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IDB President Enrique Iglesias: "Education is basis for improving growth"
Latinamerica Press / March 9, 2001

By Larry Luxner

WASHINGTON -- On Mar. 19, the Inter-American Development Bank will launch its 42nd annual meeting in Santiago, Chile. Over 6,000 people are expected to attend the two-day meeting, which will focus on issues like state reform, social investment, poverty reduction and private-sector development. In addition, 15 official seminars preceding the annual meeting itself will address a host of topics from "Expansion and Modernization of Civil Aviation" to "Sports as a Means for Economic and Social Development."

Established in 1959 in order to provide development funds for projects that would not ordinarily be financed by commercial lending, the IDB today has authorized capital of $101 billion and offices in 26 countries.

In the 42 years since its founding, the bank has approved $106.6 billion in loans, supporting projects with a total cost of $156.8 billion. These range from tiny projects like a $250,000 loan to support research into medicinal plants in Central America, to a massive $3.4 billion loan aimed at shoring up the faltering Argentine economy.

Enrique V. Iglesias, 69, has been president of the IDB since 1988. Here are excerpts from our recent interview with the former Uruguayan diplomat:

Q: How would you describe the IDB's mission?

A: "The bank has, in recent years, been the main source of international financing in Latin America. Now it's quite clear that we must adapt the institution to modern times, and to the internationalization of the economy, in which Latin America is becoming an increasingly important partner. This is the mandate under which we operate now.

"One of the major assets of our bank is the feeling of ownership among the borrowing members, and our full understanding that the private sector must play a key role. We're active not only in providing money but also stimulating the creation of financial intermediaries and working with governments to create microbusinesses."

Q: You have said that the economies of Latin America must grow twice as fast as they're currently growing in order to eradicate poverty over the long term. How, then, do you explain cases like the Dominican Republic, where most people live in poverty despite the country's average 7% GDP growth per year over the last five years?

A: "Growth is an important ingredient, but not the only one. A high rate of growth would help tremendously, we must also make expenditures to improve efficiency. In other words, we spend a little money on education, but maybe we can spend it more wisely."

"We try to make the countries more competitive through better infrastructure and sound economic policies, so we can influence the rate of growth. We also help member countries export more. There's also a wide consensus today that education is the basis of improving growth and fighting poverty."

Q: How will you make that happen?

A: "Four things must be done. First, increase the competitiveness of the region in world markets. Second, make social policy our main area of work. In that sense, the bank has a very respectable record. Almost 50% of our $44 billion portfolio is devoted to social projects. We are an active player and intend to be more active in years to come.

"Third, we must improve governance of the region, through projects ranging from more efficient services to fighting corruption, and fourth, promote regional and hemispheric integration as well as Latin America's integration with Europe and the rest of the world."

Q: What is your biggest challenge?

A: "To stay relevant, and to be helpful to the countries we serve."

Q: Are you worried about corruption?

A: "We try to take care of how we invest our money, so we're sure the money is going to the right destination. We have officies in every country watching exactly how the money is spent, and we examine the results of the projects."

Q: Last year, Ecuador joined Panama in adopting the U.S. dollar as its official currency. Several other currencies including the Argentine peso and El Salvador's colon are now pegged at fixed exchange rates with the dollar. What are your thoughts on dollarization?

A: "Since countries have different foreign-exchange systems, there is no one uniform formula, and each requires a different solution. Countries which have dollarized had good arguments to do it, and I hope they'll succeed. But you can't transplant these conditions to other countries. In order to have dollarization in place, you must have social legitimacy and resignation of monetary sovereignty, as well as economic viability. So far, most of the countries do not consider dollarization to be a viable proposition, and I agree with that view."

Q: What's the future of the Free Trade Area of the Americas (FTAA), and how active has the United States been in pushing for hemispheric integration?

A: "It's a difficult but important initiative, and I think we have to succeed. It'll take a big effort, but the political will is there. If you follow what President Bush has said, Latin America will have a high priority in his administration. His recent visit to Mexico is a very good indication of this."

Q: How do you see your own role as president of the IDB?

A: "The big difference between being a CEO of a large corporation and running the IDB is, you don't have shareholders sitting on your board all day. This bank is basically a cooperative, ruled by consensus, and I'm a team player. I like to listen and work with the board. It's very important in this institution to listen and find a common denominator."

Q: You have led the IDB for 15 years. Will you seek another term as president once your current term expires in 2003?

A: "Ask God."

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