Proposal preview

INTERNATIONAL FINANCIAL INSTITUTIONS: MULTILATERAL INVESTMENT AND DEVELOPMENT BANKS SINCE WORLD WAR II

The evolution of financial markets and international banking institutions has been considered a key factor in the development of the world economy and regional integration (Eichengreen 2010). In principle, the higher the level of economic and financial integration, the greater the achieved economic benefits (Eichengreen 2007). For this reason, after the Second World War, International Financial Institutions (IFIs) were established in order to restore standards and rules for the operation of the global financial markets to promote growth and integration. IFIs such as the World Bank were created for this purpose (1944) while regional integration banks such as the European Investment Bank (EIB, 1958), the Inter-American Development Bank (IADB, 1959), the Central American Bank for Economic Integration (CABEI, 1960) and the Latin American Development Bank (CAF, 1968) followed, charged with the objective of facilitating access to global capital markets and to regional investment (Clifton et al. 2014a).

The role that IFIs have taken since post-war, as the World Bank on a global scale, and the EIB, IADB, CABEI, CAF, on a regional scale, should have led to the development of global financial markets and regional integration. However, while a significant body of work exists on the role of the World Bank as regards the development of nations and the globalization of financial markets (Alacevich 2009), relatively little is known about the regional IFIs, which should be key as regards the development and integration of their respective regions. This lack of historical studies can be explained by the fact that, until recently, these IFIs had not enough available information about its financial operations (Clifton et al. 2014b for the EIB, BID 2013). The recent opening of the historical archives of these regional financial institutions, as well as the opening of other archives of national development institutions (Rougier 2011), in addition to that of private banks, such as the Santander Bank Historical Archive, offers the possibility to collect their databases to perform a rigorous comparative historical analysis on the contribution of IFIs to national development, regional integration and globalisation. This is the aim of this session at the WEHC in Boston, 2018.

Organizer(s)

  • Daniel Díaz Fuentes University of Cantabria daniel.diaz@unican.es
  • Judith Clifton University of Cantabria judith.clifton@unican.es
  • David Howarth University of Luxembourg david.howarth@uni.lu

Session members

  • Sarah Babb, Boston College
  • Dominique Barjot, Paris-Sorbonne University
  • Anthony Bartzokas, EBRD
  • Carlos Brando, Universidad de los Andes (Colombia)
  • Soumya Chattopadhyay,
  • Judith Clifton, University of Cantabria
  • Lucia Coppolaro, University of Padova
  • Alberto Cortés, Universidad de Costa Rica, CABEI
  • Jose Cuesta, Unicef
  • José Deras, BCIE
  • Daniel Díaz Fuentes, University of Cantabria
  • Juan Huitzilihuitl Flores Zendejas, University of Geneva
  • Ana Lara Gómez, University of Cantabria
  • Elisa Grandi, Paris School of Economics
  • David Howarth, University of Luxembourg
  • Helen Kavvadia, University of Luxembourg
  • Erika Kraemer-Mbula, University of Johannesburg
  • Pierre Lanthier, Université du Québecc à Trois-Rivières
  • Moritz Liebe, University of Luxembourg
  • Justin Lin Yifu, Peking University, World Bank
  • Pablo López, Universidad Nacional de José C. Paz
  • Carlos Marichal, Colegio de México
  • Stefano Palestini , Freie Universität Berlin
  • Stephen D. Roper, Florida Atlantic University
  • Marcelo Rougier, Universidad de Buenos Aires
  • Dane Rowlands, Carleton University, Canada
  • Juan José Ruiz, Inter-American Development Bank
  • Jiajun Xu, Peking University

Discussant(s)

  • Carlos Marichal Colegio de México cmarichals@gmail.com
  • Pablo Martín Aceña Universidad de Alcalá pablo.martin@uah.es

This panel has Call for Papers open.
If you are interested in participating, please contact the panel organizer(s) to submit a proposal.

