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Bachelet Says Chile Supports Recapitalization of IDB

By Sebastian Boyd and Nathan Gill
     July 3 (Bloomberg) -- Chilean President Michelle Bachelet said her government supports the recapitalization of the Inter-American Development Bank to help developing countries cope with declining capital flows.
     Bachelet, speaking today to finance ministers from North and South America, urged member governments to help raise additional funding for the multilateral lender.
     “It can’t be that a region of healthy economies, of entrepreneurs and investors with a desire to move ahead, misses the opportunity because of a lack of adequate financing conditions,” Bachelet said in Vina del Mar, Chile. “It is more necessary than ever to support the process of recovery and development of our economies.”
     Companies and governments in Latin America may need as much as $180 billion this year, World Bank President Robert Zoellick said yesterday. Canada yesterday offered $4 billion of temporary callable capital, Finance Minister Jim Flaherty said.
     The IDB’s governors set a December deadline for it to complete “technical studies” for a capital increase. Its President, Luis Alberto Moreno, said today the bank would hold a meeting in October.
     The Canadian funds, which will be available for between five and eight years, are in addition to $2 billion that would be released by changes to the bank’s lending rules, it said in the statement.

‘Who Finances?’

     Governors were “very likely” to approve a capital increase, Ecuadorian Finance Minister Maria Elisa Viteri said in a July 1 interview.
     “It’s the right time,” Viteri said. “But the bank should be conscious that this increase in capital should be accompanied by a change in the way it distributes resources.”
The World Bank and other multilateral lenders are trying to find $90 billion to lend to Latin America over the next two years, Zoellick said.
     Latin American governments need to boost spending and may need to run deficits, Osvaldo Kacef, director of economic development at the United Nation’s economic commission for the region, said yesterday.
     “The problem is: who finances the deficit? International markets, which are the usual financers, are pretty illiquid,” Kacef said in an interview at the commission’s Santiago headquarters.
     IDB has the highest-possible AAA rating from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.

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