New LatAm bank chief gets warm welcome for tough job ahead

The new president of the Inter-American Development Bank has been on a whirlwind global listening tour, meeting with various constituencies, shunning grand statements, and certainly not making headlines. It’s being met with a huge sigh of relief. Ilan Goldfajn’s subdued management approach is a substantial shift from his predecessor, Mauricio Claver-Carone, who was ousted in a messy and public ordeal last fall after being accused of having an improper relationship with a staffer and unfairly promoting her. Goldfajn, a former Brazilian central bank chief, faces a tough task at IDB. Importantly, he has to improve morale among staff, according to Latin America experts, who have largely welcomed the new president. And he will have to improve relations between the bank and its client countries, especially now that the region faces slowing economic growth. “He is listening a lot,” Annalisa Prizzon, senior research fellow at the Overseas Development Institute think tank in London, told Devex after meeting Goldfajn. He popped in for a chat with the group this month while in town to shore up British government support for IDB Invest, the bank’s private-sector wing. Goldfajn, who most recently was the Western hemisphere director at the International Monetary Fund, was rushed into office at the end of 2022, giving him little time to do a typical campaign-style tour before taking over the Washington-based development lender to Latin American and Caribbean nations. The new president is stepping into a troubled work environment that has plagued IDB on and off for decades but was worsened by Claver-Carone. Some staff described his rule as a “reign of terror.” The former president is now threatening to sue the bank, adding to the drama. Goldfajn, meanwhile, came into office with a subtle but firm rejection of the status quo ante. “We will create an environment where — starting with me — we listen, learn and respect different approaches,” Goldfajn told staff in January, in his first public remarks since taking the job .“Not a place of intolerance and polarization.” His office declined to make him available for an interview for this piece. Bringing it back home Goldfajn also marks a return to normalcy in another key way: Unlike Claver-Carone, he is from the region the bank serves. MCC, as he was known, was a nominee of former U.S. President Doland Trump’s administration and brought with him the pugilistic foreign policy agenda of some of the White House’s more hawkish members. Notably, beyond politics, MCC was the first U.S. citizen in a job that had always gone to a Latin American. Trump managed to take advantage of disharmony in the region and push his own man into the role. That caused a stir among some client countries of the bank, which allocated about $23 billion in financing and commitments in 2021. In one small but notable anecdote showing the change under the new leadership, Denisse Linares, an environmental activist in Peru, noted that Goldfajn himself responded to her correspondences about engaging more effectively with civil society groups. A tentative meeting is planned during the bank’s annual gathering, which kicked off Thursday in Panama. “I think he is an improvement. Never before have we gotten such an answer from the president of the bank, looking to meet with us,” said Linares, who works with Derecho, Ambiente y Recursos Naturales. She added that her team is in Panama in the hopes he follows through. Her concerns that civil society had been ignored, including their complaints around a lack of transparency and accountability, reflects a wider sense that the previous bank leadership had alienated key stakeholders. That’s according to experts such as Otaviano Canuto, who worked at IDB and is now at the Policy Center for the New South, a think tank. “Ilan is landing at a specific moment when the institution is in crisis. A crisis of legitimacy vis-à-vis staff, clients and all shareholders really,” said Canuto, who like Goldfajn is a Brazilian. Goldfajn himself came into office warning that the IDB’s projects were scoring poorly on development effectiveness. Not only was the staff demoralized, but the bank’s core work was slipping. “Certainly the pre-existing problems played a role,” said Amanda Glassman, executive vice president at the Center for Global Development, who once worked for the lender. But, she adds, IDB has a presidentialist system, which she described as “command and control” — meaning the president is critical in setting the organization’s path more so than in other multilateral institutions. Right place, right time The consensus among experts interviewed by Devex is that Goldfajn is broadly well-placed to work with client countries on social challenges and the hurdles of the 21st century. This includes issues he has defined as priorities, such as digitalization, climate change, and addressing the widening between rich and poor in a region known for deep inequality. The fact that he does not have a development background and has never run an international organization seems less important. “He does not have to know everything. You don’t have to be the expert on roads, and educational reform projects, and telecoms and everything else,” Canuto added. The trick is to manage the bank well and let the staff do their work. Goldfajn does have management chops. Born in Israel, the 57-year-old was educated in Brazil and went on to be that country’s central bank governor from 2016 to 2019. His Ph.D. thesis adviser was Stanley Fischer, who has come to be the preeminent legend of the central banking world. Notably, Goldfajn's thesis concerned debt, a useful knowledge set given the current elevated public borrowing levels. After his time at the central bank, Goldfajn went to IMF, but only lasted a year before Brazil nominated him for the IDB job. “Ilan is supremely qualified and realistic about the region’s challenges and the potential engines of economic recovery,” said Benjamin Gedan, the director of the Latin American Program at the Wilson Center in Washington. He also recently hosted Goldfajn as part of the listening tour. He is traveling the world because a number of European and Asian governments are shareholders in the bank, though it only lends in Latin America. The United States is the largest owner with a 30% share. Actions louder than words Still, the IDB chief will have to turn from listening to action mode pretty quickly. IMF warned that Latin America is set to see “slowing growth, high inflation, and global uncertainty” which will cause living standards to decline. Following years of poor growth, people “will likely face increased anxiety about their future,” the fund said, warning about social unrest. Gedan argues the bank will need a capital infusion from shareholders, especially the United States. A proposal is already on the table for an IDB Invest capital increase. “He’ll need greater support from the United States, which should vastly increase its own investments in this strategic region, including for infrastructure and renewable energy production,” Gedan said. Washington’s role For the U.S., this will be a balancing act. Claver-Carone was part of a hardline group in the Trump administration that imposed sanctions and other economic isolation measures against Cuba and Venezuela. Caracas accused Washington of trying to initiate a coup against the government in its messy support for the Venezuelan opposition. When MCC was sent packing, it was the likes of John Bolton, the former U.N. ambassador, who rushed to his defense, charging that it was all politics by the Democratic White House. Both Bolton and Claver-Carone served in national security roles in the Trump administration. Devex tried several times to obtain a comment from Claver-Carone but was unable. In a way, Claver-Carone’s appointment reflected an interest by the White House in the region, although a dogmatic approach. Under his watch, IDB’s public rhetoric was “becoming an extension of the views of the Trump administration,” said Canuto, the former bank official. Those who want to see the U.S. playing a positive role in its near-abroad say President Joe Biden will need to find a way to be engaged without coming across as too overbearing. This is, after all, a region that can be sharply divided over its views on Uncle Sam. “One thing good about MCC’s nomination was that it put the IDB as a central piece of U.S. strategy for Latin America,” Glassman said. The Biden administration’s strategy for the region, she noted, is still unclear.