  • Daniel Díaz Fuentes , University of Cantabria, daniel.diaz@unican.es,
  • Judith Clifton, University of Cantabria, judith.clifton@unican.es,
  • David Howarth, University of Luxembourg, david.howarth@uni.lu,

Papers

Panel abstract

After the Second World War, International Financial Institutions (IFIs) were established to restore standards and rules for the operation of the global financial markets in order to promote growth and integration. IFIs such as the World Bank were created for this purpose while regional integration banks such as the EIB, IADB, CABEI or CAF followed, charged with the objective of facilitating access to global capital markets and regional investment. While a significant body of work exists on the World Bank, relatively little is known about the regional IFIs, essential as regards the development and integration of their respective regions. Growing scholarly interest coupled with the recent opening of their historical archives offers the possibility to perform a rigorous comparative historical analysis on the contribution of IFIs to national development, regional integration and globalisation. This is the aim of this session at the WEHC in Boston, 2018.

1st half

The African Development Bank. Erika Kraemer

Erika Kraemer-Mbula

Africa’s economic upswing over the last three decades has not translated into major improvements in the lives of most Africans. Despite regional variations, some collective challenges persist at the core of African development, such as limited economic diversification (high dependence on commodities and extractive industries), poor physical infrastructure, the threats posed by climate change and insufficient efforts in knowledge generation, innovation and technology development. The African Development Bank (AfDB) was established in 1964 with a strong commitment to address African interests and priorities. The controversial move to accept non-regional membership in 1982 was driven by its need to access external resources in a heavily constrained environment, and had important implications in its approach to governance and decision-making. This chapter explores the historical evolution of the AfDB in tackling key issues related to diversification, natural environment, inclusion and innovation, and the extent to which it is currently posed to develop present...

Africa’s economic upswing over the last three decades has not translated into major improvements in the lives of most Africans. Despite regional variations, some collective challenges persist at the core of African development, such as limited economic diversification (high dependence on commodities and extractive industries), poor physical infrastructure, the threats posed by climate change and insufficient efforts in knowledge generation, innovation and technology development. The African Development Bank (AfDB) was established in 1964 with a strong commitment to address African interests and priorities. The controversial move to accept non-regional membership in 1982 was driven by its need to access external resources in a heavily constrained environment, and had important implications in its approach to governance and decision-making. This chapter explores the historical evolution of the AfDB in tackling key issues related to diversification, natural environment, inclusion and innovation, and the extent to which it is currently posed to develop present and future “African solutions to African challenges”.

The Asian Development Bank. Barjot and Lanthier

Dominique Barjot and Pierre Lanthier

This paper examines the activities of the Asian Development Bank since its beginning in the 1960s to today. We will insist on the Bank’s mission relating to economic growth of Asia: how, on one side, the Bank invested in developing countries and how, on the other side, it got involved in poverty relief irrespectively whether the nation was developed or not. Moreover, we will show how the bank intervened in situations of emergency such as natural disasters or economic crises. Throughout the chapter, we will try to answer the following question: is economic growth a sufficient condition to develop welfare or more is needed, and how does the Asian Development Bank address this issue?

This paper examines the activities of the Asian Development Bank since its beginning in the 1960s to today. We will insist on the Bank’s mission relating to economic growth of Asia: how, on one side, the Bank invested in developing countries and how, on the other side, it got involved in poverty relief irrespectively whether the nation was developed or not. Moreover, we will show how the bank intervened in situations of emergency such as natural disasters or economic crises. Throughout the chapter, we will try to answer the following question: is economic growth a sufficient condition to develop welfare or more is needed, and how does the Asian Development Bank address this issue?

Crossing the Alps. Paolo Tedeschi

Paolo Tedeschi

During the Sixties and Seventies, EEC financed the renovation or building in the Alps of infrastructures connecting Italy to France (Savoy) and, crossing Austria, West Germany (Bavaria). The EIB financed the renovation of the railways between Genoa-Modane (Savoy) and between Bolzano-Brennero, and, secondly, the building of the Bolzano-Brennero and Aosta-Quincinetto motorways. The EIB was the “tool” used by EEC to improve the social and economic cohesion between the EEC countries. New infrastructures allowed better connections to the Southern Italy (the poorest EEC region) and developed new factories which had just been established there. These infrastructures also favoured links between the Alps and the most developed EEC regions (Lombardy and Bavaria) as well as the port of Genoa and the Savoy and the Southern France. So, the EIB’s loans improved the communications through the Alps and also favoured the development of the Alpine enterprises and the growth of the Alpine tourism.

