In general, a president or governor who incurs debts with a bank is not interested in who will pay them in the future.  He is interested in the immediate future, in the four or six years of his term, in his popularity, in his political career.  He does not work for others nor for a long-term project.  Although the government of Chiapas has made agreements with the Inter-American Development Bank and the World Bank and handed over the state’s sovereignty, it mainly wants to look good in the short term.  But it does not want to recognize this.  Even among state and federal legislators, there is misunderstanding and even ignorance of the fact that much of the funding from government programs like Banobras and Nacional Financiera originates with the multilateral banks; and that these funds come with structural conditions, such as President Vicente Fox’s insistence on privatizing the electrical and oil industries.  That fiscal reforms are intended to guarantee interest payments, given that the Ministry of Finance guarantees the loans.  That the increased municipal revenue collection is a double-edged sword, because it lays the groundwork for the multilateral banks to collect interest on their future loans.  Let’s now further examine the IDB.

HOW MUCH THE IDB LOANS: The IDB currently has US$8.5 billion available to loan each year.   That is nearly the same as the net worth of one single man, the richest person in Latin America and the Caribbean—and to add insult to injury, a Mexican: Carlos Slim.  According to Forbes magazine, the 16 riches men in Latin America have a total net work of US$36.6 billion, equivalent to five times the IDB’s budget for fighting poverty in the Continent.  [Translator’s note: According to Forbes magazine’s 2005 list of the world’s richest people, Mr. Slim, the owner of Telmex and the main beneficiary of the  privatization of that formerly state company, earned about $10 billion in 2004, bringing him to a total net worth of $23.8 billion (http://www.forbes.com/static/billionaires).]

In 1962, the IDB lent US$294 million.  In 1998, its loans reached over US$10 billion.  This growth reflects the large gains and benefits that have accrued to many countries and companies that work with the Bank.  In its history, the IDB has loaned a total of US$280 billion for the supposed purpose of alleviating poverty in the Continent.  Nevertheless, it has contributed to the increase in Latin America’s external debt, which now totals over US$800 billion, a number which leaves out many debts that the region’s governments do not wish to identify as such. 

In recent decades poverty, as well as unemployment and migration, have increased in Latin America and the Caribbean.  Then why has the IDB failed to meet its stated objectives?  In 2001, the number of Mexicans living in poverty rose 82%.  According to the World Bank study “Poverty in Latin America: Trends and Determinants,” extreme poverty rose 38% in the Continent in the last decade, meaning that in 1998, 36% of its population, some 179 million people, were living in poverty. 

WHO THE IDB LOANS TO: The IDB loans directly to its member governments and their institutions in Latin America and the Caribbean, as well as to independent, national, regional, and municipal organizations.  Civil society groups also receive “government guaranteed” funds from the IDB.  Chiapas receives IDB funds both directly and indirectly through the federal government. 

The loan´s conditions and the IDB´s guarantees depend on the amount of the loan.  If the loan is of “ordinary capital,” the recipient government has between 15 and 25 years to repay it.  The interest charged on the loan is adjusted biannually.  The interest rate on Fund for Special Operations loans is 2%.  With government approval, private companies may receive up to 5% of the total loan without a government guarantee.  Other organizations that may receive IDB loans include the Andean Development Corporation (CAF), the Central American Bank for Economic Integration (BCIE), the Caribbean Development Bank, and the Fund for the Development of the River Plate Basin. 

Of the 47 members countries of the IDB, only 26 (the borrowing countries), from Latin America and the Caribbean, may request loans.  The other 20 countries provide the majority of the IDB’s funds and may not request loans.  These are Canada, the United States, the 16 European countries, Israel, and Japan.  If these countries cannot receive loans from the Bank, how do they benefit?  Their corporations can provide goods and services to IDB-financed projects.  They also gain by being able to focus their resources and “their concerns about development toward Bank programs and policies, thereby collaborating with more countries of Latin America and the Caribbean than would be possible with bilateral programs.”  In other words, they use the IDB to pressure governments in the region to adopt measures that are in their interest, to participate in the sales of state assets and companies, and to bid for government contracts.

WHO MAKES DECISIONS IN THE IDB: The United States and the richest countries.  The number of votes that a country has in the Bank is based on the amount of money that it contributes.  So, the more money a country contributes, the more decision-making power it has.  The United States controls 30% of the votes, Japan 5%, Canada 4% and the European members control 11%.  That leaves only 50% of the votes under the control of the 26 borrowing countries, even though the Bank’s Charter obligates it to give the countries of Latin America and the Caribbean control over the majority of its capital. 

