Background Note

THE WORLD BANK

Prepared by the Department of External Relations

October 2007

The World Bank Group was created as part of the post-war Bretton Woods institutions with the mission of promoting economic development. Over recent years it has put primary emphasis on poverty reduction, in order to eliminate and/or alleviate the poverty that is experienced by around half the world’s six billion population. The World Bank has been carrying out its worksince 2000 in the context of the UN Millennium Development Goals (MDGs), and the benchmarks and yardsticks set out by the UN in the MDGs are also being used by the Bank as a measure of effectiveness of its work.

The work of the World Bank is very widespread and encompasses all aspects of the development agenda that can contribute to poverty reduction, including health, education, infrastructure, communications, trade, institutional strengthening, etc. Besides providing and managing loans and grants, the WB staff also provides economic analysis and policy assessment and advice in the areas and on the countries and regions in which it works. The World Bank has a staff of over 10,000 employees working both at headquarters and in more than 100 WB offices around the world, and a volume of outstanding loan commitments of $14 billion (US) as of end 2006. With these resources, the World Bank is able to carry out an extensive program of work in a large number of areas of economic development.

The new World Bank President who took office on July 1st, 2007, Robert B. Zoellick, will almost certainly not change this overarching goal for the Bank. He may, however, put emphasis on relatively different priorities within this goal. On his first day on the job, Zoellick stated that

“...... a key challenge for the World Bank and its staff is to help all nations, particularly the poorest ones, share in the benefits of globalization, which has been driven by two huge developments since the end of the Cold War - an international labor force that has grown from 1 billion to 4 billion workers and a parallel large savings pool.” These two trendswere creating many winners among nations, but leaving some, especially in Africa, lagging behind, he said, and, "One of the challenges of the Bank today is to help the poorest countries take advantage of these changes…and opportunities."

In various other interviews after taking office, Zoellick has stated that:

“I think one of the main challenges for the Bank today is how it works to try to help the poorest countries, particularly Africa, take advantage of the changes brought by globalization. The middle-income countries—how they continue to benefit from it, with some of the dangerous fragilities; but also for the developed countries to recognize they can’t turn away from this, they can’t live in a world where they are isolated and separated from these phenomena; whether it be capital flows, integration flows, or others.....” (July 2007)

“If you look at most of the work in the development field, having sound institutions and having good governance is a core element -- along with sort of basic property rights and rule of law -- to any successful development effort.” (September 2007)

Since taking office Zoellick has spent much of his time reaching out and meeting with various officials, with the WB Board and with the many committees and organs of the Bank. The Bank’s lending policy towards middle income countries is currently under review. Zoellick’s first official trip as World Bank President was to Asia to attend the APEC Finance Ministers Meeting in Sydney, Australia, on September 5th, 2007. As part of this trip to Asia, Zoellick also stopped in Japan, Cambodia and Vietnam. In his speeches in the latter two countries, he emphasized the importance of dealing with corruption at all levels of government and of land titles and reform in promoting economic development.

On their side, the Executive Directors of the World Bank have identified the following as challenges that the new President will have to address:

1. a successful 15th replenishment of IDA funds;

2. development of a long-term strategy for the Bank Group;

3. issues related to corporate governance.

World Bank Activity in the Latin American and Caribbean regions

Latin America and the Caribbeanare not priority regions for the World Bank, either in terms of their programs or their loans, given the relatively higher level of per capita income enjoyed by these two regions compared to others in the developing world. Africa and South Asia are at the top of the WB priority list, and it is to these two regions that the majority of WB lending is directed.

Nonetheless, the Vice President of the World Bank for Latin America and the Caribbean, Pamela Cox, coordinates a staff of around 700 in her department, with a $16.6 billion portfolio of loans, grants and credits. This staff size in the LAC department is roughly the same as that of the total staff of the OAS.

For the Latin America region as a whole, the World Bank website shows a current loan portfolio of four projects, with one additional project in the pipeline (see Annex I). All five of these projects fall within the environmental area and focus on aspects of sustainable development. They are being conducted in the context of the World Bank’s Global Environment Project. There has been an active program of collaboration between the WB and the OAS Department of Sustainable Development for several years for work in this area, as indicated in the section below. However, projects have been approved and are ongoing for individual LA countries, as indicated in the table in Annex II (number of active projects and lending amount by country). The Latin American countries with the largest number and volume of active WB loans are Brazil (71), Argentina (37), Colombia (32), Mexico (29) and Peru (28).

