Tuesday, 21 December 2021 14:53

IDB closes the year with nearly $20 million in new financing for the region

Written by Evelyn Alas

The Inter-American Development Bank (IDB) and its private sector arm, IDB Invest, expect to close 2021 with $19.5 billion in new financing for Latin America and the Caribbean, having helped countries recover from the pandemic and usher in an era of sustainable and inclusive growth.

This financing is the second highest annual total in IDB and IDB Invest history, helping countries invest across a range of priorities, from COVID-19-era healthcare and digitization to climate change action, supply chains and education.

The financing will also help reduce gender inequality, expand entrepreneurial ecosystems, and empower small and medium-sized enterprises, which account for more than two-thirds of the region's jobs.

The combination of IDB loan approvals ($14 billion), IDB Invest's expected financial commitments ($5.5 billion), and private sector mobilizations ($2.8 billion) total $22.3 billion.

Latin America and the Caribbean is the region most affected by the pandemic. It represents about 8% of the world's population and has suffered nearly one-third of all deaths due to COVID-19, more than 1.5 million people. The region also continues to face great inequality, and severe economic and social problems.

"This year we demonstrated how a 21st century IDB can empower countries to overcome unimaginable challenges and usher in a new decade of prosperity. We did so by listening closely to our clients and member countries, and by leveraging our exceptional human capital to create innovative financing and private sector partnerships that will accelerate the region's recovery", said Mauricio Claver-Carone, president of the IDB.

"The pandemic created unprecedented challenges, but it also opened up historic opportunities for Latin America and the Caribbean to grow, especially in areas including digitization, nearshoring and supply chains; and we are proud to focus on helping countries take advantage of those opportunities", he said.

From vaccines to recovery ecosystems

In total, the IDB approved 103 sovereign guarantee projects in 2021 for a final amount of $14 billion, while disbursements are expected to reach $12.1 billion. In the context of COVID-19, the financing helped secure life-saving vaccines and increase access to credit so that small and medium-sized enterprises, which are the main drivers of employment, can expand their businesses.

New projects and funding will accelerate digitization so countries can improve public services, expand access to education, increase transparency and fight corruption. The funding will also help improve digital skills training to enrich the region's human capital.

Amid a historic reconfiguration of international trade, the IDB approved $2.3 billion to strengthen regional supply chains, nearly double the average amount in pre-pandemic years. This will help countries take advantage of a tangible new opportunity amplified by the pandemic and the crisis in global supply chains to attract foreign direct investment and increase exports of goods and services.

The IDB also worked with 16 countries to identify critical export and supply chain advantages, including, for example, Costa Rica's semiconductor sector, and the textile sector in Central American countries.

Gender, climate change and small countries

In 2021, the IDB continued to facilitate the acceleration of post-pandemic recovery in countries, while addressing long-standing critical issues such as climate change and gender inequality.

The IDB launched its Amazon Initiative and approved some $4.5 billion in resources for climate-related operations, the highest amount in history.

The IDB also took a leadership role among multilateral development banks at COP26, the annual UN climate change conference, announcing a plan to align all operations with the Paris Agreement and provide $24 billion for climate and green finance over the next four years.

Of all projects approved in 2021, nearly 70% included one or more components to address climate change, while 75% addressed gender issues.

Nearly 40% of approvals went to small and vulnerable countries.

These figures are in line with the Bank's institutional priorities and its plan for economic recovery, Vision 2025.

Institutional reforms boost efficiency and private sector investment.

The IDB also piloted a new streamlined process for projects that reduced approval time by 30%; this allowed the Bank to quickly meet the needs of its 26 regional member countries.

"The IDB stepped up efforts and provided the second highest level of approvals for sovereign guarantee operations in the Bank's history in response to pandemic, natural disasters and multiple other crises", said President Claver-Carone. "I am confident that as we implement new initiatives and deploy ongoing operational efforts, the IDB will be even more productive in 2022 in meeting the needs of Latin America and the Caribbean as the region's partner of choice."

The IDB also dramatically expanded its engagement with the private sector through the creation of the Private Sector Partners Coalition, which began with 40 of the world's leading companies and has since expanded to more than 160 of the world's most innovative companies.

Its activities span 13 working groups in areas such as nearshoring, climate change, women's empowerment and digital transformation. The Coalition is creating a resource mobilization platform to identify investment opportunities and provide new technologies, knowledge and other private sector resources for the region.

A strategic alliance with Coalition partner NTT Data everis a leading information technology company, led to the creation of a platform that enabled Guatemala, El Salvador and Honduras to continue providing digital services during the pandemic. Another partnership with Mastercard and MercadoLibre resulted in an initiative to increase the financial resilience of small businesses, entrepreneurs and project-based workers.

To further catalyze investment, the IDB also organized a series of investment promotion forums in Belize, Brazil, Ecuador and Miami, as well as twelve trade promotion forums, which attracted nearly 100,000 participants. The events generated a projected $55 billion in trade agreements. In 2022, the IDB plans to organize another round of trade and investment forums in Jamaica, Panama and Paraguay, among other countries.