In response to resistance in many of its debtor countries to various policies that it typically favors, the Inter-American Development Bank (IDB) claims that its loans and projects are formulated only at the request and under the direction of democratically-elected presidents. Spokespersons for the Bank insist that the institution has no policies of its own other than to endorse democratic processes and good governance.
In stark contrast to its pro-democracy rhetoric, however, the Bank has insulated itself from meaningful popular pressures by structuring its loan approval process in such a way as to marginalize the influence of national legislatures. Typically, the IDB prefers to deal exclusively with the executive branches of borrowing governments: they’re easier to manage than the Congresses because the presidents are, without exception, haunted by debt commitments and determined to avoid defaulting during their terms. They’re also less expensive to buy than legislative majorities. So despite the much-heralded return to democracy in Latin America and the celebration of a diversity of political cultures, we see a striking uniformity of loan and project objectives across both countries and sectors at the IDB. In its efforts to modernize the State in Latin America, for example, the IDB denies that it shills for the private sector, but the emphasis on a particular mode of modernization is striking.
ELECTRICITY
Guyana - Electricity Sector Program:
986/SF-GY and ATN/MT-5429-GY 1996
“The objective of the project is to support the privatization of the Guyana Electricity Corporation (GEC), the state electric utility, through the implementation of a public-private joint venture for the creation of a new GEC, along with related sectoral, policy and regulatory reforms.”
Colombia - Support of Privatization and Concessions in Infrastructure:
927/OC-CO 1996
“This technical cooperation will support the privatization process and concessions to operate services in the energy, transport, telecommunications and water and sanitation sectors.”
WATER
Brazil - Tieté River Cleanup Project
1212/OC-BR 1999
“The project provides strategy development for the state of Sao Paulo basic sanitation sector to identify opportunities for private sector involvement and map out the roles of the public and private sectors in developing basic sanitation in the state.”
Argentina - Program in Support of Reform of Water Supply and Sanitation Sector:
1134/OC-AR 1998
“The main objective of the Program is to support the process of sector reform and promote private sector participation in both service delivery and financing.”
HEALTH CARE
Belize – Health Services and Private Health Care Providers:
ATN/MT-6805-BL 1999
“The Bank has approved a non-reimbursable technical cooperation operation via the Multilateral Investment Fund to stimulate the private sector’s participation in Belize’s health sector.”
Nicaragua – Program of Support for Strengthening of Nicaragua’s Private Health Care Service
ATN/MT-7158-NI - 2000
“The general objective of the program is to support and promote private sector participation in the health care services market in Nicaragua.”
The loan generating process behind these projects is seamless, and it varies little across the continent, whether the Bankers are dealing with economies the size of Brazil or Belize. It begins with a Trojan Horse of “non-reimbursable technical assistance” provided by the IDB to the potentially borrowing government. This gift consists of a couple of million or so for contracts, plane tickets and spending money for IDB-approved consultants to study a sector and recommend reform measures. The resulting recommendations are uniform: private sector participation. This is the case whether the IDB experts are looking at a starved and strangled government service like health care in Nicaragua, or a prosperous, efficient public revenue producer, such as many of Colombia’s municipal enterprises. The consultants then write the loan proposal, often including lucrative budget slots for their own future employment, plus the pork for designated political beneficiaries in the office of the Presidencia or atop the relevant ministry. If the consultants are especially astute and detect the rumblings of discontent about massive outsourcing and dismissal, they tack a “consensus-building” component onto the loan to provide funding for focus groups and advertising campaigns that flog privatization. These last activities are presented publicly by the Bankers as initiatives designed to enlist civil society participation in IDB operations. Sometimes these programs are expensive, but in the end, they pay off. An unwilling population borrows money for an advertising campaign to convince itself that it wants something that it doesn’t want, and then has to pay the money back – with interest.
The Executive Branch of the borrowing government then takes the proposal to the IDB Board for approval. Only after the IDB Board approves the loan does the legislature in the borrowing country see the proposal. It is not uncommon for loan documents to be written only in English, with no available Spanish translation. In Colombia, legislators reported, they rarely receive supporting documentation for an IDB loan. Frequently they have no idea that a loan has been approved and disbursed until the executing agency shows up in their districts. It’s a sort of super-fast-track operation for whole sector budgets.
This process is about to become more unilateral still as the Bank promotes its new lending products. Of most concern is the Multi-Phase Loan, designed to provide the flexibility a political party will need when implementing an unpopular policy such as raising the value-added tax or cutting pensions. This arrangement establishes a sector reform loan disbursed over a period that is generally twice as long as the more conventional loan, and subject to unqualified adjustment as time goes by. In general, only the first phase of the loan is approved by the Bank’s Executive Directors. Subsequent adaptations to policy or implementation may be decided without substantive review by any elected official or government representative, even in cases where the government of the borrowing country changes over the life of the loan. In the IDB’s new Social Development Strategy, we are told that… “By 2005, Bank lending should exhibit a substantial increase in the share of these operations in the social sectors.” For voters, this means that whomever wins a current election, public sector modernization policies will continue, effectively short-circuiting the democratic processes, and incrementally reducing sovereign control over national states.
