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Tuesday, March 26 2019 @ 06:14 PM UTC

The IDB goes with the flow

Foreign Direct Investment Edited by Richard Lapper, Latin America editor Ft.com - Luis Alberto Moreno, president of the Inter-American Development Bank, made his priorities clear last year when shortly after taking up the job he threw the bank's weight behind a new policy designed to integrate Latin America's poor majority into economic development. The "Building Opportunity for the Majority" initiative, heavily influenced by Indian business guru CK Prahalad, has focused on persuading businesses to find new ways to bring the poor into the economy either as consumers or as producers. The bank's problem, however, has been how to stimulate broader development than that already happening. Great store, for example, has been set on the innovative business methods of companies that have built up retail franchises in poor areas - like Casas Bahia, the Brazilian retail group, or banks that offer accounts for low-income customers, such as Banco Azteca of Mexico. But those companies would have been doing business any way. Similarly, the IDB has been among those emphasizing the development potential of remittance flows sent home by migrant workers living in the US, Europe and Japan. These flows amounted to more than $62.3bn in 2006 according to new research. Yet there is no sign as yet that the bank is having much success in persuading financial institutions to offer deposit accounts, life insurance or mortgages to migrants in the US and recipient families in Latin America, all of which would potentially allow families to invest more easily in their futures by buying property or starting small businesses. (more)

A different kind of dilemma could bedevil another "opportunity for the majority" idea that surfaced at this weekend's annual conference in Guatemala City. On Friday the bank agreed to work on plans to make land titles more widely available. This would, for example, allow the poor to use land - often their only asset - as collateral for loans. The scheme is in its early stages - a statement of principle has been agreed with the Lima-based Institute for Liberty and Democracy, an organisation founded by Peruvian economist Hernando de Soto. According to bank officials it envisages working on developing land registration mechanisms in Haiti, the Dominican Republic, Mexico, Guatemala and Panama and one other country. Here the problem is not that land titling is already happening. Far from it. Only limited progress has been made anywhere in the region, with powerful vested interests that prefer existing legal ambiguities blocking reform. The bank itself has started similar schemes elsewhere without success, for example. If it is to succeed this time it must be prepared for some complex political challenges.

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