Inter-American Development Bank (IDB): What it is and How it Works

Key takeaways
* The Inter‑American Development Bank (IDB) is a multilateral development bank founded in 1959 to support economic and social development in Latin America and the Caribbean.
* It is owned by 48 member countries and provides loans, grants, and technical assistance.
* The IDB raises lending funds by issuing AAA‑rated bonds; member capital pledges back these bonds.
* In 2021 the bank financed $13.6 billion for 94 projects; by October 2022 its active portfolio comprised about 601 projects totaling roughly $56.1 billion.
* The United States is the largest shareholder (about 30%), followed by Brazil and Argentina (~11.35% each), Mexico (~7.3%) and Japan (~5%).

What the IDB does
* Provides financing (loans and grants) and technical assistance to governments and public entities across Latin America and the Caribbean.
* Helps design and implement development policies that aim to:
* Promote environmentally sustainable economic growth
* Increase competitiveness and regional integration
* Reduce poverty and enhance social equity
* Modernize public institutions and services
* Support free trade and investment
* Prioritizes areas such as social inclusion, economic integration, innovation, climate action, gender equality, and diversity.

How the IDB finances projects
* The bank raises most of its lending capacity by issuing bonds in international capital markets.
* Those bonds are backed by the IDB’s loan portfolio and by capital pledged by non‑borrowing member countries.
* The IDB’s bonds are triple‑A rated, which helps keep its borrowing costs low and allows it to lend to member countries on favorable terms.

Typical activities and examples
* Financing infrastructure, energy, environment and climate projects; reforms to improve public sector efficiency and services; and social investment programs.
* Recent completed projects (examples from 2022) included public‑sector modernization in Suriname, Guyana, Jamaica and Barbados; social investment in Ecuador; energy projects in Mexico; and environmental initiatives in Colombia and Barbados.

Governance and leadership
* The IDB is owned by its member countries and governed by a Board of Governors and a Board of Executive Directors.
* Presidents serve multi‑year terms; leadership shapes strategic priorities and operational focus.

Challenges and priorities
* The region faces persistent inequality and uneven growth—issues the IDB highlights as central to its mission.
* After the end of the commodity boom in 2014, many countries experienced weak growth, increasing demand for social and economic reforms.
* The bank continues to address structural challenges while increasing emphasis on climate resilience, gender equity, innovation and inclusive recovery strategies.

Why the IDB matters
* By combining financing, policy advice and technical capacity, the IDB plays a central role in supporting development projects that governments may not be able to fund or implement alone.
* Its AAA credit standing and pooled capital model enable sustained, lower‑cost lending aimed at promoting long‑term regional stability and growth.