During the Sixties and Seventies, EEC financed the renovation or building in the Alps of infrastructures connecting Italy to France (Savoy) and, crossing Austria, West Germany (Bavaria). The EIB financed the renovation of the railways between Genoa-Modane (Savoy) and between Bolzano-Brennero, and, secondly, the building of the Bolzano-Brennero and Aosta-Quincinetto motorways. The EIB was the “tool” used by EEC to improve the social and economic cohesion between the EEC countries. New infrastructures allowed better connections to the Southern Italy (the poorest EEC region) and developed new factories which had just been established there. These infrastructures also favoured links between the Alps and the most developed EEC regions (Lombardy and Bavaria) as well as the port of Genoa and the Savoy and the Southern France. So, the EIB’s loans improved the communications through the Alps and also favoured the development of the Alpine enterprises and the growth of the Alpine tourism.

CABEI´S Contribution on Development. Alberto Cortes and Jose Deras

Alberto Cortés, José Deras and Guillermo Funes

During 57 years, the Central American Bank for Economic Integration (CABEI) has supported the region through the facilitation of financial resources and technical assistance with the purpose of promoting integration and balanced social and economic development of its founding countries tending to and keeping in line with the interests of all its partners. In the recent past, the institutional evolution process and the achievement of trends using management for development results, have clinched a relevant question in the Bank: What have been the effects on development that the interventions of the Bank have had on its beneficiaries? To answer this question, CABEI uses an evaluation structure that focuses on three strata: evaluation of the institutional strategy or corporate evaluation, evaluation of country strategies or country evaluation, and the evaluation of development interventions or Project evaluation. The present publication shows the evolution of CABEI through certain milestones during the last 57...

During 57 years, the Central American Bank for Economic Integration (CABEI) has supported the region through the facilitation of financial resources and technical assistance with the purpose of promoting integration and balanced social and economic development of its founding countries tending to and keeping in line with the interests of all its partners. In the recent past, the institutional evolution process and the achievement of trends using management for development results, have clinched a relevant question in the Bank: What have been the effects on development that the interventions of the Bank have had on its beneficiaries? To answer this question, CABEI uses an evaluation structure that focuses on three strata: evaluation of the institutional strategy or corporate evaluation, evaluation of country strategies or country evaluation, and the evaluation of development interventions or Project evaluation. The present publication shows the evolution of CABEI through certain milestones during the last 57 years, the outreach of the contributions to development made by CABEI during the 2010-2016 period, and the institutional commitment to continue boosting the evaluation and learning process. In this context, CABEI establishes as its general conclusion that “To improve we have to evaluate”, and that the results of this article are a part of the aforementioned exercise.

The Andean Development Corporation. Carlos Andrés Brando

Carlos Andrés Brando

Outstripping the World Bank and the Inter-American Development Bank in the value of lending committments, the Andean Development Corporation (CAF), recently became Latin America`s single largest development financier. Grounded on the reconstruction of statistical series derived from primary sources, this paper offers a long-run view of this Corporation, from its conception in the late 1960s to the present day. It seeks to contribute to the existing literature on three fronts. First; by tracing the historical evolution of CAF according to its changing mandates. Secondly; by offering descriptive analyses of the most salient trends and changes in its operations, specifically, by looking at the patterns of loan allocations and the evolving origins of its funding sources. Lastly; through an examination of the distinctive operational phases that have come to characterise concrete periods of its existence, it offers a novel periodisation of the entity`s trajectory.

