George Shultz is the former U.S. secretary of state under Republican president Ronald Reagan. Thomas F. McLarty is the former White House chief of staff and special envoy for the Americas under Democratic president Bill Clinton. Carla A. Hills is the former U.S. trade representative under Republican presidents Ronald Reagan and George H.W. Bush. Robert B. Zoellick is the former World Bank president, U.S. trade representative, and U.S. deputy secretary of state under Republican presidents Ronald Reagan, George H.W. Bush, and George W. Bush. Abraham Lowenthal is the president emeritus of the Pacific Council on International Policy. Nelson W. Cunningham is the former special advisor under president Bill Clinton.
As multilateral institutions attempt to respond to today’s unprecedented global challenges, one that already works well is the Inter-American Development Bank (IDB).
Established in 1959 and headquartered in Washington, the IDB is widely recognized for its important role in supporting efforts to reduce Latin American poverty and inequality in a sustainable way and to facilitate inter-American economic co-operation. It is the largest source of development financing to our hemisphere, channelling some US$12-billion a year in loans to Latin American and Caribbean countries to support well-reviewed projects in infrastructure, state modernization, education and social programs. Annually, the IDB finances more projects in Latin America than any other multilateral development bank, including the World Bank. The Bank’s significance, moreover, should be even greater in the future, as Latin America copes with the triple whammy of COVID-19 (with 28 per cent of the world’s fatalities so far), the steepest economic downturn of any developing region (projected by the International Monetary Fund to plunge by 9.4 per cent), and major social upheavals in many countries.
That is the context for the Trump administration’s unprecedented nomination this month of a White House aide, the first from the United States, to serve as the IDB’s fifth president. The choice risks alienating the region and politicizing this successful institution. Sixty years of tradition – of Latin American leadership of the IDB – should not be overturned in the bank’s presidential elections, currently scheduled for mid-September.
The surprise announcement has provoked a storm of negative reaction in Latin America. Five recent Latin American presidents – Fernando Henrique Cardoso of Brazil, Ernesto Zedillo of Mexico, Ricardo Lagos of Chile, Juan Manuel Santos of Colombia and Julio Sanguinetti of Uruguay, all outstanding statesmen and warm friends of the United States – issued a strong statement in opposition.
The Trump administration, for its part, is pressing Latin American governments to support the nomination, dangling the carrot of the Bank’s upcoming capital renewal and brandishing the stick of withholding postpandemic relief.
Yet, opposition is building. In recent days, Chile, Mexico, Costa Rica and Argentina have called for a delay of the election to 2021. The European Union is lobbying its member countries who are IDB shareholders to join them. And Canada, which controls just over 4 per cent of the vote, is weighing its decision. The tipping point to block the needed quorum – more than 25 per cent of voting shares abstaining – is within reach.
This is not about Mr. Trump’s nominee, who brings relevant background in economic, financial and foreign affairs. The main objection to his nomination is that it disregards a decades-old practice started under president Dwight Eisenhower’s auspices, which provides that the Bank would be headquartered in Washington, its president would be Latin American and its executive vice-president would be a U.S. citizen. This formula has worked well for six decades, years in which Latin American countries have increased their capital contribution and sense of ownership, and have made the Bank’s loans and programs ever more effective.
The U.S. is the largest single contributor to and shareholder in the IDB, but Eisenhower’s decision to agree to Latin American leadership of the Bank is consistent with the traditional postwar U.S. approach to multilateral organizations that he championed – influence, yes, but one-country dominance, no.
If the Trump administration’s unprecedented effort to place an American in the IDB presidency is intended to counter growing Chinese influence in Latin America, hijacking a successful multilateral institution is the wrong approach. The right way to restrain Chinese clout would be to reinforce meaningful inter-American co-operation to meet economic and social needs. Moreover, naming an American as head of the IDB shortly before the November presidential election risks marginalizing and politicizing the institution.
The pandemic has delayed or made virtual many multilateral meetings. The European Bank for Reconstruction and Development, for example, postponed its annual meeting because of the pandemic. The IDB postponed its September annual meeting for six months for the same reason. It should also defer until March 2021 the vote to elect its new president. That is the prudent step.
And at that time, the U.S. government – whether led by Donald Trump or Joe Biden – should return to the well-established norm that the IDB’s president be a Latin American. If it ain’t broke, don’t fix it.
Keep your Opinions sharp and informed. Get the Opinion newsletter. Sign up today.