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The president of Latin America’s largest development bank has called on leaders to seize opportunities to export green energy, food and critical minerals to change the region’s economic fortunes.
Inter-American Development Bank President Ilan Goldfajn plans to increase lending by $20 billion over the next 10 years. He believes this will help the region capitalize on the shift to clean energy and moves to bring production closer to the U.S. market, as well as meet citizen needs for better health, education and digital infrastructure.
“This is a turning point,” Goldfine told the Financial Times during a visit to London. “This is not just a narrative, it’s actually an opportunity that can be seized… We will be involved in everything we can do in areas such as renewable energy, clean energy and clean minerals.”
Goldfajn believes that Latin America, which holds two-thirds of the world’s lithium reserves and 38% of copper reserves, can play an important role in providing the world with the raw materials needed to shift to electric vehicles and renewable energy.
China currently dominates many rare earth and mineral markets, raising concerns in the West about energy security.
Latin America also leads in global food exports, giving it the potential to be part of the solution to some of the world’s most pressing challenges, the president of the Inter-American Development Bank said. Russia invaded Ukraine and grain exports were severely hit.
However, Goldfine also warned that governments in the region need to invest in better education, increase productivity and ensure a stable investment environment to fully benefit.
For the region to use its abundant and cheap solar and wind energy to export green hydrogen, Goldfajn said: “You need to organize, you need to plan, you need to bring resources, you need rule of law, you need to have regulations.” Chile has been this way A pioneer in this field, Brazil’s new left-wing government is also enthusiastic about it.
Goldfein is a former governor of Brazil’s central bank, worked at Credit Suisse, and headed the International Monetary Fund’s Western Hemisphere Department. Goldfein said he would prioritize results over loan amounts.
Referring to a hypothetical $500 million digitization project, he said: “You approve it and pay for it, and when you’ve paid all the expenses, everyone is happy. But now, we want to see: “Tell me How much, and then how are you going to measure that and how are we going to follow up? “That will be our measure of effectiveness.”
Goldfein also advocated greater coordination with other multilateral development banks.
Inter-American Development Bank Signed a four-year partnership with the World Bank By the end of August, the two sides will work together to address deforestation in the Amazon, help the Caribbean address climate disasters, and improve internet access for poor people in Latin America.
“The agreement with the World Bank is a breakthrough,” Goldfein said. “This is the first agreement where we don’t just sign a letter of intent and say, ‘Let’s be friends.’ We actually have working groups and we only sign when they come up with a plan of action.”
He added that the IDB was discussing similar cooperation agreements with Latin American development bank CAF and the International Monetary Fund, but would only sign the deal after clear deliverables were agreed.
Goldfein arrived at the IDB amid chaos last September after the firing of his U.S. predecessor, Trump appointee Mauricio Claver-Carone. An outside investigation has uncovered an undisclosed intimate relationship between the Cuban-American former lobbyist and a subordinate to whom he gave two significant pay raises. Claver-Carone has denied the accusations.
Goldfein, who was elected president last November with U.S. support, moved quickly this year to rally employees behind a new vision for the Washington-based bank.
His team is developing a formal proposal to the 48 shareholder countries to increase capital for the IDB’s private sector lending arm. Although Goldfajn did not confirm a specific amount, the figure is likely to be between $3 billion and $5 billion.
The proposal will be presented at the bank’s next annual meeting in March 2024, along with the IDB’s new seven-year strategy. This will allow the bank to focus on helping Latin America and the Caribbean adopt clean energy and address what Goldfein calls the region’s triple challenge: governments starved of money, citizens desperate for better public services and the region’s low increase.
New financial instruments may help. These could include loans to Caribbean countries that allow payment moratoriums in the event of a climate disaster, or groundbreaking green loans such as the $1.5 billion Uruguay sovereign bond issued last year. The Inter-American Development Bank provided technical assistance in designing the instrument, which would have lower interest rates if targets for reducing greenhouse gas emissions are met.
“The entire region is facing climate change issues,” Goldfein said. “So there’s an opportunity for the region to seize this opportunity, invest in clean energy, change the (energy) matrix, and export some of that energy.”
As an example, he cited a $400 million loan from the Inter-American Development Bank in June to help Chile build a green hydrogen export industry using its cheap and abundant renewable electricity. “Green hydrogen is booming because there’s a lot of demand in Europe,” Goldfein said. “This is an area where it can be produced in a cleaner way. . . . We need to seize the opportunity.”
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