Preferences, Variance, and Politics of Multiple Lenders: The Case of Brazil Ruth Ben-Artzi...
-
date post
19-Dec-2015 -
Category
Documents
-
view
213 -
download
0
Transcript of Preferences, Variance, and Politics of Multiple Lenders: The Case of Brazil Ruth Ben-Artzi...
Preferences, Variance, and Politics of Multiple Lenders: The Case of Brazil
Ruth Ben-ArtziDepartment of Political ScienceProvidence College
Prepared for IPES, College Station, TX11/14/09
RESEARCH QUESTION
IS THERE UTILITY IN HAVING MULTIPLE PUBLIC DEVELOPMENT BANKS SERVE THE SAME COUNTRY?
CONSIDERATIONS: DO BANKS MAKE LOANS TO THE SAME SECTORS IN A GIVEN COUNTRYDO BANKS OF A DIFFERENT GLOBAL-STATE LEVEL HAVE DIFFERENT DECISION-MAKING CALCULUS
THREE INSTITUTIONAL LEVELS
The world bank (WB)Inter-American development bank (IDB)Brazilian development bank (BNDES)
All make project/program loans to Brazil
WHY IS THIS IMPORTANT?
Countries spend billions of $ on aidIs the (political) involvement of shareholders influential in different ways for the three institutional levels?No study of how different multilateral financial institutions (that aid the same country) compare to each otherWho benefits from the existence of multiple development banks?
LITERATURE
IFIs are a platform for advancing political interests of principal member states (Vreeland, Stiglitz, Easterly, Thacker)
Governance of IFIs: the extent of delegation by member states (Tierney et al, Martin, Gould)
Why states have an interest in membership in IFIs (Rodrik, Milner)
ARGUMENT
World Bank (US, Wash. Cons.) A
IDB (US, but LA influence) B
BNDES (domestic interest grps) C
institution
country
X (Brazil)
How are decisions made? Where is the money going?
METHODOLOGY
WB
IDB
BNDES
institution
country
BRAZIL
•shareholders
•‘politicking’
•delegation
•amount
•sector
•region
power structure/instit design
strategy
BASIC FACTSWB IDB BNDES
Lending since… 1949 1961 1953
Shareholders 185 48 1
Shareholder power
US 16.38% LA 50.016%; US 30.007%
--
Brazil’s shares
2.07% 10.752% 100%
Gvt guarantee √ √ √
Microlending New, not much, through IFC
New, not much, through the IIC
yes
mission “global poverty reduction and the improvement of living standards”
“contribute to the acceleration of the process of economic and social development of the regional developing member countries, individually and collectively”
“foster sustainable and competitive development in the Brazilian economy, generating employment, while reducing social and regional inequalities”
LOANS TO BRAZIL
$0.00
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
year
World Bank
IDB
LOANS TO BRAZIL
$0.00
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
$14,000.00
$16,000.00
$18,000.00
1949
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
Year
$ (m
illio
n) Total WB
Total IDB
total BNDES
2005-7 SECTOR DISTRIBUTION
0 1,000 2,000 3,000 4,000 5,000 0 1,000 2,000 3,000 4,000 5,000 0 1,000 2,000 3,000 4,000 5,000 0 1,000 2,000 3,000 4,000 5,000
0, Agriculture/Rural Development 0, Energy and Mining 0, Financial Sector/Economic Policy 0, Infrastructure
1, Environment/Pollution1, Multi-sector Credit and Pre-investment1, Public Sector/Governance 1, Social Investment
2, Health, Nutrition, and Population 2, Microenterprises 2, Private Sector Development 2, Science and Technology
3, Education 3, Industry and Trade 3, Tourism 3, Urban Development
Brazilian Development Bank World Bank
Interdevelopment Bank
Graphs by var7 and sectorname
INTERVIEWS
Multilateral development banks should not be lending to BrazilBrazil is a safe borrowerBanks need to show success
FINDINGS
Global, regional and domestic development banks all do the same workThese institutions overlap and compete with one anotherAid/development projects are the same despite different institutional configurations (power structure/institutional design)
CONCLUSIONS
It is not clear that there’s a need for multiple public lenders to middle-income emerging marketsA domestic development bank appears more effective despite its politicizationIt seems the IFIs’ potential as a policy tool for principals sustains their continued loan-making to BrazilBrazil has influence
Preferences, Variance, and Politics of Multiple Lenders: The Case of Brazil
Ruth Ben-ArtziDepartment of Political ScienceProvidence College
Prepared for IPES, College Station, TX11/14/09
Variables and measurements (methodology 2)
major shareholders/Brazil’s sharesnegotiations (how decisions are made)% of loans to sector% of loans to regionPresident/political party in powermajor trading partnersRegional-level socio-economic indicators (to test for alternative explanation – need based)
WB (Mission and Functions)
IBRD and IDA: “Global poverty reduction and the improvement of living standards.” ~promote long term growth
~promote investment
~more urgent projects dealt with first
~not to compete with other sources of financing
IBRD
185 membersMaking loans since 1945 (Brazil member since 1946)Shareholders: Brazil 2.07%; US 16.38%Developed countries hold majority of votes
IDB (Mission and Functions)
“contribute to the acceleration of the process of economic and social development of the regional developing member countries, individually and collectively”
~Use funds raised in financial markets, its own capital and other available resources to finance the development of its borrowing member countries; ~ Supplement private investment when private capital is not available on reasonable terms and conditions; and ~ Provide technical assistance for the preparation, financing and implementation of development projects, programs and strategies.
IDB
Started making loans in 1961Lends more to Brazil than the WBSometimes works with the BNDESShareholders: Majority to LA countries (50.016%); US has veto (30.007% - more than any other country)Brazil’s vote share: 10.752% (together with Argentina is largest regional voter; next is Mexico with 6.912%)
BNDES
Federal development bankIssues loans at low costFinanced small projects/micro-lendingReceives $1bn annually from the IDB
Brazil - politics
1960-4: democracy, weak1964: military coup1964-1985: military regime1985: elections, democracy restored1985-1990: Jose Sarney (PMDB)1990-2: Fernando Collor de Mello (PRN)1992-4: Itamar Franco (PMDB)1994-2002: Fernando Henrique Cardoso (PSDB) (re-elected 1998)2002--: Lula da Silva (PT) (re-elected 2006)
Brazil Loan Data Sector Variables
1-Agriculture/Rural Development2-Urban Development3-Infrastructure – Sanitation, Transportation4-Environment/Pollution5-Private Sector Development6-Public Sector/Governance (Reform/Modernization of the State)7-Social Investment – Development, Protection8-Financial Sector/Economic Policy
9-Education10-Health, Nutrition, and Population11-Energy and Mining12-Industry and Trade13-Science and Technology 14-Multi-sector Credit and Pre-investment15-Tourism16-Microenterprises