The IDB and the World Bank join forces to promote the development of Latin America

The Inter-American Development Bank (IDB) and the World Bank have the same mission: to promote development. The two financial organizations overlap in Latin America and the Caribbean, where the IDB has its scope of action. Despite their common goals, they carry a tradition in which they have frequently acted as competitors and with suspicion of each other. The two new presidents, Ilan Goldfajn, of the IDB, and Ajay Banga, of the World Bank, have decided to join forces in the region.

Goldfajn and Banga signed a memorandum of understanding this Thursday at the IDB headquarters in Washington. The alliance is initially for four years and extends to three areas: the protection of the Amazon, strengthening the Caribbean’s capacity to confront natural disasters and reducing the digital divide throughout Latin America and the Caribbean, with special focus on education.

Beyond the signing of the agreement, Banga and Goldfajn have shown great personal complicity in a previous discussion. They consider themselves friends, they know each other from the private sector and also from when Banga was in the financial sector and Goldfajn was the governor of Brazil’s central bank. Both have assumed their position in the last year and in both cases they arrive with the mandate to work in a different way.

Even before this memorandum they have begun to work together. Last June, both visited Peru and Jamaica, where they met with Peruvian President Dina Boluarte and Jamaican Prime Minister Andrew Holness. “It was a historic trip. The first time that the two presidents traveled together to the region,” said Goldfajn.

Somewhere during that trip, while the president of the IDB was having coffee and the president of the World Bank was having a glass of wine, as they have joked, they began to talk about the need to collaborate more closely. And in those conversations on the trip, they thought that the best way to put those good wishes into practice was to choose some topics that were important for both organizations and thus, a few months later, the alliance signed in Washington this Thursday has crystallized.

A Rubik’s cube

Goldfajn and Banga have alluded to the magnitude of the challenges ahead. “It’s like a geometric progression. You can’t win alone. You have to join forces, and join forces not only between multilateral banks, or with governments, but really with civil society, philanthropy and the private sector,” said Banga, who pointed out that both the problems and the possibilities of Cooperation are intertwined as in “a complex Rubik’s cube.”

“Multilateral bank reform is an opportunity to increase development impact,” said Goldfajn. “We have to focus on implementation. There are too many conferences, too many seminars,” said Goldfajn, who has called for a cultural change and has called to move from words to actions and also to give less importance to the money mobilized and more to the impact generated.

Under the agreements signed, in the Amazon, the organizations will combine their expertise to support countries in their transition towards zero net deforestation, contribute to people obtaining better livelihoods and at the same time preserve the ecosystem, including instruments innovative financiers.

In the Caribbean, the agreement will result in greater support for countries to manage disasters and climate crises and develop financial protection mechanisms for when catastrophes occur.

The organizations have also committed to working together to promote digital development in the region. The action plan proposes that through this collaboration digital infrastructure and connectivity can be effectively expanded to help accelerate socioeconomic development. Through the “Connected Schools for All” initiative, the World Bank and IDB will develop plans to close the digital divide in education, ensuring that young people have the skills necessary for the economy of the future. An innovative pilot program will bring connectivity to underserved areas of the region, helping more people gain access to the Internet opening new opportunities.

Aside from the agreement for the IDB and the World Bank to coordinate with each other, IDB Invest, the private sector arm of the IDB Group, and MIGA, the political risk insurance arm of the World Bank, have agreed to collaborate to mitigate political risk in the region. The two agencies will work together with the World Bank’s International Finance Corporation (IFC) to attract more private sector investment to the region.

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