After enduring a decade of virtually no growth and the devastation wrought by the pandemic on education and poverty levels, Latin America has never been more in need of a major development bank.
However, the first challenge awaiting the new president of the Inter-American Development Bank, who will be elected on Sunday by the bank’s 48 shareholders, will be to rebuild the bank’s shattered morale after the dismissal of its former leader.
The Washington-based bank’s governors fired Trump’s nominee, Mauricio Claver-Carone, in September. This came after an investigation concluded that he maintained a sexual relationship with his subordinate and rewarded her with pay increases totaling more than 45 percent in less than a year. Claver-Caron and the woman denied the relationship.
Michael Schefter, a senior fellow at the Inter-American Dialogue in Washington, noted that Latin America’s largest development bank, which arranged more than $23 billion in financing last year, has faced severe challenges. Food and energy insecurity threatens to exacerbate already high levels of social discontent.
“The new IDB president will need a solid understanding of these problems and a clear idea of how to address them,” he said. “But arguably more important is the political shrewdness that will be vital in garnering support for securing a much-needed capital increase and in restoring integrity and calm to lifting up a shaky staff.”
Five candidates are competing for this position. Three of the region’s largest economies, Brazil, Mexico and Argentina, while Chile and Trinidad and Tobago put forward candidates.
The bank’s largest shareholder is the United States. Since Washington holds 30 percent of the voting power, American support is generally considered essential. Brazil and Argentina are the second largest contributors, with 11.35 percent each.
However, in the aftermath of the debacle of Claver-Caron—the first American to hold a position traditionally reserved for Latin Americans—the United States has been coy about its preferences. With no candidate of its own this time, officials said, Washington wants Latin America to unite behind a consensus choice.
Instead, the region’s major countries compete with each other. There is no clear favorite and very few countries make their preferences public before Sunday’s election.
The first two candidates, according to those who follow the process, are the Brazilian Ilan Goldfein and the Chilean Nicolas Izaguirre. A former President of the Central Bank of Brazil and a respected economist, Goldfajn is currently on leave from his position as Director of the International Monetary Fund in the Western Hemisphere to run for the position of the Islamic Development Bank.
In addition to immediate HR challenges, “this bank has to be data-driven and guide-oriented, given when projects are effective,” Goldfein told the Financial Times. “You need to look at the numbers. I love the data, and I like to look at the evidence.”
His top priorities are using the Bank’s firepower to tackle poverty, food insecurity, climate change and improving financial infrastructure in the region.
Goldfajn will be Brazil’s first president of the Islamic Development Bank, but his home country may snatch defeat from the jaws of victory. Key members of leftist president-elect Luiz Inácio Lula da Silva’s team have complained about Goldfein’s candidacy by Jair Bolsonaro’s far-right government and demanded that the IDB elections be delayed to allow Lula to nominate his own candidate – a request that other countries have refused.
Goldfajn presents himself as an apolitical, technocratic choice, but the lack of support from his next government could hurt his chances.
Chile’s Eyzaguirre hopes to get into the middle. A former finance minister who also served as head of the International Monetary Fund in the Western Hemisphere and worked for the Central Bank of Chile, he has experience in the role and is more politically aligned with the region’s incoming leftist governments.
Like Goldfajn, Eyzaguirre stresses the need to improve morale at the bank and improve lending effectiveness. He told the Financial Times: “Chile is a country that has made tremendous progress in the past 40 years but does not use many of the IDB’s resources.” “It’s a reliable, unbiased mediator.” Eyzaguirre believes that his experience holding various ministerial positions in Chile is a good basis for negotiating and building the needed consensus at the Islamic Development Bank.
Mexico nominated outgoing deputy central bank governor, Gerardo Esquivel. Esquivel is a respected technocrat and former academic but lacks the international experience and profile of his Brazilian and Chilean rivals. He may be disadvantaged by his candidacy so late in the day and by his relative lack of managerial experience. Esquivel did not respond to requests to discuss his nomination.
Argentine Cecilia Todesca, Minister of International Economic Relations at the Ministry of Foreign Affairs, hopes to become the first woman to hold the position of permanent head of the Islamic Development Bank. Speaking to the Financial Times from Washington where she was lining up support, Todska said one of her most important plans is a program to prioritize the “care economy”.
“Gender inequality is a big factor behind the lack of social development that we see, and the primary function of the Bank is to assist in social development,” she said.
Todska will direct IDB funds to help improve dependable child and elderly care, so women can “reintegrate themselves into the workforce,” and create better conditions for domestic workers. She added, “Argentina decided to introduce a woman, and this is important for the region.”
Gerard Johnson of Trinidad and Tobago, former head of the Caribbean division of the Islamic Development Bank and now an adviser to the Government of Jamaica, was also nominated. The Caribbean has never had an IDB president, but the region’s limited voting power makes that option unlikely. Efforts to reach Johnson were unsuccessful.
To secure the job, a candidate needs to win more than 50 percent of the voting power in the 48 member states and a majority in at least 15 of the member states in the Western Hemisphere.