Special edition: Latin America has what the world needs

In Asunción, Paraguay, the Inter-American Development Bank brought the global issues of multilateralism, declining aid, and the potential of working with the private sector to a lesser-known corner of the world.

The vibe at the IDB’s annual meetings, compared to other large gatherings I’ve gone to in the last year, was overwhelmingly positive. Few attendees had anything negative to say about the bank. Even civil society was complimentary.

Perhaps some of the good vibes were built into the venue: The meetings took place at the headquarters of the South American Football Confederation (soccer for the Americans), known as CONMEBOL. On Wednesday night, staff members from IDB — including President Ilan Goldfajn — competed in a soccer game of international versus local staff. The game was surprisingly tense — finishing 1-1. The bleachers were stacked with meeting-goers taking a well-deserved break after a long day of conferencing.

These meetings stood out because of the niche Latin America inhabits in the world of development: The region is not in extreme debt distress, it has natural resources galore, and it has shown an eagerness to harness new technologies such as hydroelectricity, which powers 41% of the region. All of this means that Latin America has the resources to take advantage of private funds right at the time when development is increasingly dependent on them.

We spoke with Edgardo Álvarez Chávez, secretary-general of ALIDE — an association representing public development banks across Latin America and the Caribbean. He said that now is Latin America’s moment. “We have what everybody wants. We have the people, skilled people, we have natural resources. We have copper, we have lithium,” he said. “But we must add value. Industrialization is the key.”

Countries around Latin America are hopping on the bandwagon. “We are ready to take on this challenge,” said Paraguayan President Santiago Peña on Friday at the conference. “We have worked for many, many years to strengthen our institutions, establish responsible economic policies, and we wagered on sustainable development. Our aim is not to grow for the sake of growth; we want to grow better.”

The challenge now is scaling up and cultivating the regional leadership and institutions to carry out sustainable development.

And IDB, the premier multilateral development bank for Latin America and the Caribbean, wants everyone to know it's up to the challenge.

Read: Who were IDB's top contractors of 2024? (Pro)        

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Punching above its weight

Goldfajn used every one of his speeches to highlight that 1,600 representatives from the private sector were present, 300 of them CEOs.

Faheen Allibhoy, global head of development finance and advisory at J.P. Morgan, was one of those private sector representatives.

She told me that the bank “has been very intentional about its strategy," from spinning off its private lending arm, called IDB Invest, to give it a separate balance sheet, to raising funds in capital markets and recruiting staff with commercial banking backgrounds.

Morgan Doyle, the general manager of the Southern Cone Regional Country Department at IDB, confirmed the push, telling Devex that there are plans to "substantially increase our private sector staff over time.”

"They're small but mighty,” said Allibhoy, adding that IDB Invest has leaned into an “originate-to-distribute” model — structuring deals and then bringing in outside investors — a strategy that Allibhoy said has allowed the relatively small institution to “punch above its weight.”

Still, structural gaps remain. She said institutions such as IDB and the World Bank are structurally organized around a clean public vs. private divide, depending on the mandate of the project. But, she said, the private world doesn’t see it like that.

“I very much was in this mindset that like [International Finance Corporation] does private sector and World Bank does public sector, and the IDB model also completely made sense to me. IDB Invest does private sector and IDB does public sector,” she said, referring to her 18 years of work at IFC. “But the private capital markets don’t look at the world that way. … They look at issuers … by investment grade. How creditworthy are they?”

Big kids’ table

Two big shareholders of the bank, the United States and China, were very quiet this week at the meetings, but their influence was still felt.

China’s hold on Latin America continues to grow — often through turnkey projects that bring financing, companies, and labor together — offering a very different model from Western-backed development finance, which usually separates funding from implementation, relies more on competitive procurement and local partners, and ties projects to governance, environmental, and social safeguards.

The U.S. government’s changing priorities also seemed to define the IDB meetings. There were no panels on climate change, and in a speech about resilience and critical minerals, Goldfajn did not mention climate change at all. However, the topics lived behind the scenes.

