High stakes: The spat over who'll head IDB

The level of US influence in Latin America is at stake in a dispute over who will lead the Inter-American Development Bank.

Under Donald Trump, who is behind Democratic candidate Joe Biden in the polls for November’s election, the US is breaking with an IDB tradition.

Although the US is one of the founding members of the multilateral institution, which is headquartered in Washington DC, traditionally the post of IDB president has been filled by a Latin American. But now, Trump is seeing the region as part of the US dispute with China, and is trying to exercise its influence at the bank.

Trump chose a US citizen, Mauricio Claver-Carone, a lawyer who has criticized leftist governments in the region – mainly Venezuela and Cuba – to replace Luis Alberto Moreno, a Colombian diplomat who has been IDB president since 2005.

"Trump picking up the leadership of this institution increases the US area of influence in the region, since the bank could focus on projects in those countries that are more aligned with his political views," Welber Oliveira Barral, a former Brazilian trade ministry secretary told BNamericas.

"Latin America will need a lot of infrastructure investment due to the pandemic’s effects, to trigger economic activity in the region and IDB in various countries paves the way for this kind of investment, both with its own cash and also attracting other institutions to projects," added Barral. 

In 2019, IDB approved loans for Latin America worth US$12.9bn. The largest amount was earmarked for Argentina, which is facing major economic turmoil and is largely excluded from other sources of financing.

"IDB is a very important institution not only on the financial side, in numbers, but it also plays a fundamental role in social projects across the region," Roberto Luis Troster, an Argentine economist and former chief economist at banking federation Febraban, told BNamericas. "During its multiple decades of existence, various times when global credit channels were closed to some countries in the region, IDB was one of the few sources of funding for crucial projects." 

In recent years, China has expanded aggressively trade activity and investments in Latin America and is currently the biggest trade partner of various countries in the region.

"Latin America will not be the central focus of the US, post-election, neither with Trump nor with Biden. The focus of the US is the dispute with China, but Latin America can benefit from this dispute," José Augusto de Castro, head of Brazilian exporters association AEB, told BNamericas. "China is increasing its focus on the region, at some point the US can dispute this space as well, to see which one invests more in the region." 

IDB DISPUTE 

Chile, Mexico and Argentina joined forces in an attempt to block the US choice for the IDB presidency.

The countries opposing Trump’s candidate want to postpone the IDB election until next year, betting on a Trump defeat in November and Biden allowing a Latin American to hold the post.

The choice of Claver-Carone, who is of Cuban descent but US born, also surprised the Brazilian government, which is strongly aligned with Trump. Brasília was considering putting forward Brazilian economist, Rodrigo Xavier, a former CEO of the local operations of Bank of America Merrill Lynch and UBS, to assume the top IDB post, but that never happened. 

Despite Trump declining to support Brazil’s choice, the administration of Jair Bolsonaro defended Trump’s selection.

"Brazil and the US share fundamental values, such as the defense of democracy, economic freedom and the rule of law. Brazil advocates a new IDB management in line with these values and with the greater objective of promoting development and prosperity in the region," the Brazilian government said in a release in June, after the name of Claver-Carone – who is considered the frontrunner for the post – was put forward.

Before that, Laura Chinchila, a former president of Costa Rica, was seen as the favorite, ahead of Argentine candidate Gustavo Béliz.

ELECTION PROCESS

The IDB president is elected by the board of governors for a five-year term. To win, a candidate must get the votes from IDB member countries representing a majority of total voting power, including an absolute majority of the governors of the regional members – the 26 borrowing member countries plus Canada and the US.

The bank was founded in 1959 as a partnership between 19 Latin American countries and the US. The original members were Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, Venezuela and the US.

After that, the bank expanded its membership, initially through the Western Hemisphere. Trinidad and Tobago became a member in 1967, followed by Barbados (1969), Jamaica (1969), Canada (1972), Guyana (1976), The Bahamas (1977) and Suriname (1980).

Apart from Canada and the US, IDB’s non-borrowing members include Japan, Israel, South Korea, China and 16 European countries.

The election is scheduled for September 12-13.