COVID-19 is the biggest threat facing Latin America: it has taken away the health of two million Latin Americans, threatens the sustainability of social gains of the last decades and will mean the biggest recession since World War II. Against this bleak backdrop, CAF-the Latin American Development Bank-is providing countries with non-reimbursable resources and lines of credit to strengthen health care and counter-cyclical policies, tools for real-time monitoring, knowledge generation, and training.
During the first virtual meeting in 50 years, the institution's board, made up of ministers of economy and finance, central bank presidents and senior economic authorities from the shareholder countries, once again demonstrated its commitment to regional integration and economic revitalization by approving $570 million in operations in Argentina, Barbados and Brazil.
"With these financial resources we hope to strengthen the counter-cyclical effect of fiscal policy through the temporary introduction of measures to protect the income of vulnerable households and to increase the liquidity of firms and preserve jobs during the health and economic crisis," said Luis Carranza Ugarte, executive president of CAF.
In the last five years (2015-2019), CAF has approved operations in favor of Barbados for USD 112 million, which represents an average of USD 22 million in approvals per year. Likewise, in the same period, total disbursements amounted to US$96 million, representing an annual average of US$19 million.
In the case of Argentina, the resources provided by CAF support the country's social protection agency linked to the food security of vulnerable families with children up to the age of six, who are mainly, but not exclusively, beneficiaries of another social protection initiative known as the universal child allowance and its related programmes.
"This initiative is aligned with CAF's nutrition agenda, which promotes more equitable access to opportunities for human capital development, paying particular attention to the comprehensive development of early childhood, a key population segment for sustainable quality social inclusion, especially at a time when it is imperative to mitigate the effects of inequality that were already present, but which will undoubtedly worsen in the region as a result of the COVID-19 pandemic," said Luis Carranza Ugarte, CAF's Executive President.
In the case of Brazil, two loans worth 176 million have been approved. The first, for 96 million, will help improve drainage systems and flood control in the Baquirivu-Guaçu River basin and promote road connectivity and urban mobility in the Municipality of Guarulhos. The second, worth $80 million, will be used to reduce flood risk, improve mobility, urban infrastructure and solid waste management in the Municipality of Juazeiro do Norte.
The programme in the Municipality of Guarulhos will directly benefit the approximately 326,799 residents of the neighbourhoods of Bonsucesso, Taboão, São João, Presidente Dutra, Cecap, Lavras, Sadokim, Várzea do Palácio, and Aracilia, and indirectly 1,379,182 inhabitants. The resources from CAF's financing will mainly be used to finance open canalization works along the Baquirivu-Guaçu River, bridge expansion, construction of water reservoirs, parks, sports fields, bicycle paths, and road corridors, among others. The second loan, for the Juazeiro do Norte Urban Sanitation and Infrastructure Program, covers urban drainage, solid waste management, urban and social infrastructure and urban mobility, and is expected to benefit some 134,000 inhabitants directly and 274,000 people indirectly in Juazeiro do Norte.
"These two loans are intended to promote comprehensive economic development that will include all regions of Brazil and help improve the provision of quality public services for the most vulnerable sectors. In this sense, the improvement of infrastructure is crucial to prevent the effects of flooding, promote greater efficiency in mobility and, ultimately, contribute to improving the quality of life of people," said Luis Carranza, executive president of CAF.
"The commitment of the member countries has allowed us to respond quickly and in a timely manner to meet the needs of the population. Given the magnitude of the social and economic crisis we are going through, new sources of resources are required, which is why we are working on the formation of a fund to finance integration and digital infrastructure in the region that would be set up with the support of developed countries that would offer guarantees for bond issues. This would allow Latin American countries to have a source of financing at the same cost that they have access to in the very long term and to address the infrastructure challenge in a definitive manner," said Luis Carranza Ugarte, CAF's executive president.
By financing SMEs through microfinance companies, local development banks and commercial banks, CAF channels its assistance to the private sector to stimulate recovery and protect jobs in Latin America. As a complement to the financial action, non-financial support activities are developed with projects and programs for internationalization, business innovation and integration into productive chains and clusters.
In addition, CAF has made available to the countries mechanisms for real-time monitoring, virtual training and knowledge generation as a comprehensive support to governments in the design and implementation of their economic and social recovery strategies. CAF's human talent, together with experts in strategic sectors such as health, education, economy, transport, social protection, technology and governance, work on the design of public policies adaptable to the reality of each country.