The confirmations are a victory for IDB President Mauricio Claver-Carone, a former official in the administration of U.S. President Donald Trump who took office in October and pledged to elevate smaller countries in bank leadership. Honduran Reina Mejía, currently chief executive officer of Citi Honduras, was named executive vice president Friday, marking the first time a Central American will hold one of the highest leadership roles.
“It’s a very important signal that is being sent. It ratifies what [Claver-Carone] is saying: ‘We will make [smaller] countries a priority.’ I think it was about time and very much needed,” said Mauricio Silva, former IDB executive director for El Salvador. “The smaller and vulnerable countries, which are by far the majority — at least two-thirds of the countries — have not received the attention and the assistance from the bank that they should. Hopefully they will now.”
Also confirmed to new roles by the 14-member board are Richard Martínez of Ecuador as vice president for countries, Benigno López of Paraguay as vice president for sectors and knowledge, and Gustavo De Rosa of Argentina as vice president for finance and administration.
De Rosa has worked for the bank as general manager of the finance department and chief financial officer since 2015. He was added to the slate of candidates being voted on by the board for last week’s meeting, while the other three had initially been up for consideration during the last week of October before postponement by Mexico and Argentina.
Those two countries abstained from the board vote, telling Reuters the slate of candidates did not accurately represent Latin America and the Caribbean.
The Trump administration surprised the region this summer by nominating Cuban-American Claver-Carone for the top job at IDB as former President Luis Alberto Moreno of Colombia prepared to depart after 15 years at the helm. The bank previously had always been led by someone from Latin America, with the executive vice president typically being an American. The U.S. is IDB’s largest shareholder at 30%.
Other IDB leadership has had heavy representation from larger borrowing countries like Colombia, Argentina, and Mexico, while the 19 smaller borrowing nations have not been tapped for major roles. Claver-Carone told Devex last month his will be “the presidency of small countries.”
In a statement after the vote, Claver-Carone called Mejía, Martínez, López, and De Rosa “highly respected professionals.”
New Inter-American Development Bank President Mauricio Claver-Carone said he's confident he can secure a capital increase for the bank that will help Latin America and the Caribbean recover from COVID-19.
“Their complementary private- and public-sector backgrounds, innovative approaches, and first-hand experience with the needs and challenges of the region will strengthen the IDB’s leadership during these times of crises,” Claver-Carone said. “I thank the Board for their consideration of these talented individuals, whose historic and diverse leadership will mark a new chapter for the IDB.”
Although the nominees were considered qualified for the positions to which they were nominated, Silva said the nominations created a worrying split in regional bank membership, along with some ethical concerns. Mexico and Argentina — which initially opposed Claver-Carone’s nomination — also opposed the first vote on the vice presidential nominees that was scheduled in October, saying the bank should wait until after the U.S. presidential election.
Some ethical questions were raised about candidates such as Martínez. He was Ecuador’s finance minister until he resigned earlier this fall and is prohibited by the Ecuadorian Constitution from serving at any international financial institution within two years of leaving government service.
Silva said this shows a lack of respect from the bank for democratic norms in the region.
“It is a break of the cohesion of the bank. It’s an unprecedented thing that happened, the administration having to present four times the nomination and three times it was withdrawn by member countries, and very important member countries,” Silva said. “This reflects the tensions within the bank that are not good.”
Amanda Glassman, former principal technical lead for health at IDB, said the voting delays from members of the board of directors were likely a combination of U.S. domestic political considerations and a signal of displeasure from the larger countries — which have typically had more power in the institution — upset at seeing their influence wane as smaller nations are elevated.
“Who borrows? Your biggest clients. And that’s what you’re funded from, are the Argentinas and Colombias and Mexicos,” said Glassman, now an executive vice president at the Center for Global Development. “To the extent that you create a disruption or a space between your biggest borrowing member countries and their representation in the bank, I think you have a problem.”
“We will have to wait and see what the Biden administration does with respect to its relation with … the administration of IDB appointed by the Trump administration.”— Mauricio Silva, former executive director for El Salvador, IDB
Claver-Carone has pledged to secure IDB, which currently has a $12 billion borrowing limit, a capital increase during his five-year term. He argues that the institution will need around $20 billion to appropriately respond to the aftermath of the COVID-19 pandemic in the region, one of the hardest hit in the world in terms of total caseload, as well as economic shock. The high proportion of informality in Latin America and Caribbean economies has left many unable to earn a daily wage due to lockdown restrictions.
Glassman said that helping the region recover from the crisis will require major investments in social sectors and a focus on direct lending to regional governments. The new executive team may not be best placed to lead that type of development lending, she said, noting that private sector activity alone is not sufficient to raise the entire region out of poverty.
“It’s a bunch of finance ministers and banking executives, so I think they’re qualified in the sense they’ve had a good career in their respective fields. But I think what we can say is the job of the bank is actually to provide finance mainly to social sectors and infrastructure. The question is: Do those people come with that kind of knowledge?” Glassman said. “At face value, I think former finance ministers are a good bet because at least they’re economists and they understand the issues.”
Before he was named U.S. president-elect, Joe Biden opposed Claver-Carone’s nomination as IDB president on the grounds that the regional lending institution was best led by a citizen of Latin America. Some Democrats in the U.S. Congress also expressed opposition to the former Trump administration official, who would need support from multiple congressional committees to get his promised capital increase. With control of the Senate still undecided but likely to remain in Republican hands, Claver-Carone could have a higher chance of delivering the additional funds.
A capital increase would also need backing from the secretary of the U.S. Treasury, engagement from whom Glassman said would likely dictate how large of a priority IDB is for the Biden administration. Removing Claver-Carone would now be more complicated with the rest of the executive team confirmed, she said, and could impact U.S influence at the bank, were the Americans to give up the top job.
“We will have to wait and see what the Biden administration does with respect to its relation with the multilaterals in general, and specifically with IDB and the administration of IDB appointed by the Trump administration,” Silva said. “The thing that we will now have to watch is the very needed balance between the two roles of a development bank: being a bank that has to move money and being a development institution that has to give technical assistance and prioritize the most needed countries.”