Outstripping the World Bank and the Inter-American Development Bank in the value of lending committments, the Andean Development Corporation (CAF), recently became Latin America`s single largest development financier. Grounded on the reconstruction of statistical series derived from primary sources, this paper offers a long-run view of this Corporation, from its conception in the late 1960s to the present day. It seeks to contribute to the existing literature on three fronts. First; by tracing the historical evolution of CAF according to its changing mandates. Secondly; by offering descriptive analyses of the most salient trends and changes in its operations, specifically, by looking at the patterns of loan allocations and the evolving origins of its funding sources. Lastly; through an examination of the distinctive operational phases that have come to characterise concrete periods of its existence, it offers a novel periodisation of the entity`s trajectory.

A supranational instrument of intergovernamentalism: The EIB’s lending policy from 1958 to 2004. Lucia Coppolaro

Lucia Coppolaro

This paper analyses the origins of the European Investment Bank (EIB) and its lending policy from its inception in 1958 to the enlargement to Eastern Europe of 2004. It tries to assess whether the Bank was autonomous, and its credit allocation was shaped by the viability of projects or whether political considerations prevailed and limited the autonomy of the EIB so that, as a result, politics prove to be more important than development objectives. This contribution shows until the 1970s, EIB’s lending decisions were subject to the requirements of the member states, also when these requirements were in contrast with the viability principle or with the development goals. This situation changed in the1980s, when the lending policy evolved in responses to the changing global and European economy, redeployed the field of operations and refocused the Bank’s methods and scopes. This refocusing ultimately helped increasing the autonomy of the EIB.

This paper analyses the origins of the European Investment Bank (EIB) and its lending policy from its inception in 1958 to the enlargement to Eastern Europe of 2004. It tries to assess whether the Bank was autonomous, and its credit allocation was shaped by the viability of projects or whether political considerations prevailed and limited the autonomy of the EIB so that, as a result, politics prove to be more important than development objectives. This contribution shows until the 1970s, EIB’s lending decisions were subject to the requirements of the member states, also when these requirements were in contrast with the viability principle or with the development goals. This situation changed in the1980s, when the lending policy evolved in responses to the changing global and European economy, redeployed the field of operations and refocused the Bank’s methods and scopes. This refocusing ultimately helped increasing the autonomy of the EIB.

Transformations, ruptures and continuities in IDB policy from 1980 to present. Pablo López and Marcelo Rougier

Pablo J. López and Marcelo Rougier

Unlike the multilateral banks (MDBs) with a presence in the region, especially the World Bank (WB), since 1959 Latin American countries had a specific regional bank in which they played a greater role in the decision-making process. From the late1970s and in particular during the Washington Consensus at the end of the 1980s, neoliberal policies pursued in the region implied a transformation of the objectives and guidelines of the multilateral and regional banks. Although the IDB did not change its original main mandate, it assimilated the structural reform agenda and changed the orientation and prioritization of its credits. From a long-term retrospective view, we inquire how transformations in the mainstream perspective of the 'best' policies to boost economic development were expressed in the IDB´s lending policy during the last 35 years. At the same time, we try to understand if the greater participation of the debtor countries in the IDB´s...

Unlike the multilateral banks (MDBs) with a presence in the region, especially the World Bank (WB), since 1959 Latin American countries had a specific regional bank in which they played a greater role in the decision-making process. From the late1970s and in particular during the Washington Consensus at the end of the 1980s, neoliberal policies pursued in the region implied a transformation of the objectives and guidelines of the multilateral and regional banks. Although the IDB did not change its original main mandate, it assimilated the structural reform agenda and changed the orientation and prioritization of its credits. From a long-term retrospective view, we inquire how transformations in the mainstream perspective of the 'best' policies to boost economic development were expressed in the IDB´s lending policy during the last 35 years. At the same time, we try to understand if the greater participation of the debtor countries in the IDB´s governance was reflected in credit lines according to the specific needs of regional development, in contrast to the lending policies of other multilateral banks.

