The public sector can’t do it alone: A new era for global development

When world leaders meet this week in Seville for the 4th International Conference on Financing for Development, they’ll face a new global development landscape. Governments’ fiscal space is more limited, and the gap between their desire to implement new initiatives and the ability to do so has widened. To meet these challenges, we need resources, innovation, and implementation, as well as a new form of cooperation that reflects today’s world, not yesterday’s.

We’re already working on this. This week, the Inter-American Development Bank Group (IDB Group) will announce concrete initiatives to bridge the gap between ambition and action: FX EDGE, a global platform to reduce currency risk and attract private investment; FIRRe, a regional program to strengthen disaster resilience; and the Amazonia Bond Issuance Program to promote a new bond market focused on the Amazon region.

In this new world, there’s a simple truth: the public sector can’t do it alone. Mobilizing private capital is no longer an option; it’s essential. That’s why multilateral development banks (MDBs) are working more closely with companies. We’re becoming the bridge between the public and private sectors, between development policies and financing, and between global needs and local solutions. This is exactly what we’re doing at the IDB Group.

We believe the private sector is key to development. So, we’re becoming a true private-sector MDB, leveraging more than 65 years of experience with governments to generate synergies that benefit everyone. Today, over 44% of our financing goes to private companies through IDB Invest and IDB Lab, our branches for the private sector and innovation, respectively. With IDB Invest’s capitalization process already underway, we’re on track to reach parity by 2030.

To close the gap between financing and needs, it’s essential to mobilize more private capital. To do this, we’re acting on several fronts.

First, we launched a program called “BID for the Americas” to connect international companies with concrete business opportunities in Latin America and the Caribbean. This includes unlocking opportunities to bid on IDB projects, promoting trade and investment through platforms like ConnectAmericas, and co-financing and boosting private investment through IDB Invest and IDB Lab.

Second, we’re using innovative financial instruments to increase private investment. In Brazil, we helped launch EcoInvest, a program to address key investment barriers, including currency risk. In its first auction, EcoInvest mobilized 45 billion reals in private investment. The next phase will support reforestation in several Brazilian biomes, covering one million hectares, an area roughly the size of Lebanon. The program will then support investment in Amazonia using all of EcoInvest’s financial solutions, including a liquidity facility for currency hedging. We’re now expanding that experience globally with FX EDGE, which we’re announcing in Seville.

The IDB is also leading application of another innovative instrument — debt swaps. We helped Barbados do a climate-resilient swap, and we worked with Ecuador on a swap related to marine and Amazon conservation. Another debt swap focused on protecting the coast in the Bahamas. Now, we’re working on a new, multinational debt-swap platform to bolster fiscal resilience and sustainability in the Caribbean.

Third, we’re implementing an innovative business model — “originate-to-share” — at IDB Invest. This model lets us originate projects and share them with investors, freeing up our capital for new projects, distributing risks, and deepening markets. It also helps ensure good governance, while maximizing the impact of public funds. We launched this model last year, sharing $1 billion of our portfolio — placing $100 million of it among private investors and freeing up as much as $500 million in new lending capacity. In addition, IDB Invest’s portfolio this year will be almost $10 billion.

Fourth, we’re working with governments to create the conditions investors need: stability, predictability, infrastructure, strong institutions, and rule of law. This includes strengthening legal frameworks, reducing investment barriers, and improving the business environment. These are priorities in our work with the public sector, and IDB programmatic loans can be key to advancing these reforms and paving the way for private-sector-led growth.

We’re doing all this work with partners. This week, the IDB Group will announce new initiatives with the World Bank, the European Investment Bank and the Development Bank of the Council of Europe, Spain’s Ministry of Digital Transformation and Public Service, and “La Caixa” Foundation, including innovative financing instruments, risk-sharing mechanisms, and more.

In this new global context, beyond the new challenges, it’s also important to take advantage of opportunities that arise.

For example, in Latin America and the Caribbean, natural disasters pose a growing threat, with 74 major events in 2024 affecting over seven million people and generating $10 billion in estimated losses. That’s why we created a Ready and Resilient Americas program. And in Seville, we’ll announce a new initiative, FIRRe, with four lines of action: risk transfers, the expansion of contingent credit, debt-resilience clauses, and a business-resilience program.

But there are opportunities, too. In little over a decade, global demand for critical minerals is expected to quadruple. Latin America is home to 60% of the world’s lithium, 40% of its copper and silver, and large reserves of nickel, bauxite, and rare earths. The region can also contribute to food security and biodiversity goals by protecting the Amazonia.

But to generate value, we need political stability, strong institutions, security in all its dimensions, and strategic infrastructure, from ports and energy to water and logistics.

That’s why we’re building regional platforms that translate this potential into concrete results. This includes the Alliance for Security, Justice, and Development, to reduce organized crime, and Amazonia Forever, our umbrella program for the Amazon region that promotes preservation by offering economic alternatives and better living conditions to its inhabitants. In Seville, we’ll launch a new Amazonia Bond Issuance Program with our own issuances, as well as technical assistance and a regional registry to boost this nascent market and channel investment towards Amazon priorities.

In short, we’re working in multiple fronts to address challenges and seize opportunities arising from this new world. Two years ago, these regional programs didn’t exist. A decade ago, they weren’t even concepts. Today, they’re generating real impact.