HOW THE IDB MAKES LOANS: The Bank classifies the borrowing countries according to their size and level of development.  Out of the total cost of a project, the Bank finances a part inversely proportional to the size of the country’s economy.  The country pays for the rest.  The financing categories are: Group A, 50%--Argentina, Brazil, Mexico, and Venezuela.  Group B, 60%: Chile, Colombia, and Peru.  Group C, 70%: the Bahamas, Barbados, Costa Rica, Jamaica, Panama, Surinam, Trinidad and Tobago, and Uruguay.  Group D, 80%: Belize, Bolivia, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Nicaragua and Paraguay. 

As a project progresses toward its objectives, the IDB gradually releases funds for it.  Before the first release of funds, the borrower must present the bank with a schedule of program costs and a detailed accounting plan for the repayment of the loan with interest (also called debt service). 

The IDB adds 10% more to the loan if at least half of the benefits of the project go to low-income groups.  The Fund for Special Operations (FSO) channels resources exclusively to the five poorest countries in the hemisphere: Bolivia, Guyana, Haiti, Honduras, and Nicaragua.  These special loans come with interest rates of 1%-4% and a repayment schedule of between 25 and 40 years.  There is also a mechanism called the “Ease of Intermediate Financing” which uses FSO funds to reduce interest rates on the ordinary debts of a group of poor countries, including the Dominican Republic, Ecuador, El Salvador, Guatemala, Jamaica, Paraguay and Surinam.

Today, México is paying interest on the debts it incurred in the past, and during the next Presidential term it will use its tax revenue to pay back the loans that President Fox is now requesting for Procampo, for the Opportunities program, for micro-credits, for social security payments to retired people, and for health and education costs, among others.  Because of this, we should expect a new debt crisis in Mexico during the Presidential term 2006-2012.

When the Third World debt crisis struck in 1983, México owed 62.6 billion dollars, the equivalent at the time to 42% of the country’s GDP.  By that time, it had already paid US$6.5 billion in interest on its loans.  By 1996, Mexico’s external debt had reached US$98.3 billion, equivalent to 30% of GDP, and had paid over US$7.1 billion in interest.  By 2002, the debt stood at US$76.6 billion, equivalent to 26% of GDP.  During the first six months of 2002, the Mexican government paid a total of US$12 billion—over five times the entire annual budget of the state of Chiapas—in debt service, while the proportion of Mexicans living in poverty grew to 60%. 

WHAT THE IDB MAY LOAN FUNDS FOR: Officially, the areas are called Sector and Policy Reform (in other words, economic liberalization), Poverty and Equity, Modernization of the State, Civil Society, Women, Environment, Private Sector, Microbusiness, Economic Integration, Emergency Relief, and Culture.

The majority of the IDB’s annual loans are for government investments programs.  They are also directed toward reforms in the health and education sectors, with an eye to the privatization of these sectors.  In the Bank’s own words, “In the past, the Bank emphasized production sectors, such as agriculture and industry, physical infrastructure sectors, like energy and transportation, and social sectors, such as public and environmental health, education, and urban development.”

In 1999, the IDB dedicated 53% of its resources to improving government infrastructure and to “Modernization of the State,” which implies designing government policies; using country’s tax revenues to guarantee debt repayments (called fiscal reform); decentralizing state departments and structures in order to sell them to the private sector.  In the Bank’s words, “Improvements in public sector efficiency and the consolidation of democracy in Latin America have been accompanied by the growing role of the IDB in helping countries redefine the roles of the State and of civil society.  In 1999, the Bank approved 15 projects for a total of two billion dollars.”

So, after having developed and privatized their infrastructures, governments stopped recognizing that the money they were receiving was eroding their sovereignty and pushing them deeper into debt.  This happened when the IDB and the World Bank began to support poverty-reduction programs.  Their policies defined the lives of millions of Caribbeans and Latin Americans.  In the Bank’s words, “Today, our funding priorities include social equity and poverty reduction, modernization, integration, and the environment.”  Nevertheless, the burden of the external debt has taken on immorally large dimensions.  The true debt is not from poor countries to rich ones, but the other way around.  For example, if in 1997 the debts of the world’s 20 poorest countries had been canceled, that money, if dedicated to health care, would have saved the lives of 21 million children in the year 2000.  That comes to 19,000 children every day.