Asian Infrastructure Investment Bank- Its Birth, Mandates, and Infrastructure Financing. Jiajun Xu

Jiajun Xu

The present paper first examines why the Asian Infrastructure Investment Bank (AIIB) was established under the leadership of China, what is its original mandates, and then compares its infrastructure financing with that of Asian Development Bank (ADB). It argues that China initiated the AIIB because the existing US-centered Multilateral Development Banks, especially the World Bank, fail to provide sufficient infrastructure financing and China was impatient about the slow progress in the governance reform despite the persistent lag in adjusting voting powers in line with its relative economic weight. The AIIB was established to provide infrastructure financing to bridge the infrastructure deficits that hamper economic structural transformation in Asia and beyond. Finally, the paper compares the nascent infrastructure financing by AIIB with the well-established infrastructure financing models at ADB in terms of scale, risk mitigation, social and environment safeguards, and long-term finance.

The present paper first examines why the Asian Infrastructure Investment Bank (AIIB) was established under the leadership of China, what is its original mandates, and then compares its infrastructure financing with that of Asian Development Bank (ADB). It argues that China initiated the AIIB because the existing US-centered Multilateral Development Banks, especially the World Bank, fail to provide sufficient infrastructure financing and China was impatient about the slow progress in the governance reform despite the persistent lag in adjusting voting powers in line with its relative economic weight. The AIIB was established to provide infrastructure financing to bridge the infrastructure deficits that hamper economic structural transformation in Asia and beyond. Finally, the paper compares the nascent infrastructure financing by AIIB with the well-established infrastructure financing models at ADB in terms of scale, risk mitigation, social and environment safeguards, and long-term finance.

2nd half

Eximpo in Latin America. Elisa Grandi

Elisa Grandi

This paper analyses the Export Import Bank from 1940 to 1960 underlining its role as a development bank in Latin America. It traces the history of the Bank since its early activities, underlining two main turning points in the evolution of its policies: the loan to Haiti, in 1938, which represents the first lending to development projects; and the Export-Import Bank Act Amendments of 1954, which increases the lending capacity of the Bank, allowing to wider the spectrum of its activities. The analysis will follow two perspectives. First, we will study the relationship between the Eximpo and other development agencies acting in the region. We will focus mainly on Eximpo action in Colombia, comparing its policies with the World Bank ones. Indeed, the World Bank General Survey mission in Colombia in 1949 inaugurated a durable and stable relationship between the country’s economic policies and the international lending agencies. Second, we...

This paper analyses the Export Import Bank from 1940 to 1960 underlining its role as a development bank in Latin America. It traces the history of the Bank since its early activities, underlining two main turning points in the evolution of its policies: the loan to Haiti, in 1938, which represents the first lending to development projects; and the Export-Import Bank Act Amendments of 1954, which increases the lending capacity of the Bank, allowing to wider the spectrum of its activities. The analysis will follow two perspectives. First, we will study the relationship between the Eximpo and other development agencies acting in the region. We will focus mainly on Eximpo action in Colombia, comparing its policies with the World Bank ones. Indeed, the World Bank General Survey mission in Colombia in 1949 inaugurated a durable and stable relationship between the country’s economic policies and the international lending agencies. Second, we will connect the Eximpo evolution with the US foreign policy in the Inter-American system. Indeed, the loan to Haiti followed Roosevelt Good Neighbor Policy, and set up a pattern for US international technical assistance and economic aid. On the other hand, the Amendments of 1954 were strictly related to the increasing interest of Eisenhower administration in the region, which preceded the massive economic assistance launched by Kennedy through the Alliance for Progress.

The IDB and the Washington Consensus. Sarah Babb

Sarah Babb

The World Bank and International Monetary Fund became famous for their promotion of the “Washington Consensus” in developing countries during the 1980s. Under U.S. Treasury Secretary James Baker’s plan for solving the Third World debt crisis, the Bank and the Fund were charged with using conditional loans to persuade governments to adopt market liberalizing reforms. However, there was another Washington-based financial institution that was far more reluctant. Under the Baker Plan, the IDB was supposed to divert some project-lending resources to market-liberalizing policy-based lending, under the guidance of the World Bank. This new role was forcefully resisted by the bank’s Latin American member governments and management. This chapter tells the story of the IDB’s resistance, and how the U.S. was able to erode this resistance over time through holding up Congressional approval for IDB financing. The tale of the taming of the IDB is an unusually clear example of a...

