortly before the US presidential election risks marginalizing and politicizing the institution, moreover, if US voters set a new direction in November.
The pandemic has delayed or made virtual many multilateral meetings. The European Bank of Reconstruction and Development, for example, postponed its annual meeting because of the pandemic. The IDB postponed its September annual meeting for six months for the same reason. It should also defer until March 2021 the vote to elect its new president. That is the prudent step.
And at that time, the US government, whether led by President Trump or Presiden Biden, should return to the well-established norm that the IDB’s president be a Latin American. If it ain’t broke, don’t fix it.
Document Signed by:
George Shultz, former US Secretary of State, Thomas F. McLarty, former White House Chief of Staff and Special Envoy for the Americas, Carla A. Hills, former US Trade Representative, Robert B. Zoellick, former World Bank President, US Trade Representative, US Deputy Secretary of State, Abraham Lowenthal, President Emeritus, Pacific Council on International Policy and Nelson W. Cunningham, former Special Advisor to the President