Inter-American Development Bank Totally Explained

Everything about The Inter-american Development Bank totally explained

The Inter-American Development Bank (preferred abbreviation IDB, although sometimes found as IADB), was established and headquartered in Washington, D.C., United States, in 1959 to support Latin American and Caribbean economic and social development and regional integration by lending mainly to governments and government agencies, including State corporations. The current president of the Bank is Luis Alberto Moreno, a Colombian diplomat who was elected to succeed Enrique V. Iglesias on July 27, 2005.
The IDB has four official languages: English, French, Portuguese, and Spanish. Its official names in the other three languages are as follows:

French: Banque interaméricaine de développement;
Portuguese: Banco Interamericano de Desenvolvimento;
Spanish: Banco Interamericano de Desarrollo. In all three of the other languages, the Bank uses the acronym "BID".

Member states

The Bank is owned by 47 sovereign states, which are its shareholders and members. Of these, 26 are eligible to receive loans from the Bank and 21 are not.

Borrowing member countries	Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, and Venezuela
Non-borrowing member countries	Austria, Belgium, Canada, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Japan, The Netherlands, Norway, Portugal, Republic of Korea, Slovenia, Spain, Sweden, Switzerland, United Kingdom and the United States

How the IDB works

The IDB makes loans to the governments of its borrowing member countries at standard commercial rates of interest, and has preferred creditor status, meaning that borrowers will repay loans to the IDB before repaying other obligations to other lenders such as commercial banks.
   The funds that the IDB lends are raised by selling bonds to institutional investors at standard commercial rates of interest. The bonds are backed by (a) the sum of the capital subscriptions actually paid in by the Bank's 47 member countries, plus (b) the sum of the callable capital subscriptions pledged by the Bank's 21 non-borrowing member countries. Together these constitute the Bank's ordinary capital, some US$101 billion. Of this amount, 4.3 percent is paid in, while the remaining 95.7 percent is callable.
   The callable capital pledged by the 21 non-borrowing members, which include the world's wealthiest developed countries, therefore functions as a guarantee for the bonds that the IDB sells. This arrangement ensures that the IDB maintains a triple-A credit rating, and as a result can make loans to its borrowing member countries at rates of interest similar to those that commercial banks charge their largest corporate borrowers. At the same time, the 21 non-borrowing countries are only putting up guarantees – not actual funds – so their support of the IDB's lending operations has a minimal impact on their national budgets.
   As in the World Bank and other development banks, the developing countries that borrow from the IDB are shareholders and are therefore full members alongside the developed member countries. Each member's voting power is determined by its shareholding: its subscription to the Bank's ordinary capital. The United States holds 30 percent of the Bank's shares, while the countries of Latin America and the Caribbean combined hold 50.02 percent. This arrangement is unique in that the developing member countries, as a group, are the majority shareholders. Though this arrangement was first viewed as risky, it's believed by some that strict peer pressure prevents the borrowers from defaulting, even when under severe economic pressure. However, Argentina did default in 2001; this was publicly announced in 2002.

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