Strengthening national development banks: Why wait?
In 2020, we had a simultaneous confluence of crises: economic, environmental and health. To this was added a geopolitical crisis, with impacts that forced us to rethink concepts about development and the role that development finance institutions in Latin America and the Caribbean should play. These crises led us to reflect on key questions about security, risk diversification, climate change, health and the impact of technology on development finance, digitalisation, the energy transition, and their relationship to the protectionist policies that have intensified today.
At the same time, several challenges were revealed for Latin American and Caribbean countries, including the need to mobilise resources to strengthen investment in resilient productive and social infrastructure, digital access and support for job-generating activities. Other challenges involve support for small and medium-sized enterprises, the economic empowerment of marginalised sectors, the promotion of entrepreneurship, and the generation of new investment through the relocation and regionalisation of companies in international value chains. Key areas include agricultural and rural development, deepening financial inclusion, mobilising climate investments and supporting technological innovation in business. All these aspects make up the scope of action of the development bank as part
of the global financial architecture.
Development banks are key drivers of sustainable economic development
In recent years, we have witnessed a resurgence of these development banks worldwide, in some regions or countries more than in others. This resurgence is due to the recognition of their role not only in promoting economic development – now focused on being sustainable, inclusive and resilient – but also as stabilisers of economic activity during periods of crisis, such as the 2008 global financial crisis or the Covid-19 crisis.
Faced with these situations, development banks have shown resilience and adapted their support instruments to respond to complex environments. As an example, we can highlight the countercyclical role that they played during past crises, when market financing tended to slow down, which led many governments to use their development banks to induce proactive action by their financial institutions.
A common vision unites all these efforts, as well as the more than 530 development banks and financial institutions around the world that manage assets worth $23 trillion and finance investments of $2.3 trillion (according to the Global Network of Public Development Banks). They go beyond just correcting market failures and contribute to the development of their countries on a traditional basis.
A unique perspective that supports innovation
Development banks are in a privileged position to be agents of change, identifying cutting-edge sectors that will allow Latin America and the Caribbean to compete in the future, induce an environmentally friendly development model and develop the potential of entrepreneurs, to make it possible for their ideas and projects to be translated into businesses. They open up paths where others only see risks and difficulties, supporting projects in new sectors or products where market information is incomplete or nonexistent. They empower and offer financial and non-financial tools to entrepreneurs who are creating the economy and businesses of the future. They identify new areas or sectors for development. What better than a development bank to serve as an antenna to capture where business and market opportunities are heading in economies such as those of Latin America and the Caribbean?
We can affirm that strengthening and giving greater attention to national development banks is justified by the need not only to create markets where they do not exist, but also to efficiently develop existing markets in key areas for the structural transformation of economies. This includes sectors such as agriculture, infrastructure, energy, education, health, small and medium-sized enterprises, and innovation. At the same time, they contribute to a global and collaborative approach to the challenges and priorities of a constantly changing world, as well as other challenges previously mentioned. This takes on greater relevance at a time when it seems that coordination to address global problems shows a certain weakness.