“[Climate and gender] were a feature of our one-on-ones,” Loyce Pace, the regional director for the Americas at the International Federation of Red Cross and Red Crescent Societies, told me. “I would say that there are people who continue to serve in these formal government or donor capacities who still very much have an interest. I think they're trying to be innovative or creative about how they approach it, and I am pleased that no one is shutting down the conversation.”

Meanwhile, the region is attracting some new friends.

The Qatar Fund for Development, or QFFD, in particular, had a significant coalition registered for the meetings but could not make it due to flight restrictions connected to the Iran war. In a comment to Devex, Rwodah Al Naimi, director of investment for QFFD, said that the fund is expanding its development engagement in Latin America and the Caribbean through a strategic partnership with the IDB and IDB Invest.

“Latin America and the Caribbean present significant opportunities for development partnership, particularly in areas such as sustainable infrastructure, climate resilience, digital transformation, energy transition, and inclusive economic growth,” said Al Naimi.

The two organizations now have a long-term framework that will help facilitate new, scalable financing models. “Beyond financing, the partnership also promotes knowledge exchange and policy cooperation, including initiatives to strengthen economic and development ties between the Gulf region and Latin America,” she added.

From sea to shining sea

IDB is helping finance a 2,300-mile highway that will stretch from the Atlantic to the Pacific as part of its new plan to connect South American countries with digital and transit infrastructure, as well as regulatory integration. The goal is to link South American countries and correct the continent’s severe lack of trade routes, which have caused it to have a fraction of the trade enjoyed by Europe or Asia.

“Trade in South America is way below any other trade or geographic regions,” IDB’s Doyle told me. “There's a real recognition that there's an enormous opportunity and a need.”

The operation is a private-sector catalyst. IDB officials are banking on the road — as well as other parts of the project — to trigger a wave of investment in logistics, agro-industry, and digital infrastructure, creating a much-needed jobs engine in historically isolated regions.

But critics warn that the rush of capital risks accelerating deforestation and encroaching on the territories of the uncontacted Indigenous Ayoreo people.

"It's gonna majorly change the landscape,” Cecilia Vuyk, a development officer at the United Nations Development Programme country office in Paraguay, told me. “One of the main challenges the region has is to be able to move the commerce … in the region more rapidly. The Bi-Oceanic road is definitely going to help to do that.”

However, she added, “it's also gonna have a social impact and an environmental impact that has to be seen, that has to be put on the table.”

Read: Is a transcontinental highway the key to unlocking trade in Latin America? (Pro)

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A critical demand

IDB announced on Thursday its new LAC Minerals, or Latin American and Caribbean Minerals, initiative, designed to help Latin America capitalize on its critical minerals supply and meet global demand with that supply.

The critical mineral focus will help Latin American countries extract minerals, but more importantly, it aims to move them beyond just extraction to developing refining and processing capabilities. For the rest of the world, it is about securing a stable critical mineral supply chain.

“There is a very strong demand from both the United States and Europe, as well as Japan and Korea, to diversify the supply of critical minerals,” said Tomás Serebrisky, manager of infrastructure and energy at IDB, at a press briefing.

IDB plans to help Latin America bring critical minerals to the world through policy reforms that enable investments, de-risk private investments, and provide associated infrastructure to mining regions.

With the global market for critical minerals expected to reach $770 billion by 2040, Latin America is positioning itself as a stable source of critical minerals, but some civil society organizations are worried this could just continue the destructive path of mining.

“We are facing a risk that the region could become a sacrifice zone to enable the energy transition in the global north,” Camila Bartelega, economist at the Interamerican Association for Environmental Defense, told Devex. “The energy transition should not replicate historical extractive models.”

IDB, however, insists that mining deals will benefit from its environmental and social safeguards, such as community consultation and dispute mechanisms.

Read: IDB to connect Latin America critical minerals supply with global demand

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Andrew Kaminsky contributed to this special edition of Devex Newswire.