Trump Moves to Take Leadership of Regional Development Bank Away From Latin American Nations

Inter-American Development Bank headquarters at Washington, D.C. Photograph Source: Mariordo (Mario Roberto Durán Ortiz) – CC BY-SA 4.0

Four Latin American countries have called to postpone the election of the president of the Inter-American Development Bank (IDB), scheduled for September 12 and 13. Argentina, Chile, Costa Rica and Mexico proposed suspending the election until March 2021 to prevent Donald Trump’s National Security Adviser for Latin America, the Cuban-American Mauricio Claver-Carone, from taking the powerful regional post.

On June 16, the Trump administration launched Claver-Carone’s candidacy for the presidency of the Bank that bills itself as “the leading source of development financing for Latin America and the Caribbean”. [1] Sixteen Latin American countries have announced support for the U.S. candidate as others reportedly are coming under heavy pressure to agree to Trump’s proposal.

Claver-Carone’s bid for power has sparked a controversy in large part because it breaks with the Bank’s 50-year tradition of being run by a president from a Latin American nation. The pretext for proposing a U.S. candidate is supposedly to fulfill its commitment to help Latin American and Caribbean economic recovery in the face of the pandemic.

The justification sounds good, but it is not true. The truth is that the U.S. president seeks: 1) to curry favor among conservative Cuban and Venezuelan-Americans, 2) to counter the growing presence of China in the IDB and in the region by transferring hegemonic power disputes between the two countries to a U.S.-controlled Bank, and 3) to maintain an important position of economic and political power following his likely defeat in the Nov. 3 presidential elections.

Blocking Chinese Influence

The Trump administration has deepened tensions with China and in this context has grown increasingly concerned about China’s growing participation in multilateral organizations in the Americas. China has observer status in the Organization of American States (OAS), the Economic Commission for Latin America and the Caribbean (ECLAC) and the Pacific Alliance. It also maintains close ties with the Caribbean Community (CARICOM) and with the CAF-Development Bank of Latin America.

China became a member of the IDB in 2008. Its membership generated high expectations. The bank’s current president, the Colombian Luis Alberto Moreno, has repeatedly highlighted China’s potential to improve regional infrastructure. He recently stated that “China is an essential partner for the institution and for the protection of the social and economic benefits of Latin America”.[2]

In 2013, the China Co-Financing Fund for Latin America and the Caribbean (“China Fund”) was created within the framework of IDB Invest–the Bank’s financial arm oriented to the private sector. The Fund provides financing for infrastructure projects, with an initial commitment of $350 million USD. The IDB and the Chinese Council for the Promotion of Trade Exchange (CCPIT) have also co-sponsored the China-Latin America and the Caribbean Business Summit for the past 13 years, the last one held in Panama in 2019. The IDB routinely co-sponsors summits between China and regional members on policy issues and knowledge-sharing to develop innovative programs.

The Trump administration has sought to undermine this growing relationship. The last annual meeting of the IDB was scheduled for March 2019 in the Chinese city of Chengdu. The meeting was suspended due to a U.S. government threat to block a quorum if China did not admit the participation of Ricardo Hausmann, Juan Guaidó’s representative at the IDB. The Chinese government wanted to avoid the presence of both Guaidó’s and Maduro’s representatives so the event was canceled.[3] Several months before the meeting, then-U.S. Undersecretary of the Treasury and current World Bank President, David Malpass, urged the IDB to reconsider holding the meeting in China and warned of China’s “substantial inroads” in multilateral development banks.[4]

Breaking the rules to usurp the IDB presidency

Many members of political, diplomatic and academic circles in the region have voiced their opposition to a U.S. candidate for a post that has always been filled by a Latin American. Five former Latin American presidents, Fernando Henrique Cardoso from Brazil, Ricardo Lagos from Chile, Julio María Sanguinetti from Uruguay, Juan Manuel Santos from Colombia and Ernesto Zedillo from Mexico, immediately rejected the nomination in a letter that states that Claver-Carone’s candidacy “implies a break with the unwritten rule, but respected from its origin, by which the IDB, for reasons, among others, of financial efficiency, would have its headquarters in Washington, but in exchange would always be led by a Latin American”. [5] The letter adds that the move violates the spirit of the founding of the bank, explicitly expressed by former President Eisenhower in committing to a Latin American presiding. This unwritten rule, respected until now, also implies that a European is always the head of the IMF and a U.S. citizen runs the World Bank.[6]

