Ideas to Action:

Independent research for global prosperity

X

Views from the Center

Feed

The US nomination of an American, Mauricio Claver-Carone, to head the Inter-American Development Bank is a shock. As my CGD colleagues explain here, since its founding, the presidency of the IDB has gone to a citizen of a Latin American country, and the executive vice-president to an American. For the US to back an American candidate as president disrupts an arrangement that has been fundamental to the bank’s effectiveness as a development institution investing in better lives and livelihoods in its borrowing member countries. The arrangement has ensured a strong sense of ownership and trust in the institution on the part of its borrowers (a comparative advantage relative to the World Bank) and a shared sense of responsibility for the bank’s performance with the United States, it largest creditor country, in turn reassuring the global capital market on which the bank’s own borrowing depends.

Claver-Carone has apparently already secured the support of Brazil, Colombia, and other Latin countries, presumably with promises of patronage at the bank (Brazil is allegedly promised the position of executive vice-president) and US financial and political support (that Colombia needs as it struggles with millions of Venezuelan refugees). That brings him close to the 51 percent of the weighted votes (including the US 30 percent) to be elected; he would also need a simple majority of the 28 member countries of the region, including Canada, the US, and all the borrowers. He could well win the prize before the scheduled vote in September.

Independent of the effect on the IDB’s effectiveness as a trusted institution with independent technical credibility, and aside from Claver-Carone’s personal qualities—“controversial” (The Economist), “polarizing, ineffective” (Senator Leahy of Vermont), “ideologically driven” (see Latin American experts and diplomats here)—the possibility of his election is, to use a word President Trump likes, “sad” in a broader sense. Here’s why.

First, the nomination of an American constitutes another assault on the multilateral system, as distinguished former presidents of Brazil, Uruguay, Mexico, Chile, and Colombia made clear in a statement last week. Ironically, it is an example of the the fading hegemonic power of the United States, a country with an administration tempted by short-term political gains at home to violate the rules, norms, and traditions of the liberal global order it created. It is those rules and norms that tempered its sheer brute power, much if not all of the time during the last 70 years. An American at the helm of the Inter-American Development Bank is a sign not of American strength but of America losing its mojo in a newly perilous world.

Second, the possible election of an American to head the IDB exposes the failure of collective action among Latin American governments, rooted in the renewal of populist and nationalist governments not only in Venezuela but now in Brazil, Ecuador, and some US-dependent Central American countries. Collective action is hard with the region’s failure to manage more than minimal economic growth; the region’s political and social cohesion has long been disadvantaged by longstanding, searing inequities that particularly affect Black and indigenous peoples. Only Chile and Costa Rica, the “whitest” countries in the region, have managed to build a relatively resilient middle class. And even in Chile, slow growth and longstanding high inequality have generated a worrying populist backlash.

Third, his nomination is a reminder of the deep flaws in the selection process for the leadership not just of the IDB but of the IMF, the World Bank, and the other three large regional multilateral banks (African, Asian, and European). The heads of all these are chosen via a process that fails a minimum test of being transparent, open, and competitive, and is instead part of a system in which power, patronage, and other spoils too often reign—as various high-level commissions have concluded over many years. At the IMF and World Bank, the process has sometimes failed to produce even minimally adequate candidates subject to minimally adequate due diligence—as the early departures from office of Wolfowitz at the World Bank and Strauss-Kahn at the IMF suggest. In the case of the World Bank, the White House has full discretion, so open competition even among the best possible American candidates is rare. At the IDB, with a tradition of a borrower candidate becoming president, there has been at least the possibility of healthy competition among alternative borrowing country candidates—though as in the United States, even then the best possible candidates may be of the wrong political affiliation in their own country at the right time.

Fourth, it’s “sad” to see that Cuba still upends reason in the US approach to national security and foreign policy. For decades, the US has blocked the entry of Cuba into the IMF, the World Bank, and the Inter-American Development Bank. Even China is admitted into the international community, suggesting Cuba’s exclusion is about US politics, not about ideology.

Finally, it’s “sad” to imagine the IDB burdened with a controversial lame duck at its helm within months, should Biden win in November. A major capital increase at the IDB makes sense, as it did in 2010 at the time of the global financial crisis, with region’s cash-strapped countries facing the ongoing COVID health emergency and a long COVID-induced recession. But Democrats in Congress would hesitate to support an increase at a bank whose leadership does not see climate, green growth, support for social programs, and progressive tax, pension and other reforms as development priorities. Should Trump win again, China, the region’s key trade partner, will surely prefer to channel any financial support to the region not through the IDB, but directly, at long-run higher interest rates to the IDB’s members.

There are other candidates, including former President of Costa Rica Laura Chinchilla, and Gustavo Beliz, a minister in Argentina’s current government. And there is the alternative (The Economist’s suggestion) of the current president, Luis Alberto Moreno, delaying his departure for several months, until after the US election. At the least that would allow other candidates to make their case within the region. In this situation, time is on the side of healthy competition, and healthy competition on the side of a stronger future IDB.

Nancy Birdsall (disclosure: former Executive Vice President of the Inter-American Development Bank, 1993-1998, appointed under the problematic selection process decried above.)

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

Photo credit for social media:

Wikimedia Commons