WASHINGTON DC, July 1, 2010 - The World Bank Group (WBG) committed $17.9 billion in fiscal year 2010 –a slightly higher figure over last year’s record lending of $17.1 billion- to support countries in Latin America and the Caribbean (LAC) as they recover from the global financial crisis and resume a path of sustained growth.
The region is expected to post 4.5 percent growth in 2010, with Brazil leading the recovery with a projected 6.5 percent expansion on account of strong commodity demand. Other South American economies such as Peru, Argentina and Uruguay are also expected to reach or pass the 4 percent growth mark. Mexico’s expansion is projected to rebound to 4.3 percent, marking the fastest growth pace in almost a decade, while Central American economies will lag in the recovery on weak workers’ remittances from the United States, projecting a 2.7 percent growth for 2010. Excluding Haiti, growth in the Caribbean region will accelerate modestly to 3.2 percent in 2010, from 2 percent in 2009.
“We continue to see the fruits of our unprecedented support to the region’s recovery as it heads towards solid growth in 2010 and beyond, while renewing our commitment to improving human opportunities for all its citizens,” said World Bank Regional vice president Pamela Cox.
In Latin America and the Caribbean, the WBG maintained its strong support for the region approving $13.9 billion in new loans in fiscal 2010, $13.6 billion from the International Bank for Reconstruction and Development (IBRD) and $0.3 billion from the International Development Association (IDA).
IDA support includes $151 million in new funding to help Haiti in the aftermath of its devastating January 12 earthquake. During this fiscal year the Bank committed a total of $250 million to support Haiti’s recovery and development, which includes the above mentioned $151 million in grants, plus $39 million in debt cancellation and $32.5 million in investments from the IFC.
Mexico, Brazil, and Colombia were the largest borrowers, while transportation, public administration and health and social services received the most funding this fiscal year. Support to the region represented 31 percent of IBRD lending and nearly 24 percent of total IBRD/IDA lending.
The WBG’s International Finance Corporation (IFC), which supports sustainable private sector development through financing and advisory services, committed $3.9 billion to private sector projects in Latin America and the Caribbean, of which $897 million were in syndicated and parallel loans, a 25 percent increase in mobilization over the previous fiscal year. IFC's investments spanned 23 countries in the region, with a focus on Central America and the Caribbean.
In an unpredictable economic landscape, IFC directed significant financial resources into regions where we could do the most good,” said Lars Thunell, IFC’s Executive Vice President and CEO. “We mobilized capital to address the major development challenges of our time. We leveraged our global expertise, developing innovative products and services to help our clients succeed. We catalyzed investment in emerging markets, demonstrating to investors that development and commercial success can go hand in hand in these markets.”
IFC also supported 91 advisory services projects to help improve business environment, promote access to finance for underserved segments and enhance the benefits of private sector projects in local communities.
To help countries during the economic recovery, the WBG’s Multilateral Investment Guarantee Agency (MIGA) in fiscal year 2010 provided $18.1 million in guarantees for financial sector projects in the Latin American and Caribbean region.
In addition, last year MIGA signed a Memorandum of Understanding (MoU) with the Central American Bank for Economic Integration (CABEI) aimed at promoting foreign direct investment in Central American countries by jointly providing non-commercial risk guarantees for projects in a variety of sectors, mostly through coinsurance arrangements.
“MIGA remains committed to helping the economies of the Latin American and Caribbean region continue on a path of growth by supporting investments that create jobs, lending services to the real economy, and infrastructure,” says MIGA’s Executive Vice President, Izumi Kobayashi. “Countries in the region are also continuing to become major sources of outward investment, and we stand ready to support such developmentally-beneficial activity across borders.”
Region Eyes Solid Economic Recovery
Several LAC countries were able to conduct countercyclical policies, particularly on the monetary front, for the first time in decades. The effectiveness of these policies was complemented and enhanced by the sizeable, flexible, and timely provision of liquidity and budget-support financing from multilateral institutions.
By early 2010, the region’s international reserves were more than three times what they had been five years earlier. Public sector debt remained manageable, averaging 30 percent of GDP, and the region underwent no banking crisis, despite the subprime-driven global turmoil.
The current pattern of global recovery has favored the region so far. Countercyclical policies have supported domestic demand in the larger countries and external demand from fast-growing emerging economies, especially China’s, has boosted exports and terms of trade for LAC’s net commodity exporters.