Former foreign ministers, the Puebla Group and, recently, the Latin American Reflection Table, have also opposed the nomination.[7]

Europe has not remained on the sidelines. In late July, the High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell, proposed to delay the elections until March in a letter to Spain’s Minister of Foreign Affairs, Arancha González Laya. Borrell also argued that the U.S.-sponsored candidacy of Claver-Carone’s is unprecedented since the bank’s founding in 1959.[8]

Although no European government member of the Bank has made an official statement so far, the proposal to postpone the election has received the support of twenty-two former government leaders that are members of the Club of Madrid, and also members of the Bank. In a Club de Madrid communiqué signed Aug. 18, the group stated that “the conditions are far from being favorable for the thoughtful and deep debate that this decision requires.”[9]

The signatories note that Latin America and the Caribbean is one of the regions hardest hit by the pandemic–with only 8% of the world population, it represents 25% of infections and 28 % of deaths from COVID-19 in the world total. They emphasize the role that the IDB will play in the region’s recovery, since the Bank channels around 12 billion dollars annually to financing infrastructure and development in the region–more than any other multilateral development bank, including the World Bank. To carry out an “in-depth discussion on their role and leadership, and appropriate institutional response to the recovery from the pandemic crisis”, they propose “to postpone the election until March 2021 and that, in a similar way to what happened with the World Trade Organization, an interim president be appointed.”

Objections to Claver-Carone’s candidacy for the IDB presidency transcend the fact of his nationality. Claver-Carone is a key ideologue for President Trump in the design of Cuba and Venezuela policy. Appointed in September 2018, he worked under the direction of ultra-hawk John Bolton, replacing Juan Cruz, a former agent of the Central Intelligence Agency who had served on the National Security Council for more than a year. According to the daily Las Américas, Claver-Carone made a name for himself among Washington circles interested in Cuba with his blog Capitol Hill Cubans, where he fiercely criticized the policy towards that country of former President Barack Obama.[10]

Claver-Carone also directed the “non-profit” organization Cuba Democracy Advocates INC, whose work consists of “raising awareness” about the opposition movement on the island and “collecting and disseminating information” on political prisoners and alleged human rights violations in Cuba. With this background, his presidency would represent the return of a strict ideological framework for inter-American diplomatic relations, at a time when it is necessary to expand the capitalization of the IDB. Erick Langer, Latin American history professor at Georgetown University, noted that Trump’s decision arises from his need for strong backing from rightwing Cuban-Americans and constitutes “a maneuver within the United States in electoral terms: Trump is thinking exclusively about his re-election and to improve his chances he has chosen Claver-Carone to win support in a group that has a lot of influence on the country’s foreign policy”.[11]

Staunch Trump allies Brazil and Colombia immediately backed the U.S. candidate. They were joined by Ecuador, Uruguay, the Bahamas, Bolivia, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Panama, Paraguay, the Dominican Republic, Suriname, and Venezuela, currently represented at the IDB by Juan Guaidó’s group. These decisions have reduced regional endorsements for the candidacies of the former president of Costa Rica, Laura Chinchilla and the Argentine Gustavo Béliz, former president of the Institute for Latin American Integration (INTAL) and current Secretary for Strategic Affairs of the Argentine Presidency.

Trump has tasked the Colombian government with organizing regional support for his candidate. To this end, the Colombian Foreign Ministry issued a Statement of Support[12] for Claver-Carone the day after the visit of the White House National Security Advisor, Robert O ´Brien, and Mauricio Claver-Carone himself announced a 5 billion-dollar loan to Colombia from the U.S. Development Finance Corporation (DFC) within the framework of the “US-Colombia Growth Initiative”.[13] The statement was signed by 17 countries, including the United States.

Nations that did not sign on include Canada, Belize, Nicaragua, Barbados, Trinidad and Tobago, Uruguay (which initially supported Claver-Carone), Peru and the four (Argentina, Chile, Costa Rica and Mexico) that officially proposed postponement of the elections for the IDB Annual Assembly scheduled for March 17-21 in Barranquilla, Colombia. The 20 extra-regional partners also have not endorsed the Trump candidate.

