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What Happens in Cancun Shouldn't Stay in Cancun: Toward Transparency at the Inter-American Development Bank

This weekend the Inter-American Development Bank (IaDB) will hold its annual meetings in the popular Mexican resort city of Cancun. Much of the focus will be on the capital increase for the Bank, which made an original request for an increase that topped US$ 180 billion. Subsequent estimates of what the main shareholders may be able to stomach include a lower figure of around US$ 60 billion, while more optimistic estimates are around twice that figure.

Ultimately, a final commitment that is well below US$ 100 billion would not only restrict the Bank’s ability to lend to Latin American and Caribbean countries at its current very high levels, but it could also be interpreted as a vote of no confidence on its leader, Luis Alberto Moreno from Colombia (even if government shareholders are now tightening the purse strings anyway, in the aftermath of the financial crisis). All of the focus on capital increase commitments and their perceived value on the IaDB’s leadership will draw even more attention and prominence at the Cancun meeting since it will take place against the backdrop of the impending decision of whether to renew Mr. Moreno’s term for another five years when it expires in a few months.

Yet, a crucial issue that will get much less attention at the annual meeting than it deserves is transparency, of course.  Let us hope that it gets at least some attention at this weekend’s meeting.

Transparency has never been one of the IaDB's strong points, in fact. The standards of public disclosure and access to information about basic financial information of the Bank, the projects it funds, and its dealings with its client countries has been generally low. But there are four reasons why the issue of enhanced transparency should get some prominence in Cancun.

First, enhanced transparency should get some attention at the IaDB meeting because of the controversy regarding the requested capital increase from the member countries and the reckless financial losses by the Bank’s treasury last year. As a result, some member governments may demand commitments to some internal transparency reforms by the Bank leadership before pledging capital.

Second, a few blocks away in downtown Washington, DC, the World Bank has just adopted a new disclosure policy, following years of internal debate, work and consultation. Whether due to the customary competition among financial aid institutions or as a result of pressure from overlapping shareholder governments, regional development banks tend to follow suit after reforms at the World Bank take place. In fact, some work toward a new disclosure policy is already taking place at the Asian Development Bank. Even the IMF, historically a secretive organization, has been making some strides regarding its own disclosure standards.

At the World Bank, the challenge of implementing this new disclosure policy still lies ahead. And its new transparency policy has some drawbacks, such as the ability by member governments to veto public disclosure of important documents and information. But by having moved to a policy of presumption of disclosure, the World Bank has taken a transparency leap forward compared with its previous standards -- at least in paper. As usual, the devil will be in the implementation details, but the World Bank is now far ahead the IaDB in terms of disclosure. 

Third, in the coming years, the IaDB will have to step up its work on supporting many Latin American countries on their own institutional reforms related to improved governance, anti-corruption and transparency. The region is falling behind others in this respect, and neglecting this dimension would be costly.  

While the Latin American region has made inroads in terms of macro-economic policies over the past decade, as we observe in the chart below, on average Latin America has fallen behind the industrializing countries in East Asia, as well as the former Eastern European socialist countries (now part of the new Europe), in terms of key dimensions of governance. Yet to be credible in these important areas of pending reforms, the IaDB will need to implement transparency reforms – the example starts at home.

And the fourth reason for enhanced transparency is Haiti. The vast aid package that Haiti will require is already the subject of much homework and debate among donors who will congregate at the UN in New York for a major meeting on March 31st. Some bilateral aid donors will demand satisfactory transparency and accountability from the Haiti side before making firm commitments. As important, however, will be to observe the initiatives that donors themselves take regarding making its own programs and funding details in Haiti much more transparent than customary.

The Inter-American Development Bank covets having some leadership role in the Haiti reconstruction effort. To consolidate such a role in the eyes of the rest of the donor community, it can’t afford to stay far behind in terms of its own transparency.

For these reasons, it may make sense for the Inter-American Development Bank to publicly commit this weekend to the design of a far-reaching disclosure policy, one which could build on (and even improve upon) the World Bank’s and which would be consistent with modern transparency standards in such organizations.

In particular, the IaDB ought to pledge working toward very concrete mechanisms for access to detailed financial and technical data on all its projects. And it could pledge to make its operations in Haiti as an early model test case of the broader and deeper transparency policies and disclosure measures to come.

For good measure, the IaDB may also wish to disclose the price tag of the Cancun meeting.