Finance Minister Audley Shaw backs IDB call for increased capital to US$280 billion, urges early decision.

Jamaica's finance minister, Audley Shaw, pushed this week for donor-backed economic stimulus for vulnerable economies in the region, amid acknowledgement by development financiers that millions more people are falling into poverty.

Shaw, who was addressing the 50th board of governors' annual meeting which concluded Tuesday, said lenders needed to do more for struggling economies.

He urged the Inter-American Develop-ment Bank (IDB) to vary its US$6 billion liquidity support programme so that funds could be shifted to infrastructure and employment programmes.

Jamaica has been a recipient of US$300 million of liquidity funds.

Shaw's appeal came days ahead of the G20 Summit set for London on Thursday, spoke directly to that group of leading traders, urging their support of the IDB in its lobby to replenish its capital - taking it to US$280 billion from its current US$101 billion - and position the bank to assist its resource-deficient members.

Lion's Share of loans

Last year, the IDB loaned out US$11.2 billion but a breakout of the funds indicate that most went to its biggest shareholders in the region.

Brazil received US$3 billion, Argentina got US$1.2 billion and Mexico received US$1.1 billion. After the US, those three are the bank's biggest stakeholders.

Ecuador, which got US$500 million last year, say countries having a tough time weathering the global economic crisis deserve a bigger share. Bolivia, for example, got just $56 million.

Bolivian Planning Minister Noel Aguirre said at the bank's annual meeting on Monday that "more resources should be given to the less developed countries".

According to José Miguel Insulza, secretary general of the Organisation of American States (OAS), the region risks losing many of the gains made over the last six years, during which several countries implemented prudent economic policies that helped 50 million people escape poverty.

"Under a relatively optimistic scenario, up to 2.8 million people could fall into poverty this year in Latin America and the Caribbean", he said. "But the situation can get a lot worse. A study by the IDB suggests that more than 12.5 million people could fall below the poverty line in the next two years."

The US said it would study a proposal to nearly triple the IDB's capital to US$280 billion to help the region weather the global economic crisis. The US is the bank's biggest shareholder with 30 per cent.

Addressing the IDB meeting in Medellin Colombia, US treasury secretary Timothy Geithner said that in reviewing the bank's request, Washington expects to see "a continued ongoing commitment to good governance. This includes efforts to combat fraud and corruption and to strengthen the institution's risk management capacity."

More capital crucial

Luis Alberto Moreno, president of the Inter-American Development Bank, speaks during a press conference in Medellin, Colombia, just ahead of the 50th board of governors meeting, March 24.

IDB president Luis Alberto Moreno, a Colombian, says more capital for the development bank is crucial because the global financial crisis is beginning to batter Latin American and his bank has become the lender of choice for many cash-strapped nations in the region.

"Capitalising the bank may sound like something abstract, but I can reassure you that it is the most direct and effective means of combating poverty in the region," he said.

The IDB leadership is seeking the capital increase - the first since 1995 when US$40 billion was added - in hopes of disbursing a record US$18 billion in loans this year.

But Moreno has to face sceptics on Capitol Hill, led by Republican Senator Dick Lugar of Indiana, and Democratic Gregory Meeks of New York have complained of Moreno's tenure, specifically its loss of US$1.9 billion on "toxic" assets in 2007-2008. They are demanding greater transparency and oversight.

Critics, however, say not enough of its loans actually go to help reduce poverty and inequality, while some cause serious ecological damage, displace poor people and have even resulted in some losing access to drinking water in Ecuador and natural gas in Lima, Peru.

Moreno disputes such assertions and says a leadership overhaul since governors elected him president in 2005 has made the bank more accountable.

Support for the capital increase is broad.

Each member would contribute according its share in the bank. Member countries would only need to contribute about four per cent in cash - about US$2.16 billion for the US. The rest of the commitment is in guarantees.

"It's very important that we advance with the matter of capitalising the bank," said Mexico's finance minister, Agustin Carstens.

Brazil's planning minister, Paulo Bernardo, concurred: "The size of the bank must be increased."

Shareholding

Brazil and Argentina are the IDB's second-largest shareholders with 10.7 per cent each. Mexico has 6.9 per cent followed by Venezuela with 5.7 per cent. Smaller members include Japan, Canada and new member China.

Venezuela's finance minister, Ali Rodriguez, said his country would back the capitalisation if there's consensus.

Shaw has urged an early decision on capital replenishment in the next few months so that the IDB can funnel resources to needy members.

Gleaner and AP reports