Development Bank Plans Natural Disaster Fund for Latin America

March 19, 2012

The Inter-American Development Bank has proposed allowing member countries to tap loans in case they need to respond to natural disasters, the multilateral lender’s president said on Saturday.

Luis Alberto Moreno said the disaster funding would be financed by credits normally set aside for counter-cyclical spending in sharp economic downturns.

“What we want to do is liberate these credits for things related to natural disasters, so countries can be ready to disburse them if needed,” he told Reuters.

He did not say how much cash would be available for disasters, but seemed to downplay expectations about how much funding would be made available. “This is something we have to talk about” with member states, he said.

The IADB is one of the main sources of development financing for Latin America and the Caribbean and approved $10.9 billion in loans last year.

Moreno said he does not expect the bank to hold another general capital increase after a recent boost by $70 billion to $170 billion. The increase raised the IADB’s annual lending capacity to about $12 billion.

Koldo Echevarria, an IADB manager, said the natural disaster plan presented to the bank’s governors would allow countries to use the loans to reinforce their financial systems. He did not say when the board of governors would vote on the proposal.

Latin America has suffered deadly disasters in recent years. In 2010, an earthquake killed 300,000 people and left more than half a million homeless in Haiti, the region’s poorest country. That same year, one of the biggest earthquakes on record caused $30 billion in damage in Chile, Latin America’s model economy.

“No country is immune to the possibility of being affected by a (natural disaster) crisis. What we are doing is designing a series of instruments” to help them cope, Echevarria said.

(Additional reporting by Guido Nejamkis; Editing by Anthony Boadle)

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