U.S.-IADB: A Last-Ditch Effort at Securing U.S. Hegemony?

By Christy Thornton*

The Inter-American Development Bank building in Washington, DC
The Inter-American Development Bank in Washington, DC./ Wally Gobetz/ Flickr/ Creative Commons License

The election this month of Cuban-American hardliner and Trump National Security Council staffer Mauricio Claver-Carone to head the Inter-American Development Bank (IADB) signals a significant shift in Washington’s approach toward the multilateral institution, but Trump’s attempt to reassert U.S. strength through the bank may, paradoxically, be a sign of weakness. Claver-Carone was the first U.S. candidate put forward to head the Bank in its 60-year history, overturning an unwritten rule that the president of the Bank should be a Latin American. After a long summer of procedural maneuvering failed to delay or block the contest, other potential candidates from Argentina and Costa Rica withdrew.

  • Mexico’s decision in August to go along with the election cleared the way for the quorum necessary to hold the vote, and Claver-Carone won election despite fully one-third of member countries abstaining.

As I show in my forthcoming book, Revolution in Development, U.S. administrations since FDR have often responded to Latin American demands for representation in and redistribution through multilateral organizations by ceding procedural power to Latin Americans.  

  • In earlier eras – during the negotiations over the first Inter-American Bank in 1939‑40, the Bretton Woods institutions in 1944, and then the founding of the IABD in 1959 – Latin Americans demanded a seat at the table and decision-making power. U.S. leaders acquiesced, preferring to lead through consent rather than coercion. When the IADB was created, the United States agreed to a minority-share position and a concessional lending program, allowing it to both meet Latin American demands for development and also counter accusations of commercial and financial domination.
  • While the bank’s tenure has not been without controversy, the major congruence in economic policy prescriptions that emerged with the Washington Consensus in the 1990s meant that, even without its representative in the top spot, the United States could be assured that its interests in the region were furthered by bank activities.

The election of Claver-Carone represents an about-face in this strategy of securing consent and reinforces three aspects of Trump’s approach to the region: isolating left-wing governments like Venezuela; countering China’s growing influence; and reiterating the primacy of private enterprise and investment over public multilateral lending.

  • The very public dispute over who should represent Venezuela at the 2019 IADB meeting in Chengdu – which was to celebrate the 60th anniversary of the bank’s founding and the 10th anniversary of China’s membership – challenged U.S. influence over the institution. The Venezuelan opposition under Juan Guaidó wanted to send Ricardo Hausmann, a longtime IADB official, as its representative, but the Chinese government suggested instead that no Venezuelan representative be seated, leading to the meeting’s sudden cancelation. China’s action seems to have convinced Trump that the IADB was slipping from the U.S. orbit.
  • Seeing China as a competitor in Latin America, Claver-Carone will seek to use the IADB to counter Chinese influence. The most important way that he seeks to do that, made explicit during his campaign for the bank presidency, is through further capitalization of IDB Invest, the bank’s private-sector lending arm. This emphasis on private-sector development comes despite the fact that governments throughout the region are struggling through the worst economic downturn in decades due to the ravages of the coronavirus, with insufficient public health infrastructure and little in the way of safety nets for working people. While the bank has announced more than $3 billion in additional funding for governments to mitigate the crisis, Claver-Carone has stressed that his emphasis will be, above all, on strengthening private enterprise.

Earlier administrations demonstrated their faith in the strength of U.S. influence in the region through ceding some procedural control in the IADB, thereby securing multilateral legitimacy – but the Trump Administration’s successful push for Claver-Carone is instead an attempt to assert U.S. dominance. While Trump’s “America First” approach to the bank might seem like an attempt to bolster U.S. strength, it may instead actually reveal a fundamental weakness in U.S. legitimacy in the hemisphere. If the U.S. hegemony has to be imposed from the top down through domination rather than consent, it is sure to engender resistance.

September 30, 2020

* Christy Thornton is an assistant professor of sociology and core faculty member for the Latin America in a Globalizing World Initiative at Johns Hopkins University.

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1 Comment

  1. Christy Thornton has succinctly summarized the larger issues involved in the recent fracas over appointing the new IADB president. Two other points bear mention.

    First, there is a precise parallel to the Trump administration’s rush to nominate Amy Coney Barrett to the Supreme Court–before there could be a new US president with different preferences. A similar effort led by Argentina to delay filling the IADB post failed due to the inability or unwillingness of Latin American & Caribbean governments to unite to resist their loss of historic institutional privileges. (Of course there would be costs: for example, the US threatened to vote against approving an IMF letter of intent for Ecuador…)

    Second, Claver-Carrone’s emphasis on stimulating new private sector capital flows is not only a matter of ideology, but also of the shifting nature of US financial power resources. China, which has high savings & a current account surplus, can afford publicly-funded aid & investment to win friends in the global South. The US, in contrast, has low savings & balance of payments deficits, but retains the world’s most important private financial markets, through which the rest of the world’s financial savings flow. In power politics terms, using regional development banks to induce cofinancing with the private sector is, inter alia, a means of retaining influence abroad even without much money to spend. See my recent article: “The Monetary and Financial Powers of States…” (w/ D.C. Tirone & H-k. Chey). New Political Economy, 25:2, 2020. https://www.tandfonline.com/doi/full/10.1080/13563467.2019.1574293

    Reply

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