Trump’s pick for head of IDB fired; we need a consensus replacement

The Inter-American Development Bank (IDB) board of directors unanimously voted last week to recommend the removal of the IDB’s president, Mauricio Claver-Carone (known as “MCC”) — and the board of governors voted to fire him Monday afternoon.

The directors now need to come up with a qualified consensus candidate to replace him.

The IDB is the critical collective action vehicle for shared challenges in the region. The United States has an interest in seeing a qualified consensus person emerge. With 30 percent of the shares, the U.S. will have a significant role to play. 

Though not generally well known in the United States, the IDB is the most important regional development institution. Last year it lent a record $23.4 Billion in the region. It is trusted across the political spectrum and has enormous influence throughout the hemisphere.

The unwritten rule — broken when MCC, an American, was appointed — that the president should be a Latin American and the number two should be a U.S. citizen is likely to be respected. Previous IDB presidents had all been from Latin America. Financial ministries are often the lead agencies for the IDB and cast the formal votes for the presidency of the bank. Foreign ministries and sometimes others often have a “voice” depending on the country. Ultimately, heads of state get involved in the campaign.

Given the need to increase diversity in the bank’s leadership, The Biden administration may favor a qualified woman from Latin America. Given the current political make-up of the region, which tilts leftwards, a candidate could emerge from a country that has a progressive/center-left government that is not creating too many “headaches” for the United States. Those that meet these criteria include: Mexico, Honduras, Panama and Chile.

The next president of the IDB should commit to staying no more than two five-year terms, and this should be part of the employment agreement.

The region is politically divided, and there are a number of governments with authoritarian tendencies beyond the traditional “left” or “right” labels. A candidate from a country with an authoritarian government is not going to succeed. The candidates mentioned below are just some of the names which should be able to command enough support to secure election and lead the bank.

Mexico: Traditionally Mexico has had strong candidates to lead the IDB. The issue, however, is that many of the well-known Mexican technocrats may be opposed by President Andres Manuel Lopez-Obrador (known as “AMLO”). Much of his career has been built in opposition to the technocratic economists that have helped lead Mexico for the last 35 years. 

There are persons who might be amenable to AMLO, including the former Mexican ambassador to the United States, Marta Bárcena Coqui; Alicia Bárcena (no relation) who recently stepped down from her position as executive secretary of “ECLAC,” the UN regional economic research institute for Latin America; and Vanessa Rubio Marques, a former under-secretary of finance in a previous government.

Honduras: With a new government in Honduras, the U.S. seeks a deeper partnership. The current “number two” of the IDB, Reina Mejia Chacon, was put forward by the former president of Honduras, who is now under arrest. Unless she has unique ties to the new government, it is unlikely that Mejia Chacon will be considered, no matter how qualified she might be.

Panama: Former Vice President Isabel St. Malo is very well regarded globally but is not of the same party as the one in power.  She was formerly the foreign minister and worked at the United Nations. Also, she may not want the role. Carmen Gisela Vergara the head of “Propanama” the foreign direct investment agency and a former commerce minister would be a great pick.

ChileMichelle Bachelet, a former president of Chile and the former head of the UN Human Rights Commission that just released an excellent report criticizing China’s treatment of the Uygurs, could win easily if she ran. However, she is 70 years old — beyond the theoretical mandatory retirement age at the IDB.

Costa Rica: The strongest candidate for the IDB presidency from the region in 2020 was former Vice President Laura Chinchilla. She dropped out when she saw that the Trump administration did not support her because she was seen as “too left.” She would meet a number of criteria for the job. One problem is that Chinchilla campaigned against the current president of Costa Rica, Rodrigo Chaves Robles, who is from a conservative party. Almost always, a candidate’s home country has to put the candidate forward, but another member country might put her forward if Costa Rica proved unwilling to support her.

Argentina: Mercedes Marcos del Pont, a former president of Argentina’s central bank and the new secretary of strategic planning, could also be a conceivable candidate. A candidate from Argentina for a series of economic and foreign policy reasons will have a hard time succeeding.

Brazil: As long as President Jair Bolsonaro is president, there will be reluctance by many countries to “reward” Brazil with the IDB presidency no matter how unfair that may be. The polling seems to indicate that a progressive government might come to Brazil in December 2022, but anything is possible.

What about some qualified men?

My absolute favorite would be Dr. Juan Jose Daboub, former finance minister of El Salvador and former managing director of the World Bank. Daboub brought El Salvador to “investment grade” and drastically cut poverty on his watch.

Gustavo Beliz, former planning minister of Argentina and a long-time executive at the IDB, has expressed interest in the job; the current Panamanian ambassador and former minister of commerce of the current government, Ramon Martinez, would be excellent.

Whomever is selected will face the challenge of charting a new way forward in the context of a global economy that has been transformed by the COVID-19 pandemic and the energy and food crisis unleashed by Russia’s invasion of Ukraine.

More broadly, the bank should help countries address a series of challenges. The first is to respond to the immense economic and social challenges of the pandemic. Second, the region needs more infrastructure, more energy and a more responsible approach to the extraction of minerals like lithium and copper. Third, the bank can help countries address the drivers of migration which, thanks in part to Venezuela, has become a regional concern. Fourth, many countries in the region are stuck in the so-called “middle income trap” with the added problem that millions of newly middle-class families were set back by the pandemic. Fifth, the region should be a beneficiary of “nearshoring,” and the IDB should be an enabler of that. Sixth, the IDB can be a trailblazer in addressing deforestation.  

Critically, the IDB may require a capital increase to meet this ambitious agenda. A capital increase is a political “deal,” and the U.S. should ask for some things in return. Under a new capital increase, the IDB should add a number of new shareholders, including Taiwan. Taiwan has 8 of its 14 diplomatic “allies” in the region. Taiwan is a shareholder of the Asian Development Bank and the WTO as an “economy.” Australia, India, Singapore and the Gulf States all might want to join.

It is likely that the board of governors will meet in person in three weeks on the sidelines of the World Bank/IMF annual meetings to begin deliberations on a replacement. “Pre candidates” should be prepared to come to D.C. in mid-October.

Assuming a new IDB president is elected, President Biden should receive the new president in the Oval Office, something not done in decades. At the Summit of the Americas, the United States announced its intention for a new economic partnership with the Americas. Embracing a new IDB president and endorsing an ambitious agenda would send a strong signal.

Originally published on on September 26, 2022.

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