Claver-Carone already has the backing he needs to be elected as IDB president at the virtual meeting scheduled for September. First, he has the support of the absolute majority of member countries. To be elected president of the Bank, a candidate needs a minimum of 15 of the 28 regional members and the Trump candidate has the support of 17, including the United States. Second, Claver-Carone has the support of governments that represent more than 50% of the voting power, which is defined by the capital subscribed by each country. The United States and Brazil alone hold, respectively, 30% and 11% of the voting power. With Colombia (3.1%), Guaidó’s Venezuela (3.4%) and the other countries that support him, Claver-Carone more than meets this second requirement.

Impeding a quorum to postpone the election

For the nations that uphold the political importance of having the leadership of the IDB in Latin American or Caribbean hands, the only viable strategy is to block quorum to force postponement of the election until March 2021 to avoid Trump’s candidate from taking over. The rules mandate that at least three quarters (75%) of the voting power of the institution must participate in the election. To prevent a quorum, the opposition to the U.S. power grab needs to pass the 25% mark in terms of voting power.

The four countries that call for postponing the election have a joint voting power of 22.2%, according to the following composition: Argentina (11.35%), Mexico (7.3%), Chile (3.1%) and Costa Rica (0.45%). They need 2.9% to exceed 25% of the votes to postpone the election. If Peru, with 1.5% of the votes, were to join, and Nicaragua with 0.45% of the votes adhered to this initiative, they could reach 24.15%, leaving only 0.85% of the votes missing to prevent a quorum.

To achieve this at the regional level, one possibility is for Uruguay to rethink its position. With 1.2% of votes, the Uruguayan government was one of the first countries to support Claver-Carone, but the Broad Front has called for a review of the Uruguayan government’s endorsement of the Trump candidate.[14]Also important is Canada, which with 4% of the vote has not yet declared its position.

The IDB also has 20 extra-regional partners (16 European, in addition to China, Japan, Israel and South Korea) that have full voting rights. Spain with 1.96% and France and Germany with 1.89% each, could also contribute to preventing the quorum required for voting. The World Leadership Alliance-Club de Madrid letter shows that there is a strong current of political opinion in the European member countries of the Bank that favors postponement.

All these moves have irritated the Trump team and their candidate, Claver-Carone. Regarding the statements of the European Union’s Borrell, an unnamed Trump official told the press, “The European Union is not part of the IDB as an entity, only some of its member states are.”[15] Indeed, the European Union as a body does not have representation in the IDB, but U.S. authorities cannot prevent the 16 European partner countries of the IDB from adhering to Borrell’s proposal for postponement if they so choose.

OAS Secretary General Luis Almagro, consistently faithful to Trump’s designs, has come out in support of Claver-Carone’s candidacy. In a recent Tweet, he rejected Borrell’s statement, calling it a threat to “the independence and sovereignty of the region”, while saying nothing about the unprecedented imposition of a U.S. presidency at the Bank. The European proposal, rather than implying a threat, actually represents the legitimate right to give an opinion within an institution that includes European countries as members and contributors.

Claver-Carone himself has responded angrily to the movement to block his rise to power in the position Trump offered him. He recently aimed his attacks on the Argentine government, telling the press, “We are seeing a minority effort led by Argentina to obstruct the election because they have not wanted or been able to present a competitive vision”, referring to the candidacy of Gustavo Béliz. He also accused Argentina and the other three opposing nations of wanting to “hijack the elections” and of “subverting the process, leaving the Bank in paralysis and scaring the private sector”.

Claver-Carone went even further, brazenly threatening the region with U.S. government retaliation. He stated that “any attempt to hijack an election, despite a very clear regulation, would not only be undemocratic, but also an effort that the United States is going to confront very deeply.”[16] This is a tendentious and unsubstantiated statement, since the proposal to postpone the elections until after the presidential elections of November 3 in the United States through the lack of a quorum is an action based on the legal regulations of the institution.

The nations that advocate postponement of the election are betting that a future Biden-Harris administration will desist from imposing a U.S. politician to preside over the IDB, and that a consensus candidate will again be promoted in the interest of pulling together regionally to face the crisis.

The political trajectory of Donald Trump’s candidate for the IDB presidency would imprint an extreme rightwing vision on inter-American diplomatic relations that many countries do not share. Under his mandate, the Bank could become a political instrumental to reward Trump’s allies and punish those who oppose his demands.

On the other hand, if Trump is not re-elected, as the polls indicate, dialogue between Bank leadership under Claver-Carone and the new U.S. administration would not be fluid and could generate tensions at a time when the region needs a major influx of resources for economic recovery.