But there’s more.  If over the next 20 years, the debts of 52 countries were redistributed, they would mean a total of $4 per month for each citizen of the rich countries.  This is equivalent to about 40 Mexican pesos, which is one movie ticket or three packs of cigarettes.  Seen another way, in 1999, poor countries paid rich countries $12.8 million per day, or $47 billion per year.  Costa Rica’s case is no less serious.  In 1973, that country asked for a loan of 4 million pounds from England.  In 1999, 26 years later, it had already sent England 7 million pounds and still owed another million.

Another important component of IDB loans to governments is the financing of legal reforms and constitutional changes.  In general, these reforms consist in adjusting the countries’ laws to the requirements of treaties like NAFTA and the FTAA, regional mega-projects like the PPP, or of investors like the largest multinational corporations.  Furthermore, to add even more to poor countries’ debts, the IDB administrates emergency relief programs for natural disasters or financial crises.  In the Bank’s own elegant words, “Our current loan priorities include support for programs that develop global competitiveness, social equity, poverty reduction, the modernization of the State, public-sector reform, and economic integration.”  In reality, however, according to neoliberal market logic and the maximization of profits, rich countries and corporations will never work to truly strengthen competition that could one day hurt them. 

THE GROUP THAT MAKES UP THE IDB: The IDB group consists of two other entities.  One is the Inter-American Investment Company (IIC), an autonomous institution which supports small and medium-sized businesses.  It promotes a range of participation by employing co-financing, loans, joint projects and other methods.  It also provides technical, financial, and management assistance.  The IIC has 37 member countries.  It controls US$700 million in capital, and, by managing other loans, can channel up to US$3 billion in funds.  It has the capacity to approve 45 projects annually, totaling US$300 million.  Up to the year 2000, the IIC channeled US$1.5 billion to projects in Latin America—about the same amount of money as the personal fortune of Alfredo Harp Helú, a Mexican businessman who is the world’s 278th-richest person.  The 277 people who are richer have personal fortunes much greater than this amount. 

This is why we say that the IDB will never support small and medium businesses to the point that they could compete with TNCs—it will only push them further into debt.  Another example: while the IIC loans a total of $1.5 billion, the fortune of Mexico’s nine richest men totals an immoral $36.6 billion—while nearly three billion people in the world live on two dollars a day or less [1] .  The Venezuelan businessman Lorenzo Mendoza alone is worth $4.1 billion; the Safra brothers of Brazil have a net worth of $5.2 billion; and the Mexican Eugenio Garza Laguera’s fortune totals $2.3 billion, according to Forbes magazine.

The other entity that participates in the IDB is the Multilateral Investment Fund (MIF, http://www.iadb.org/mif/), created in 1993 “to accelerate the development of the private sector and improve the investment climate in the region.”  The establishment of the Fund helped create the necessary prerequisites for NAFTA and the FTAA.   The MIF supported and encouraged countries in liberalizing their trade laws to prepare them for “free trade.”  Of course, there is nothing “free” about it, given that the United States blocks trade from Southern countries.  And it is even less about “trade,” given that there can be no fair competition with the large subsidies that the USA provides to its exports.  Free trade has increased the leverage and power of transnational oligopolies.  The IDB also seeks to protect private investments by sponsoring the strengthening of security measures, eliminating corruption, and guaranteeing what they call “acquisition irregularities” when TNCs want to compete for government contracts.

Although the MIF is administrated by the IDB, it is autonomous.  It is the main source of  technical cooperation grants for the private sector.   It supports pilot projects in the areas of institutional, legal, and regulatory reform, job training, and small and micro business development.  It manages total contributions of US$1.3 billion from 26 countries, which are used for loans, investments, and grants.  It can authorize up to 100 projects annually for a total of US$100 million.  Supposedly, only under “special circumstances” may the IDB provide support to companies for the purposes of helping them buy assets and services being sold off (privatized) by a country’s government. 

AN ETHICAL AND MORAL DILEMMA

Poverty in Latin America and the Caribbean has been growing since the implementation of the neoliberal policies which promised equitable development, job creation and improvements in health, education, and the quality of life.  In 1980, when structural adjustment policies began under the IMF and the World Bank, in coordination with the IDB, the UN agency ECLAC (Economic Commission for Latin America and the Caribbean) reported that 135 million people were living in poverty in the hemisphere.  Ten years later, in 1990, that number reached 200 million, and by the year 2000, 224 million. 