The World Bank and International Monetary Fund became famous for their promotion of the “Washington Consensus” in developing countries during the 1980s. Under U.S. Treasury Secretary James Baker’s plan for solving the Third World debt crisis, the Bank and the Fund were charged with using conditional loans to persuade governments to adopt market liberalizing reforms. However, there was another Washington-based financial institution that was far more reluctant. Under the Baker Plan, the IDB was supposed to divert some project-lending resources to market-liberalizing policy-based lending, under the guidance of the World Bank. This new role was forcefully resisted by the bank’s Latin American member governments and management. This chapter tells the story of the IDB’s resistance, and how the U.S. was able to erode this resistance over time through holding up Congressional approval for IDB financing. The tale of the taming of the IDB is an unusually clear example of a dominant development bank donor overcoming resistance by wielding the power of the purse.

Exploring the EBRD and EIB relationship. Clifton, Diaz-Fuentes and Gomez

Judith Clifton, Daniel Díaz Fuentes and Ana Lara Gómez

The institutional financial landscape in Europe transformed with the establishment of the European Bank for Reconstruction and Development (EBRD) after the fall of the Berlin Wall. This article aims to analyse its relationship with the older European Investment Bank (EIB), created in 1957. Though the EBRD was set up with a view to supplement the EIB, analysis of EBRD and EIB loans to those countries borrowing from both institutions (during the period 1991 to 2015) shows that in practice the EBRD gradually complemented the EIB in the form of synergy. Classifying countries as EU Member, EU candidate Member, other European or non-European, we find that recipient countries progressively get lending either from the EIB or the EBRD in a mutual strategy where both institutions reinforce each other enhancing the synergy of their actions, as opposed to the intended supplementarity for which the EBRD was set (where EBRD loans would fill...

The institutional financial landscape in Europe transformed with the establishment of the European Bank for Reconstruction and Development (EBRD) after the fall of the Berlin Wall. This article aims to analyse its relationship with the older European Investment Bank (EIB), created in 1957. Though the EBRD was set up with a view to supplement the EIB, analysis of EBRD and EIB loans to those countries borrowing from both institutions (during the period 1991 to 2015) shows that in practice the EBRD gradually complemented the EIB in the form of synergy. Classifying countries as EU Member, EU candidate Member, other European or non-European, we find that recipient countries progressively get lending either from the EIB or the EBRD in a mutual strategy where both institutions reinforce each other enhancing the synergy of their actions, as opposed to the intended supplementarity for which the EBRD was set (where EBRD loans would fill the gaps of EIB loans). We see that the resulting synergy, despite unintended, brought institutional coherence to the new setting created with the establishment of the EBRD and mutually reinforced both EIB and EBRD actions.

Small words big changes understanding the EU bank through its business model. Helen Kavvadia

Helen Kavvadia

The evolution of the European Investment Bank (EIB), as the primary financial arm of the European Union (EU), since its foundation in 1957, is examined in a historical institutional approach through its Business Model (BM). This paper argues that EIB’s activity has changed overtime as a result of policy and market developments, which impacted not only the EIB activity, but also EIB’s business fundamentals. The paper examines these changes in a novel way, through the study of EIB’s BM evolution, given that BMs reflect at any point in time, structure, modus operanti, and activity fundamentals. Having used the EIB as a case study, the paper argues that BMs can be used, not only for depicting institutional future strategies, but also organisations’ past trajectories for historical institutional purposes.

The evolution of the European Investment Bank (EIB), as the primary financial arm of the European Union (EU), since its foundation in 1957, is examined in a historical institutional approach through its Business Model (BM). This paper argues that EIB’s activity has changed overtime as a result of policy and market developments, which impacted not only the EIB activity, but also EIB’s business fundamentals. The paper examines these changes in a novel way, through the study of EIB’s BM evolution, given that BMs reflect at any point in time, structure, modus operanti, and activity fundamentals. Having used the EIB as a case study, the paper argues that BMs can be used, not only for depicting institutional future strategies, but also organisations’ past trajectories for historical institutional purposes.