Latin America Advisor

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What Should the New President of the IDB Prioritize?

Photo of Goldfajn Reina Irene Mejía, interim president of the Inter-American Development Bank, congratulates Ilan Goldfajn on his election Sunday. // Photo: IDB.

Brazil’s candidate to lead the Inter-American Development Bank (IDB), Ilan Goldfajn, won Sunday’s election in the first round of voting. A former central governor and currently the head of the Western Hemisphere Department at the International Monetary Fund, Goldfajn had strong backing from the United States, which holds the most votes in the institution and is its largest financial contributor. What factors contributed to Goldfajn’s victory, and what attributes does he bring to the job? How might Goldfajn, 56, reshape the multilateral lender, and what should he prioritize for his five-year term? What will be his biggest challenges when he takes office next month?

Isabel Saint Malo, former vice president and foreign minister of Panama and a current fellow at Harvard University´s Advanced Leadership Initiative: “The decisive 80 percent of the votes given to President-elect Goldfajn are a clear mandate for him to lead amidst clear structural challenges faced by the region. Moving forward, Goldfajn will need to lead the organization in its dual capacity as a development agency and a financial institution. The financial limitations faced within the framework of slow growth, inflation and war will require the IDB to mobilize the global north and generate the fresh resources the region needs. The support he has received from the United States and Canada will be instrumental in this respect. Further, he will need to guide the IDB towards the Sustainable Development Goals, to which the world is committed as the umbrella for advancement. As a financial institution, the new president will need to work towards the expansion of capital, debt relief through restructuring or other innovative financial mechanisms, as well as the generation of new projects. The incoming president will face the structural problems that have been present in the region for decades and are made worse by the pandemic: education, employment, and governance. Given growth forecasts of 1.7 percent in 2023 with high levels of inflation, the IDB could play a transformational role in supporting its borrowing member countries, partnering with governments to deliver on progress for their citizens. While for the first time a Brazilian is elected to preside over the IDB, Goldfajn was elected amid clamor for a woman to lead the organization for the first time. While this did not happen, he does have an opportunity to advance gender parity within the organization. While the IDB has for decades promoted gender equality within the private sector in LAC, parity within the IDB does not exist. Currently three of the bank’s vice presidents are male and 21 out of 27 managers are male. Latin America and the Caribbean are home to many women with the knowledge, capacity and a proven track record needed to run the IDB. It is time to invite them to join and form a 50/50 cabinet to support his efforts as the bank’s new president.”

Peter Hakim, member of the Advisor board and president emeritus of the Inter-American Dialogue: “The new IDB chief is exceptionally well-qualified and will bring considerable management experience to the bank. He is also widely respected across the ideological spectrum. Although nominated by Brazil’s extreme right-wing president, he was endorsed by key figures in the newly-elected-president Lula’s transition team. Yes, Goldfjan would have welcomed a stronger endorsement from Lula himself, but there were few serious objections to his candidacy. Still, while it appeared flawless, the selection process should be reassessed. Rather than leaving the choice entirely to national governments, an independent board might do a better job of reviewing potential candidates. More importantly, the United States should not be commanding 30 percent of the vote. Yes, Washington is the bank’s largest contributor, but that is no reason to give the United States the right, in practice, to determine the bank’s president. Goldfjan’s first task will be to provide serious, professional leadership for an institution that has been damaged in its morale, reputation and practice by poor management in recent years. The bank has many crucial roles to play in the economies of Latin America and Caribbean, far too many to discuss here. But one particularly important challenge, which has been routinely ignored or poorly executed in recent years, is helping to build closer trade and economic ties among Latin American nations and between Latin America and the United States and Canada. That is no easy task, particularly given the many failures of hemispheric cooperation (recently and strongly illustrated in the fight against Covid) and continuing political and ideological divisions among the region’s countries. Successful coordination will mostly depend on sustainable, mutually agreed-on economic policy reforms in many Latin American nations, along with more stable and equitable growth across the region. It will also require substantial additional funding for the IDB from its wealthiest members, the United States, Canada, China and Europe.”

Rubén Olmos, CEO of Global Nexus in Washington: “The strong election result of Goldfajn sends a clear message that it is time to put behind the tumultuous last couple of months at the Inter-American Development Bank and move forward amid a critically important moment in the region as it tries to recover from the pandemic and become more competitive globally. Goldfajn has the private and public sector credentials to become the bank’s seventh president and lead it towards a new forward-looking stage taking into account the regional political complexities and social necessities. When he starts his tenure in December, he will need to assemble a solid and balanced team and immediately address institutional challenges, including employee morale and negotiate with the countries that supported his election new priorities, including increasing the bank’s capitalization. As he was presenting his candidacy, he spoke about key objectives, such as fighting inequality and food insecurity, addressing climate change and investing in physical and digital infrastructure. It will also be important to strengthen the dialogue with the private sector in the region and fix any disagreements with countries that did not support his candidacy, including Mexico.” 

Claudio M. Loser, former head of the Western Hemisphere Department of the International Monetary Fund: “Ilan Goldfajn’s election as president of the bank is a victory of collective wisdom, and a good omen for the future of the institution and the region. After a thorny period for the bank under Mauricio Claver-Carone, Goldfajn brings impeccable professional and personal credentials. A brilliant academic, he carried out great real-world jobs, as president of the Central Bank of Brazil and too short a stint as head of the IMF’s Western Hemisphere Department. He has the substantive, political, and administrative savvy to become a strong president. His job will not be easy, as Latin America and the Caribbean have lagged behind the rest of the emerging world, in terms of economic growth and innovation. His support by most shareholders provides optimism for his future work, which will necessarily be one of reinvention of the institution. With outstanding lending of more than $110 billion, it is the paramount multilateral development institution of the Americas. The work ahead is complex, though. While maintaining the commitment to develop the infrastructure of the State, fighting climate change, and seeking equality, the bank needs to become a stronger partner with the private sector, as the true motor of growth, even if some governments may not like the new orientation. But the bank needs to move forward to avoid falling into complacent status-quo. Only a renewed bank, attuned to the challenges of mid 2000s, will be a relevant protagonist to embark in a prosperous and just future for Latin America.”

Bruno Binetti, PhD candidate at the London School of Economics: “There were several reasons for Goldfajn’s decisive victory. First, he is a technocrat with vast experience in multilateral and national financial institutions and a pragmatist who can work with governments of different ideologies, the exact opposite of Mauricio Claver-Carone. Second, Goldfajn was nominated by Jair Bolsonaro but got the tacit endorsement of president-elect Lula, which proved decisive to rally Argentina and other leftwing governments behind the candidate. Third, Mexico changed its candidate at the last minute and suffered from the relative isolation of President López Obrador, especially now that Lula offers a more appealing leadership within the left. Goldfajn’s most urgent task is to restore the credibility and reputation of the IDB’s presidency not just in the hemisphere but among the bank’s own staff, which has become demoralized under Claver-Carone’s politicized and unprofessional management. The new president will need to set up more transparent and rigorous human resources practices and present a vision for the future of the IDB that transcends narrow political agendas. In the longer-term, the IDB should concentrate on areas where it can make a difference, such as infrastructure and climate change, and support sound and ambitious projects that lack public or private financing. To do so, Goldfajn will need to work with the U.S. Congress to approve a capital increase and ensure the bank has the firepower it needs.”

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