Things would be very different if loans to poor countries were made within a framework of sustainability.  If investment projects were subject to environment, human, indigenous, and women’s rights, and cultural standards.  The real problem is not with loans themselves, but rather the conditions that come along with them and the disadvantages of the countries that have to request them.  If structural adjustment policies force governments to sell their sources of revenue (such as gas, oil, telecommunications, and water companies and holdings), and prohibit them from imposing taxes and tariffs on transnational companies, just to mention a couple of examples, how can those governments be expected to pay back their debts?  How can a country pay if it has been deprived of its ability to pay?  How can it receive money intended for poverty reduction with one hand and with the other hand give up tax revenue, public services, and national sovereignty? 

On the contrary, there is no reason that investments have to ignore human rights and moral principles.  They do not have to ignore considerations of gender rights, justice, and equitable development for all.  Private investments should not be immune from public oversight if they affect the common good, the rights of communities, and the environment.  Investment should be regulated by the needs of the people, not by the single imperative of maximizing profits at all costs.  Globalization does not have to destroy the sovereignty of nation-states or their ability to design public policy in the interests of their citizens.

Chiapas is both rich in natural resources and drowning in poverty, marginalization, and debt.   Its riches have not translated into better conditions for its population.  According to the Second Report of the state government of Pablo Salazar Mendiguchía, at the close of the 2002 fiscal year the three levels of government were carrying out projects with total operating costs of US$3.486 billion, even though their budgets for expenditures totaled US$2.296 billion.  During the same year, the government paid over US$11 million in debt service, leaving a debt balance of US$93 million.  Therefore, each indigenous child born in that year came into the world owing 233 pesos.  How is this possible in one of the country’s richest states?

This is the conclusion of the analysis of the IDB.  On another occasion we will analyze the specific projects of the IDB in Latin America and the Caribbean and their social, economic, ecological impact on indigenous people, campesinos, and especially on women.  These impacts led us to develop the “Manifesto Against the IDB” which we reproduce below.

MANIFESTO AGAINST THE IDB

Around 1500 representatives of diverse organizations, networks and civil society groups from 15 countries of Mesoamerica, the Caribbean, and other parts of the world, participants in the Days of Resistance carried out during the Second Mesoamerican Forum Against Dams, “For Water and the Lives of Peoples,” the Third Week of Biological and Cultural Diversity and this Fourth Mesoamerican Forum for Self-Determination and People’s Resistance (June 18th-25th, 2003), have evaluated the role of the Inter-American Development Bank in the region and we believe the following:

The IDB negatively affects the well-being of people in Latin America and the Caribbean by using loans to promote the privatization of social services, such as health care and access to clean water.

That IDB-sponsored projects cause irreparable harm to the rich biodiversity of Central America and the Caribbean.

That The neoliberal system that the IDB promotes involves the plunder of indigenous resources and the theft of natural resources, plants, traditional medicines and traditional knowledge for the benefit of transnational corporations. 

That IDB projects, via the Plan Puebla Panama (PPP), contribute to forcible displacements of indigenous people and communities and particularly to the impoverishment of women.

That there is a growing tendency for the IDB to impose its neoliberal policies of decentralization and privatization onto local governments and municipalities.  Furthermore, the IDB finances various social programs which, like occupying armies, try to buy the people’s hearts and minds by tokens and band-aids that only serve to disguise the reality: its programs are designed and implemented to serve the interests of the largest corporations.

IDB projects are accompanied by increasing militarization of the borders of all the countries of the region, the persecution of social leaders, and human rights violations.

The IDB is part of an imperial strategy of domination over the hemisphere.  The IDB is a cause of:

Ø      Increase in the external debt of poor countries.

Ø      Loss of sovereignty by governments and peoples.

Ø      Violations of human rights and environmental destruction. 

We call all citizens of the Americas to pressure their governments to cease accepting conditional IDB loans and to cease making payments on their external debts. 

We, the indigenous, environmental, human rights, and social justice organizations that are participants in the Days of Resistance of the Peoples 2003 and signatories to this document, firmly maintain that the future of Latin America depends on the self-determination of its peoples.

WE RESOLVE to reject IDB projects and policies which damage indigenous cultures, our economies, or the environment.  We are determined to oppose any IDB policy which gives preference to private investors and harms the citizens of our countries. 

Signed July 20th, 2003 in the city of La Esperanza, state of Intibucá, and ratified in Tegucigalpa, Honduras, July 22nd 2003.

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