A Quiet Revolution in Climate Finance

Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: The Inter-American Development Bank boosts its climate finance lending, Haiti’s acting prime minister announces his resignation, and Latin American translations dominate the International Booker Prize.

In Punta Cana, IDB Banks on Change

A financial breakthrough occurred last weekend in the Dominican Republic. At its annual meeting, held this year in Punta Cana, the Inter-American Development Bank (IDB) announced that it aims to increase its lending by around $112 billion over the next 10 years, upping its annual loans by almost 50 percent. Much of the additional lending will be devoted to climate finance.

Although the IDB includes 48 member countries based mostly in the Western Hemisphere, the planned lending increase was closely watched around the world.

Developing countries often argue that they need more financial support to respond to climate change. Rich countries offer them some funds through commitments made at United Nations climate negotiations, but these disbursements are scattered and inadequate. Talks at the G-20 level in recent years have zeroed in on the potential of multilateral development banks to pump out the necessary credit at a larger scale.

Those banks—which include the World Bank, the IDB, and others—could distribute more money if they make reforms to their lending strategies, a G-20 expert report concluded last July. But such changes, often referred to as “stretching” a bank’s balance sheet, are easier said than done. They include steps such as issuing new types of bonds and being less conservative about calculating how much banks are able to loan at one time.

Some of the techniques that the IDB envisions for its own stretching that were announced last weekend depend on action from other actors in the global financial system. IDB President Ilan Goldfajn told Foreign Policy that the IDB and the African Development Bank are seeking approval from the International Monetary Fund (IMF) to allow some of the IMF’s Special Drawing Rights to be used by development banks as capital for the first time. Special Drawing Rights are a tightly controlled IMF reserve asset that typically sit in the accounts of central banks.

Goldfajn said he hoped for positive news on the proposal at the IMF’s annual spring meetings next month. If he does not get it, the IDB has other proposals for increasing its lending, including making deals with private insurers that would allow it to borrow more. “We are trying to innovate,” he said. “We are partnering with everyone we can.”

Some of the IDB’s plans for stretching its lending still require third-party approval. But the IDB’s shareholders—of which the United States is the largest—approved the IDB’s new institutional approach in Punta Cana. The shareholders also greenlit $3.5 billion in new funding to supply the bank. U.S. Treasury Secretary Janet Yellen applauded the IDB’s new strategy in a statement.

Some climate finance experts have called for this kind of uptick in development bank lending for years. Multilateral development banks “deserve to be able to do more with their capital because they will get paid back,” economist Rebecca Ray of the Boston University Global Development Policy Center told Foreign Policy.

Academic research shows that countries that borrow from multilateral banks tend to pay those banks back before they pay back other creditors, who may be faceless private bondholders. Multilateral development banks, by contrast, are diplomatic entities with whom countries have continuous relationships, Ray added.

Elsewhere, the Asian Development Bank said last September that it is also pursuing the G-20-endorsed stretching approach to boost its annual lending by around 40 percent. World Bank President Ajay Banga embraced the reforms too, saying that they and a new cash infusion could yield up to $125 billion in new lending over 10 years—a boost in annual lending by around 10 percent from 2022 levels.

Indonesia, India, and Brazil have all prioritized development bank reform as part of their consecutive G-20 presidencies from 2022 to 2024, Ray said—and now, those efforts appear to be making a difference. “We’ve had so many years of hoping for action in these directions,” she added.

Upcoming Events

Tuesday, March 19: The U.N. Human Rights Council discusses Venezuela.

Saturday, March 23: Bolivia carries out a census.

Tuesday, March 26: French President Emmanuel Macron begins a multiday visit to Brazil.

What We’re Following

Ex-presidents in court. After a lengthy court saga, former Panamanian President Ricardo Martinelli on Sunday was definitively disqualified from running for office due to an existing corruption conviction. The move was celebrated by anti-graft advocates. Martinelli had hoped to contest Panama’s election on May 5.

Meanwhile, former Honduran President Juan Orlando Hernández was convicted of drug trafficking in a U.S. federal court last week and may spend the rest of his life in prison. Hernández was indicted by U.S. authorities just weeks after leaving office in 2022, becoming the first former head of state convicted of drug trafficking in the United States since Panama’s Manuel Noriega in 1992.

Argentina’s austerity. The child poverty rate in Argentina is on track to hit 70 percent in the first quarter of this year, according to UNICEF, which cited Argentine President Javier Milei’s austerity measures as a cause of the increase. Milei has slashed government spending on social programs. The country’s child poverty rate in the first half of 2023, before Milei took office, was 57 percent.

The most painful period of Milei’s shock therapy is yet to come, Argentine economist Sebastián Menescaldi told journalist Lautaro Grinspan in Foreign Policy. Utility price hikes are expected to continue rising this month as Argentina begins a new school year. “[P]eople will feel like they are drowning,” Menescaldi said.

Milei’s reforms have yielded some positive macroeconomic results, such as a rare budget surplus in January, Grinspan noted. But they are expected to keep straining households.

Spanish author Eva Baltasar, right, and Brazilian literary translator Julia Sanches, center, pose with the book “Boulder” on the red carpet upon their arrival for the International Booker Prize award ceremony in London on May 23, 2023.Justin Tallis/AFP via Getty Images

Literary luminaries. This year’s long list for the International Booker Prize suggests a new boom in Latin American fiction, the judges said. The International Booker Prize differs from the standard Booker Prize in that it celebrates works translated into English, rather than those originally published in English. Four out of 13 books on the list were written by South American authors.

The first “Boom Latinamericano,” as it came to be known, included iconic authors such as Gabriel García Márquez and Mario Vargas Llosa in the 1960s and 1970s. Among the newer books with global appeal are titles that deal with the legacy of slavery in Brazil and life in Venezuela under the regime of Nicolás Maduro.

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In Focus: A Murky Leadership Change in Haiti

Protesters react as tires burn in the street during a demonstration following the resignation announcement of acting Haitian Prime Minister Ariel Henry, in Port-au-Prince, Haiti, on March 12.Clarens Siffroy/AFP via Getty Images

On Monday night, acting Haitian Prime Minister Ariel Henry announced that he plans to step down once a transitional leadership council is established in the country. In late February, Haiti’s security and political crisis intensified after Henry traveled internationally and gangs increased their control over much of the capital, Port-au-Prince, in his absence.

Plans for a U.N.-backed multinational security intervention in Haiti have been delayed for months in part due to concerns over Henry’s legitimacy. In response to Henry’s announcement, Kenya—which is leading the U.N.-endorsed force—announced Tuesday that it would delay its deployment until the transitional government is formed.

But emergency talks between Caribbean countries, the United States, and Haitian political actors aimed at naming that transitional government have so far been slow at yielding consensus. Although Haitians are unhappy with the political situation, they are also deeply divided over who should govern in Henry’s place.

The pause on the U.N.-backed security deployment should be a moment for reflection, the Caribbean Policy Research Institute’s Alexander Causwell wrote in Foreign Policy on Wednesday. Although Kenya had planned to send 1,000 police officers to Haiti, Causwell argued that Haiti’s situation is best understood as an armed insurgency that calls for the “work of soldiers, not police.”

Unless a military deployment is carried out, “anarchy will prevail, with attendant consequences for the people of Haiti and the security of the Caribbean basin,” Causwell wrote.

Haitian civil society groups have long called for a vote to choose Henry’s successor, but rushed elections without proper preparation are not “the panacea that the international community sees them as,” analyst Philippe de Bard wrote in Foreign Policy. International envoys should instead focus on making sure any vote is legitimate, he argued.