From Sub-Regional Industrial Financier to Latin America’s Main Development Bank

This chapter traces the historical evolution of the Andean Financial Corporation (CAF), according to its changing mandates, from its initial role as financial catalyst of economic integration to the expanding range of tasks it has assumed over time. The chapter analyses the most salient trends and changes in the CAF’s nearly fifty years of operations; specifically, by looking at patterns of loan allocations and the evolving origins of funding sources through the distinctive operational phases that have come to characterize concrete periods of its existence. The analysis shows, that by fulfilling the original mandate of treating less-developed countries within the group of founding members in preferential terms, the CAF conformed to one of the major political goals set by the Andean-region agreements which created the Corporation. Despite profound political change in all of the CAF’s founding countries, this regional development bank has managed to continue to operate according to its constitutive principles.

Do We Still Need Regional Development Banks Today (and Tomorrow)?

The need for regional development banks (RDB) is a straightforward question that does not have a straightforward answer. The authors assess the arguments claiming that RDB are called to play a substantive role—in fact an increasingly substantive role—in future development. They summarize these arguments in the following hypothesis: if RDB did not exist, we should re-invent them. This hypothesis is assessed against a critical developmental challenge affecting today’s world and most likely to remain in the future: the massive mobilization of resources required for financing of huge gaps in sustainable infrastructure investments that exist in the developing world. This exercise is followed by a discussion on what conditions need be in place for RDB to be truly playing a pivotal role in confronting such challenge—and perhaps others—in the future.

The African Development Bank

This chapter demonstrates how the African Development Bank (AfDB) has been deeply shaped by the history of its continent. Fuelled by a sentiment of independence, the creation of the AfDB was driven by a determination to create a regional bank run by Africans, funded by Africans, and serving African needs. African governments’ desire for autonomy and the quest to break with distorted patterns created by Africa’s colonial past helped position the AfDB as the largest development institution dedicated solely to serve the needs of the continent. This chapter argues that, over the years and—despite significant institutional reform, including the acceptance of non-regional members in its Board from 1982, including the United States and former colonial powers—the AfDB has managed overall to preserve its ‘African identity’.

Transformations, Ruptures, and Continuities in the Inter-American Development Bank’s Policy from 1980 to the Present

This chapter shows that, although the Inter-American Development Bank (IADB) mandate remained unchanged over the course of over fifty years from its creation, the Bank’s lending policies in Latin America changed over time, consistent with the prevailing policy framework in developed countries. Unlike in other multilateral development banks (MDB) with a presence in the region—especially the World Bank—Latin American countries played a bigger role in the IADB’s decision-making process from the very moment the regional bank was created. However, donor countries, in particular the United States, enforced IADB policy guidelines, with a varying degree of conflict over the different periods. The authors establish that the institution underwent a transition phase, which began in the 1980s, marking a move away from a developmental role associated with state-led industrialization processes. The IADB became a supporter of liberalization and deregulation policies in the 1990s and then, from the 2008‒9 global crisis, played a new active role for development.

Considerations in the Initial Design of Regional Development Banks

This chapter examines the origins, lending policies, and regional development bank (RDB) relationships with the International Bank for Reconstruction and Development from a comparative perspective focusing on the Inter-American Development Bank (IADB) and the European Bank for Reconstruction and Development (EBRD). Generally, existing historical works tend to focus on single case studies rather than explore similarities and differences among RDB. By comparing these two RDB in terms of the broader political considerations in which they were formed, we develop a greater understanding of the diversity and the similarity of RDB. This chapter argues that the international environment and regional competition among states played a substantial role in the initial development of each of these banks which in turn has fundamentally influenced the nature of lending and types of projects supported.

The Asian Development Bank

Rivalry between the United States and Japan over Asian economic growth left its mark on the ‘personality’ of the Asian Development Bank (ADB). The evolution of the ADB provides, therefore, interesting insights as regards the extent to which a principal-agent approach can be used to shed light on this regional development bank’s evolution. Usually, a principal-agent approach opposes the owner (principal) to the manager (agent). Competition observed in the ADB opposes less the principals to the agent than the principals with each other. The ADB Charter ensures regional members a majority of ‘voice’ in the Bank and that smaller members have a minimum of representation. Moreover, competition between the United States and Japan during the 1990s encouraged other member countries to counterbalance the leaders’ influence by increasing their share in voting power. China’s entry into the Bank from 1986 also contributed to diversifying the points of view among the member countries.

The Role of the Central American Bank for Economic Integration in Regional Integration and Development

The Central American Bank of Economic Integration (CABEI) is one of the few modern regional institutions that has proved to be durable in the Central American context, despite the many hurdles the Bank has had to jump since its creation. Accumulated knowledge and the relationships with its main stakeholders have allowed it to develop strengths and to create an efficient and solvent entity in providing medium- and long-term finance to promote regional integration, and the economic and social development of the isthmus. The partners’ commitment and the Bank’s status achieved in international capital markets have turned the CABEI into the main regional development bank source of financing in the region and a strategic development institution for the future of the region. The underlying strength of CABEI lies in its balance sheet in terms of liquidity, capitalization, the quality of its assets, and the capacity to generate income—thus the support of its shareholders who are also beneficiaries as clients.

Regional Development Banks and the Promotion of Public-Private Partnerships

The European Investment Bank (EIB) has been at the vanguard of public-private partnership (PPP) promotion and has been followed by most regional development banks (RDB) and many national development banks around the world. EIB activism on the promotion of PPPs can best be understood through the lenses of policy and norm entrepreneurship. Operating strategically, the EIB repeatedly created a ‘policy window’ through which to promote PPPs in different contexts. The EIB developed unrivalled PPP expertise among public bodies globally—with the possible exception of the United Kingdom Treasury. While the EIB was potentially motivated by ‘rationalist’ institutional goals, ideational considerations motivated a small group of British and Irish norm entrepreneurs to promote PPPs. The EIB promoted PPP usage to other RDB through the sharing of expertise and the joint financing of projects.

The Inter-American Development Bank and the Washington Consensus

This chapter traces how the United States (US) Treasury engineered the major shift in the Inter-American Development Bank’s (IADB) policy and formal structure through negotiations over donor contributions to its financial resources. The US behaved as an ‘activist shareholder’—using its control over resources to bargain with management for organizational change. Yet in contrast to ‘shareholder value’ in private firms, international donors can use foreign aid to pursue a range of incommensurable goals. The IADB’s initiation into the Washington Consensus resulted from a historic and durable shift in US policy-makers’ conception of shareholder value, from one in which the banks were worthy of support because of their ability to promote US security and diplomatic goals, to one that valued the Banks’ ability to change national economic policies. US shareholder activism not only brought the development banks into alignment with Washington’s agenda, but also into alignment with one another.

The European Investment Bank and the Asian Infrastructure Investment Bank

This chapter attempts to complement existing scholarly work by taking a holistic and contextual view of the European Investment Bank (EIB) and the Asian Infrastructure Investment Bank (AIIB). It addresses the following questions: How are the business fundamentals of the EIB and AIIB organized so as to fulfil their broader objectives? How are they ‘equipped’ to meet the requested increased objectives and face the current and future challenges? What role do these two institutions play in the regional development bank (RDB) field? And what are their future prospects in this field? In attempting to answer these questions this chapter follows a synthetic approach by initially investigating each RDB individually as an organizational entity and subsequently as an actor in the field of RDB. In order to analyse the EIB and AIIB as organizations, this chapter employs a novel mechanism developed by the author with recourse to Business Models and the Theory of Fields.