For the Caribbean region as a whole, the World Bank website shows a current loan portfolio of three projects (see Annex I). Nine previous projects have been carried out for the region but are now closed, five of which were carried out by the Caribbean Development Bank for the World Bank. Of the three active projects, two are in the environmental area and fall under the WB Global Environment Project. However, projects have been approved and are ongoing for individual Caribbean countries, as indicated in the table in Annex II. The Caribbean countries with the largest number and volume of active WB loans are Haiti (10), St. Lucia (7), Jamaica (5) and Grenada (3).

The main areas of World Bank lending for projects in Latin America and the Caribbeanin which the OAS also carries out work (i.e. excluding infrastructure development, agriculture, health services and finance) are the following: education; environmental issues; institutional policy reform, including governance; and trade). These four areas have been included in the proposed collaborative agenda below.

A possible Agenda for World Bank – OAS Collaboration

In spite of the huge difference in scale between the World Bank and the OAS in their respective resource bases, some of the areas in the Summit Agenda of the OAS overlap with those of the Bank’s work. The World Bank already collaborates in an important way with the OAS Department of Sustainable Development,and has contributed to a collaborative effort on a project for collecting, sharing and using information on biodiversity. The World Bank is participating as well, together with the OAS Department of Social Development and Employment, ECLAC and the IDB, in a project on “Realizing Rights through Social Policy”, toresult in case studies of eight Latin American countries. The World Bank Institute has collaborated on previous occasions with the OAS Department of Trade, Tourism and Competitiveness to conduct training seminars in the area of services trade in Latin America and the Caribbean and has participated in a joint project on services and regulatory reform. World Bank experts collaborate closely with the OAS Department of Education and Culture in seeking to build a hemispheric alliance in favor of early childhood education, including through a joint research website on the topic. However, there is certainly scope to do morein the area of economic development in well defined areas.

Given the coming meeting between OAS Secretary General Insulza and WB President Zoellick on October 1st, 2007, it would be useful to take advantage of this occasion to agree upon a collaborative development agenda for the Western Hemisphere. Four areas of existing and/or potential future collaboration are identified below,, namely:

i)Poverty Reduction and Economic Development

ii)Governance/ Institutional Strengthening

iii)Environment and Sustainable Development

iv)Education

1. TRADE, POVERTY REDUCTION AND ECONOMIC DEVELOPMENT

The World Bank’s work and lending on international trade is an integral part of the Bank’s work on development and poverty reduction. The World Bank assists developing countries to formulate trade policies expressly in their process of development and poverty reduction and provides technical assistance or policy advice to the governments towards an open trade regime. The Bank undertakes research to better understand the role of international trade in development and poverty reduction.
The OAS Department of Trade, Tourism and Competitiveness (DTTC) also undertakes work on international trade in the context of the achievement of the Summit Goals for promoting economic growth, reducing poverty and creating jobs. The DTTC carries out capacity-building activities to help OAS Member States to be better able to take advantage of the opportunities offered by trade and by trade agreements.
The OAS DTTC would be desirous of increasing its collaboration with the World Bank in the following three areas of work of:
√ Inclusion of Poor and Marginalized Groups in Benefits from Trade
The OAS will work with the Overseas Development Instituteonthe project Institutional Strengthening to Promote the Inclusion of Poor and Marginalized Groupsin the Benefits of Trade and Investment Opportunities." The project will (i) strengthenlocal governments to better serve the marginalized groups through increased dialogue, inclusion and pro-poor policies; (ii) empower marginalized and disadvantaged citizens to participate in and monitor trade and competitiveness as well as decisions that affect them, establishing a new level of inclusion and, thereby, promoting good governance; and (iii)build the capacity of marginalized groups to take advantage of trade and investment and to be more competitive by providing them with tools for finding the intangible value of their products and services, for commercializing them and for competing regionally. Collaboration of the World Bank in this project would be very welcome.
√ High-Level Dialogue on Governance, Economic Development and Crime
Crime and violence present one of the paramount challenges to development in the Caribbean and Central America. The OAS DTTC, in coordination with the OAS departments working on public security and the promotion of governance, will organize a High-Level Dialogue on Governance, Economic Development and Crime. The dialogue will bring together government representatives, international organizations and the donor community. A partnership with the World Bank, the United Nations Office on Drugs and Crime (UNODC), and the Inter-American Development Bank will be critical to the success of this initiative.
Background Arguments:

The Caribbean (from the report Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean)”

