Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Exclusive: New head of Latin American development bank launches early push for capital increase

Economy Oct 27, 2020 01:50PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Andrea Shalal

WASHINGTON (Reuters) - The new head of Latin America's main financing institution hopes to leverage concerns about Chinese lending to win the support of U.S. lawmakers for boosting the bank's yearly lending capacity to $20 billion as the region grapples with the COVID-19 crisis.

Mauricio Claver-Carone, a senior adviser to U.S. President Donald Trump who took the helm at the Inter-American Development Bank on Oct. 1, said he has already begun discussions with Democrats and Republicans in Congress, and expects to finalize a capital increase plan for the bank's board by March. The United States is the IDB's largest shareholder with 30% of the vote.

A new concept paper submitted to the Bank's board puts the region's financing needs at $25 billion a year at a time when it has been hard-hit by the pandemic, and lending by China, the United States and other countries is down sharply.

"The IDB could and should be at $20 billion per year in lending," Claver-Carone told Reuters in an interview. "That would make a huge difference in the region."

Claver-Carone said his outreach to U.S. lawmakers month before any board action was a bit "unorthodox," but was intended to smooth the way for approval of the capital increase.

Winning U.S. support for funding multilateral institutions is usually difficult and could be even tougher during the current crisis. Some Democrats could also balk after opposing Trump's nomination of Claver-Carone, a U.S. citizen, for a job traditionally held by someone from Latin America.

Economists say urgent help is needed, given high levels of debt across the region, and estimates that the COVID-19 crisis will push health care funding needs over $150 billion.

Argentina and Ecuador have already restructured their external debt this year, and the entire region is facing an 8.1% contraction in economic output this year, with only a partial and uneven recovery on the horizon in 2021.

China pumped up lending to Latin America in the early 2000s, but backed off in recent years as a drop in exports caused by the U.S.-China trade war cut foreign currency reserves. Chinese lending dropped to $1 billion in 2019 after peaking around $35 billion a decade ago, Claver-Carone said, citing data compiled by the independent Inter-American Dialogue think tank.

Growing concerns about the lack of transparency in Chinese lending, especially to developing economies, could help rally support for an IDB capital increase, he said.

"It's a huge selling point," he said, describing Ecuador's continued need for Chinese lending as "Exhibit A" for why the bank needed a bigger capital base.

Ecuador recently completed a $6.5 billion financing program with the International Monetary Fund after renegotiating some $17.4 billion in sovereign bonds and winning agreement to defer the payment of principal on loans from Chinese banks.

"Ecuador was essentially forced to negotiate with the Chinese for extended financing so the debt could be more sustainable," Claver-Carone said, adding that Chinese lending was part of what landed Ecuador in trouble in the first place.

"And I’ve made that case to Congress. Here's a president who is trying to turn around his country, and he did everything the right way. But he doesn’t have enough money and essentially had to go back to the Chinese," he said.

Claver-Carone said he had no prejudice towards China, which is also a small member of the IDB, but said most countries in the region would prefer to borrow from the regional institution under better financial terms, and without other contingencies.

 

Exclusive: New head of Latin American development bank launches early push for capital increase
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Roger Dana
Puma10 Oct 27, 2020 2:45PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Haha, Argentina will be the next Venezuela. Democratic liberals in control of Argentina and sold out Argentina to China. Similiar was happening in the U.S. until Trump came in and stopped the Chinese from taking over. Need to destroy the Democratic party
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email