Latin America's answer to the World Bank and IMF

A group of regional countries is launching a development bank to be run by Latin Americans.

from the July 11, 2007 edition

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IMF looks to adjust its approach

In fact, say observers, the new competition may help the global institutions sharpen their missions.

"I'm not concerned about countries in Latin America running away from the [IMF]," says Liliana Rojas-Suarez, a former IMF official who is now a senior fellow at Washington's Center for Global Development. "I'm more concerned about what the IMF exactly should be doing, and where it should be focusing.... It's only now starting to recognize a number of policies that could be different."

"There is the perception that the IMF has one recipe for everybody." she adds. "They are trying to improve that."

Another example of change, Singh says, could be working with countries to redefine how energy subsidies are distributed, so more money goes to the poor. "We do believe that there is room in the region for macroeconomic policies to be reoriented toward poverty reduction," he says.

On July 1 the Inter-American Development Bank put into operation a new mandate to help countries gain greater access to alternative sources of financing, to respond to the particular needs of each country, and to reduce the vulnerabilities of the region to sudden changes in the world economy.

It is this type of competition from other development banks that could ultimately serve the entire region, even as it has put the World Bank on edge.

"The World Bank never thought of what would happen if countries didn't really need the money; they didn't plan any exit strategy," says the consultant, who was not authorized by the World Bank to speak on the record. "[They] have to compete right now, because countries don't need the money."

"Like Chávez's other regional initiatives, this one too depends a lot on the extent to which the oil bonanza continues," says Michael Shifter, vice president of the InterAmerican Dialogue, a Washington think tank. "It is doubtful that Chavez's grandiose vision on this idea will be fully realized."

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