High rates of crime and violence in the Caribbean are undermining growth, threatening human welfare, and impeding social development, according to the report “Crime, Violence, and Development: Trends, Costs, and Policy Options in the Caribbean,” published by the World Bank and the United Nations Office on Drugs and Crime (UNODC).
The report clearly shows that crime and violence are development issues. Donors and OECD countries need to work together with Caribbean countries to reduce the current levels in the region,” said Caroline Anstey, World Bank Director for the Caribbean.
Caribbean governments have come to recognize that crime and violence are an important development issue. The implication is clear: violence and crime reduction should be considered an important element of development policy making—at the national, regional, and international levels. It therefore also means that crime and violence is a key issue for the traditional development partners of these countries. To date, support in this area by the donor community has been somewhat piecemeal. Donors need to work closely with their Caribbean partners to coordinate action and assistance across a range of interventions.
Central America (from the report “Crime and Development in Central America”)
Secretary-General Ban Ki-moon said last June that “Crime scares away investors. It encourages ‘brain drain.’ And it erodes support for democracy,” Pledging the UN’s commitment to helping Central American governments overcome these problems, Mr. Ban stressed that regional cooperation is also vital to reducing crime and social inequality.
Central America is one of the most unequal regions in the world, alongside South America and Southern Africa. Four of the seven Central American countries rank among the world’s most unequal in terms of income distribution.
√ Aid for Trade
Developing the supply-side capacity and trade-related infrastructure required to benefit from freer access to external markets has become critical to Latin American and Caribbean countries. Some OAS Member States (such as CAFTA-DR countries, as well as Colombia, Panama and Peru) have started to work towards this objective in the context of their “internal agendas of productivity and competitiveness.”
At the recent Conference on “Mobilizing Aid for Trade: Focus Latin America and the Caribbean,” organized by the WTO and the IDB, in association with the World Bank and the Government of Peru, held in Lima on September 13-14, it became clear, however, that the Caribbean region, despite enormous needs in this area, has been absent from IFI’s attention. The OAS DTTC will be focusing an important part of its work program to address this vacuum, building on its trade capacity building work developed during the last decade. A collaborative effort with the World Bank would be critical to the success of these efforts.
√ Support for Free Trade Agreements pending before the U.S. Congress
The Free Trade Agreements between the U.S. and Peru, Panama and Colombia are considered critical to sustainable democracy in Latin America. The OAS has taken steps at the highest level to promote passage of these agreements. Joint efforts between the OAS and the World Bank (and the Inter-American Development Bank) in this regard would be very positive at this critical juncture.

2. GOVERNANCE/ INSTITUTIONAL STRENGTHENING

Governance and institutional strengthening are important components of the World Bank Group’s work that are spread throughout hundreds of governance and anti-corruption activities by the institution and take place under many offices and in many different programs. The World Bank website state that it views good governance and anti-corruption as central to its poverty alleviation mission. WB work focuses on minimizing corruption on World Bank-funded projects and on assisting countries in improving governance and controlling corruption. The World Bank Institute is a good focus for the WB work on governance and institutional strengthening, as it combines action-oriented learning, capacity-building tools. The WB Institute uses a strategic and multidisciplinary approach, to link empirical diagnostic surveys, to areas of practical application, collective action, and prevention. This integrated approach is supported by operational research and a comprehensive governance databank. The WB databank on governance is composed of various indicators compiled by the Governance Group that also analyzes, interprets and disseminates these data and assists in capacity-building activities and learning programs.
The OAS works on a number of fronts to strengthen democratic governance, within the guidelines of the Democratic Charter. It promotes a dynamic exchange of ideas on democratic practices — not only among governments, but with political parties, parliaments and congresses, academic institutions, civil society organizations and others — as part of a broad effort to build stronger democratic institutions in the region.
Through its Secretariat for Political Affairs, the OAS supports member states' efforts to decentralize governments, strengthen national legislatures, modernize political parties and instill a democratic culture in society. In response to requests from member countries, it has offered training and technical assistance in areas ranging from the drafting of legislation to the development of modern civil registries. In recognition of the central role of legislatures in a democracy, the OAS also has a number of initiatives to support inter-parliamentary dialogue and cooperation. Strengthening democratic governance at the local level is another priority. The Summits of the Americas” proces has affirmed the importance of citizen participation in decision-making, noting that “local governments are closest to the daily lives of citizens.” The OAS serves as the technical secretariat for the High-Level Inter-American Network on Decentralization, Local Government and Citizen Participation (known by its Spanish acronym, RIAD. This initiative promotes the exchange of experiences among institutions and dialogue about decentralization policies. Possible areas of collaboration could be defined between OAS and World Bank work in this area.