Trump’s Pick to Run Latin America’s Development Bank Is the Last Thing It Needed
Foisting a divisive, first-ever U.S. president on the Inter-American Development Bank will likely hinder—not help—the bank’s quest to raise cash during the coronavirus pandemic.
When the Trump administration nominated a White House official to run the Inter-American Development Bank (IDB) this summer, it didn’t just tear up a 60-year old unwritten agreement that a Latin American would head the bank. It has also kicked off a clash among Latin American countries, and between several of them and Washington, over the bank’s future—at a time when financing of the kind the region’s most important development institution can provide is critical to pulling Latin America out of its post-pandemic economic collapse.
U.S. President Donald Trump’s nomination of Mauricio Claver-Carone, the senior director of Western Hemisphere affairs at the National Security Council, flies in the face of the bank’s 1959 foundational agreement, when then-U.S. President Dwight D. Eisenhower laid down that a Latin American should run the region’s marquee development bank. Other multilateral financial institutions, such as the World Bank, traditionally headed by an American, and the International Monetary Fund, helmed by a European, have similar national criteria for leadership. Always with the blessing of the United States, the IDB has in its history had just four leaders—a Chilean, a Mexican, an Uruguayan, and, most recently, a Colombian, Luis Alberto Moreno, who is set to depart after a 15-year tenure later this year.
Claver-Carone has plenty of credentials for the job. He was previously a senior U.S. representative to the International Monetary Fund, had international roles at the Treasury Department, and helped rejuvenate America’s own development finance arm. But the Cuban American lawyer is also viewed by critics, especially on Capitol Hill, as a hard-liner on Latin America, vocally lobbying while at the White House for tougher action against Cuba, Venezuela, and Nicaragua.
Some see his nomination for a five-year term as IDB head as yet another effort by the Trump administration to sow ideologically like-minded officials in international posts where they can maintain influence even after the end of the administration. In 2017, Trump nominated another conservative Cuban American to serve as the U.S. ambassador to the Organization of American States. Similarly to Claver-Carone, since the beginning of his tenure in April 2018, Carlos Trujillo has strongly advocated for regime change in Latin America’s “troika of tyranny.”
“The strategy is to clearly embed Trump officials within the U.S. international development institutions,” a former staff member at the U.S. Senate Foreign Relations Committee told Foreign Policy.
The U.S. pick has split Latin American countries, which earlier this year were mulling a choice between the Argentine economist Gustavo Béliz and the Brazilian banker Rodrigo Xavier. Former Costa Rican President Laura Chinchilla and Paraguayan Finance Minister Benigno López were also expected to put their names in the hat.
Colombia, a staunch U.S. ally, was the first country to issue a statement in favor of the U.S. nominee. Brazil, whose bid had originally been endorsed by the Trump administration, then ditched its own candidate to follow Washington’s beckon. So far, at least 15 of the IDB’s 48 member countries have publicly supported him, with Claver-Carone saying he has “overwhelming support.”
But Argentina, whose Foreign Minister Felipe Solá has indicated that “for the reconstruction of our economies it is key to have a Latin American perspective at the IDB, given that we are the ones worst-hit economically,” has continued to back its own candidate, enjoying the support of Mexico. Even the European Union has weighed in, suggesting postponing the election—scheduled for Sept. 12 and 13—until next year.
“This postponement is more advisable if we consider the submission, without precedent, of a candidacy to preside the Bank by the United States Government,” EU foreign affairs chief Josep Borrell wrote to Spanish Foreign Minister Arancha González Laya on July 30 in a letter obtained by Reuters.
Even some U.S. allies have backed the call for delayed elections in light of the U.S. maneuver. The conservative government of Chilean President Sebastián Piñera has supported Argentina, Mexico, and Costa Rica in urging that the elections be postponed until 2021. In June, former Colombian President Juan Manuel Santos and former Brazilian President Fernando Henrique Cardoso, whose governments had close ties with Washington, joined an array of top Latin American officials in signing a letter against the U.S. candidacy.
The spat over who will run the Inter-American Development Bank is even making waves among U.S. policymakers and lawmakers. Presumptive Democratic presidential nominee Joe Biden’s campaign has also reportedly indicated that Claver-Carone is “overly ideological” and “under qualified” to lead the bank.
Roberta Jacobson, formerly a top Western Hemisphere official in President Barack Obama’s State Department and most recently ambassador to Mexico between 2016 and 2018, and Dan Restrepo, a former Obama advisor on the Western Hemisphere, argued in a recent article that choosing an American would “undermine [the bank’s] fundamental mission in a new Inter-American system.”
But the way the bank is set up points toward a victory for Washington—if the elections go ahead as planned. The United States, with 30 percent of the voting shares, and Brazil, with just over 11 percent, have the two biggest individual votes alongside Argentina, which holds the same vote share as Brazil. If all countries that have come forward in support of Claver-Carone stick to their claims, it is unlikely that Argentina still stands a chance.
The fight has important implications for the future of the bank at a time when development aid is desperately needed in coronavirus-hammered Latin America, and the bank needs recapitalization to be able to meet all the development goals in the region. After announcing a nearly $2 billion package to help fund anti-coronavirus measures in the region in March, the bank, which continues to be the largest source of multilateral financing to Latin America and the Caribbean, is desperate to increase its lending power.
Colombia justified its support for the unprecedented nomination by arguing that U.S. leadership could help recapitalize the bank. Colombian President Iván Duque, who worked at the IDB for a decade, later added that Claver-Carone’s candidacy was “clear proof that the main stockholder at this time wants to help create a positive transformation in the bank.” Brazil struck a similar tone in its own note backing Trump’s candidate.
In Washington, things look entirely different—and could look even worse for the bank’s recapitalization’s prospects if Biden wins the White House and Democrats flip the Senate in the November elections.
“A priority for a lot of member states at the IDB would be to get a capital increase for the bank,” said Mark Feierstein, a former Obama official for the Western Hemisphere. “But if you have a leader who is opposed by the Senate Appropriations chair, who’s opposed by the House Appropriations Committee, it will be a lot more difficult for the bank to get the resources it wants to get.”
Indeed, Sen. Patrick Leahy, a Democrat who is currently the vice chairman of the Senate Appropriations Committee and stands to take the gavel early next year if Democrats win, has already made that clear.
“Electing Mr. Claver-Carone to a five-year term just weeks before the U.S. presidential election, coupled with his unpopularity with some Members of Congress,” Leahy said in a statement, “would not bode well for United States support for the bank in the coming years.”
That could be a problem, as Latin American and Caribbean economies have been hit hard by the fallout from the coronavirus pandemic. The IMF projects a 9.3 percent GDP drop this year, which could result in another 45 million Latin Americans falling into poverty by the end of 2020. Governments are relying on a stable—and fully capitalized—IDB to help them at a time when other global organizations have their hands full.
“The region is facing these enormous economic and health crises, and many countries are not in the fiscal position to be able to respond, and they will need the IDB,” said Amanda Glassman, the executive vice president of the Center for Global Development and formerly staff at the IDB.
“At the World Bank, there’s a ton of competition for these very scarce resources from the rest of the world,” Glassman told Foreign Policy. “Latin America is a small portion of the world for them, whereas for the IDB it’s their whole world.”