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04/02/2003 | The IDB's Nicaraguan Piñata

Martin Edwin Andersen

This magazine has published a number of investigative stories in recent months about alleged corruption and wrongdoing at the Inter-American Development Bank (IDB), an institution heavily subsidized by U.S. taxpayers.

 

In turn, congressional committees and lawmakers have taken note and now are looking into such allegations and a variety of other alleged wrongdoing that has begun to emerge as whistle-blowers begin to come forward with new information about the inner workings of the IDB and similar multinational development banks (MDBs) [for more information, visit Insight Online on Monday and read "Oversight Crisis at Development Banks"].

One set of such recent documents Insight has obtained raise yet new claims of mismanagement that affects both large countries in the Western Hemisphere, such as Argentina, as well as smaller ones, such as Ecuador.

For example: According to a closely-held Oct. 24, 2002, draft of a "Country Program Evaluation: Nicaragua 1991-2001," obtained by this magazine, more than $1.5 billion in loans and nonreimbursable assistance was provided by the IDB to Nicaragua, which during that time was embarked on a democratic transition.

The report, written by the bank's Office of Evaluation and Oversight (OVE), called into question the soundness of the IDB strategy in the Central American country and found that "there is a real possibility that, for Nicaragua, external assistance may be as much a curse as a blessing."

The stated purposes for these IDB assistance programs ranged from macroeconomic-stabilization strategies focusing on fiscal-debt reduction to creating a modern, private, financial sector, improving health and education and reducing poverty. "Two major areas of concern," the internal OVE study reported, "are largely absent from bank-programming documents: structural vulnerability and the problem of corruption during the transition."

Bank intentions, the evaluation report found, were "not expressed in terms of measurable goals, and there are virtually no proposed indicators to measure either ultimate success or progress toward final goals in any major line of activity."

The IDB, the report further noted, did not have a coherent mix of programs targeted to Nicaraguan needs. Of "greatest concern" was "the failure of programming documents to address the financial characteristics of bank lending." Nicaragua, it said, "began the period with an extremely large debt overhang, and the World Bank consequently declared the country eligible only for concessional finance.

"However, the IDB extended a number of early loans on Ordinary Capital terms, which made a larger contribution to the country's debt problem than would have been provided by equivalent FSO financing [private lending]. Since FSO funding sufficient to fund the entire program was not available, there is an important [and still unresolved] debate regarding whether it would have been better for the country to receive less funding on FSP terms rather than more on a mix of [Ordinary Capital] and FSO."

Amy Gray, director of Latin American programs at the Bank Information Center (BIC), a nonprofit watchdog group, tells Insight that she was not surprised by the details in the internal report concerning Nicaraguan aid. "There have been questions raised concerning misuse of IDB funds lent for a pension-fund project in Nicaragua," Gray says, "and these questions include concerns about the IDB not having been more critical about the appointment of a crony of [former Nicaraguan president Arnoldo] Aleman, already known to have misused funds in a prior post, to administer the pension fund in question."

Insight could not reach Aleman for comment on Gray's allegations. However, in a Dec. 11 memorandum to all bank staff concerning this magazine's probe of allegations of corruption at the institution, IDB President Enrique Iglesias said: "Concerns regarding the appointment of the pension-system superintendent resulted in the replacement of that individual."

The OVE study noted: "The supervision rate index for projects in execution dropped from 94 percent in 1998 to 19 percent in 2001. During this period, there were four projects that were never visited." Despite the lack of bank oversight, the programs fostered a bureaucratic explosion. There was, it said, "almost a one-to-one relationship between projects approved and number of [executing] agencies."

The IDB, it added, may have "contributed toward making macroeconomic management more difficult for the country and delivered its substantial financial flows to the country" in a way that actually reduced Nicaraguans' well-being.

Bank insiders called the OVE report on the IDB's much-touted Nicaraguan programs a bold gamble by evaluations chief Steve Quick to restore the integrity of that office. Before Quick, an American with a long track record of experience on Capitol Hill, assumed his current position, the unit often was criticized by bank staff as producing the kind of reports the IDB administration wanted to see rather than critical -- and therefore useful -- analyses.

In response to Insight questions, Mirna Lievano de Marques, IDB external-relations adviser, said that the IDB regards "the contribution of OVE to our bank's work to be indispensable in providing us with frank and meaningful assessment of our work." Indeed, she said, "Much of what was contained in the Country Program Evaluation for Nicaragua was helpful to us in reviewing our activities in that country."

"Nevertheless, you will understand that we do not necessarily agree with every conclusion reached by the OVE evaluation team," the IDB spokeswoman said. "The particular findings you cited in your [questions] are among those with which we disagree."

She further said, in a written response, that "many other findings ... were met with agreement from management. Differences of opinion are at the heart of an independent evaluation process, and the bank values OVE's freedom to make observations that are at variance with management."

Liévano de Marques went on to say, "We are very proud of our record of financing the reconstruction and development of Nicaragua during that time. We believe the positive results of our numerous interventions in Nicaragua speak for themselves."

Martin Edwin Andersen is a reporter for Insight. He worked as an international consultant for the IDB from 1997-2001.

Insight Magazine (Estados Unidos)

 


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