Although the Democrats and the Biden camp have not expressed an official position on the Trump candidate, unofficially an unnamed Biden spokesman criticized the move, stating, “Trump’s nominee for the Inter-American Development Bank is like most of his appointees: overly ideological, underqualified and hunting for a new job after November.”[17] Democratic and even Republican personalities have spoken in the same vein, along with representatives of society civil. Within Latin America the question is: Why should our region inherit five years of an IDB president imposed by a discredited government, which, under the banner of “America First” has created an unprecedented health and economic disaster in its country and contributed to disaster and division in the region?

The imposition of a U.S. IDB leader intensifies the power struggle between China and the United States in the region and intentionally drives a wedge between Latin American nations. Given the historical moment characterized by the realignment of the hegemonic powers, it is essential to keep the presidency of the IDB in the hands of the region.

Latin America and the Caribbean today have the challenge and responsibility to defend their own interests and right to self-determination, and to reject any imposed alignment.

NOTES.

[1] See Inter-American Development Bank page: https://www.iadb.org/en/about-us/strategies

[2] Myers, M, China´s Regional Engagement Goals in Latin America, Carnegie Tsinghua, Center for Global Policy, Beijing, China, May 7, 2020 https://carnegietsinghua.org/2020/05/07/china-s-regional-engagement-goals-in-latin-america-pub-81723

[3] https://www.economist.com/finance-and-economics/2019/03/28/the-inter-american-development-bank-cancels-its-big-bash-in-china

[4] https://www.ft.com/content/7bbfbe10-4cfa-11e9-bbc9-6917dce3dc62

[5] https://www.telam.com.ar/notas/202006/478422-ex-presidentes-latinoamericanos-contra-futura-presidencia–estados-unidos–bid.html

[6] Former U.S. president Dwight Eisenhower (1953-1961) stated in a speech in the United Nations in 1958: “For this institution to be successful, the function of leading it must belong to Latin American countries.” https://thehill.com/opinion/white-house/506217-latin-americas-banking-system-isnt-broke-so-dont-fix-it

[7] See: https://andina.pe/agencia/noticia-ex-cancilleres-expresan-desacuerdo-con-ee-uu-asuma-presidencia-del-bid-804514.aspx , https://www.grupodepuebla.org/declaracion-del-grupo-de-puebla-sobre-la-proxima-eleccion-del-presidente-del-banco-interamericano-de-desarrollo-bid/ , https://www.opendemocracy.net/es/postergar-la-elecci%C3%B3n-del-presidente-del-bid-es-prioritario/

[8] Garrison, Cassandra, “Borrell insta a retrasar la votación del jefe del Banco Interamericano de Desarrollo”, 3 de agosto 2020. https://es.reuters.com/article/topNews/idESKCN24Z2SH

[9] World Leadership Alliance, Club of Madrid, “A call for the postponement of the election of the president of the Inter-American Development Bank” http://www.clubmadrid.org/wp-content/uploads/2020/08/CdM-IDB-President-Statement.pdf

[10] https://www.guidestar.org/profile/54-2003328

[11] https://www.efe.com/efe/espana/economia/el-riesgo-de-ruptura-trump-con-bid-por-postular-un-candidato-a-la-presidencia-del-banco/10003-4276858

[12] https://www.cancilleria.gov.co/newsroom/news/declaracion-relacion-eleccion-presidencial-banco-interamericano-desarrollo-bid

[13] White House, Statement by National Security Advisor Robert C. O’Brien https://www.whitehouse.gov/briefings-statements/statement-national-security-advisor-robert-c-obrien-081720/

[14] https://bayanodigital.com/frente-amplio-de-uruguay-rechaza-del-candidato-de-ee-uu-a-la-presidencia-del-bid/

[15] https://gestion.pe/mundo/eeuu/eeuu-rechaza-posponer-elecciones-en-el-bid-como-propone-la-ue-noticia/

[16] La Política Online, “El candidato de Trump para el BID dice que Argentina busca “secuestrar” la elección del presidente” 12 de agosto 2020. https://www.lapoliticaonline.es/nota/85315-el-candidato-de-trump-para-el-bid-dice-que-argentina-busca-secuestrar-la-eleccion-del-presidente/

[17] https://www.politico.com/news/2020/08/15/development-bank-election-395715