Rob Katz

Building Opportunity for the Majority: Day One

IDBI attended the Inter-American Development Bank’s ?Building Opportunity for the Majority? conference today–a 2-day event serving as a launching pad for newly-elected Bank president Luis Alberto Moreno?s personal agenda. If Day One of the conference was any indication, Bank-watchers are in for some major changes under Mr. Moreno’s leadership.

The conference is being held in the IADB’s version of the ?Palace of Poverty?–its own conference center. The 3 stories of the building I saw are outfitted in modern hardwood and steel, with soft lighting and two balconies. Especially nice are the booths for simultaneous translators to use–a big help for me and my high-school level Spanish. (Gracias, Senor Moreno.) As attendees filtered in, we were treated to coffee and a looped PowerPoint presentation in both English and Spanish highlighting the six elements underpinning Building Opportunity for the Majority (BOFM):

1. Identify the Majority
2. Financial Democracy
3. Enterprise Compact
4. Infrastructure Services
5. Digital Dividends
6. Housing at the Base of the Pyramid

Leading off the day was Richard Wells, conference MC. Richard and I participated in a BOP panel together at last July’s BELL conference in Ithaca, New York (but I don?t think Richard remembers who I am). In any case, he’s a good choice for MC–bilingual, familiar with the BOP concepts, players, and misconceptions, and properly self-effacing. His opening comments really struck home for me–he noted that ?the paradigm must shift from reducing poverty to creating income, jobs, and wealth.? For too long, institutions like the IADB, World Bank, USAID, and others have focused their well-meaning efforts exclusively on poverty alleviation, often at the expense of public-private partnerships and other private sector-led solutions. Wells? message: not anymore, at least not at the IADB.

President Moreno immediately backed Wells up, observing that the Bank tends to concentrate on macroeconomic aspects of its work, often at the expense of micro aspects: ?We need to look again at the base of the pyramid.?

How will the Bank re-examine the BOP? First, the BOFM initiative will focus on ?bottleneck sectors? (see the aforementioned list) and concentrate on scale in order to make its new efforts sustainable over the long-term. Both points seem self-evident, but it’s an important public policy change coming from the head of the Bank. His work is cut out for him–Moreno wants to build platforms between the public and private sectors as a way to bring the benefits of business to the very base of Latin America’s economic pyramid. He acknowledges the seriousness of this task, noting that ?the distribution of opportunity has been left wanting.?

Moreno went on to lay out the 6-point plan and described Mapping the Majority. It was especially nice of him to single out Hernando de Soto’s Institute for Liberty and Democracy and World Resources Institute (my employer) for our contributions to the mapping project. (More on both of these later). Standard stuff for an introductory speech, but Moreno’s such a good speaker that he kept the audience engaged throughout. Unfortunately, especially if you were far from the coffee, it was not so with the next presenters.

First came Cardinal Oscar Andres Rodriguez Maradiaga of Honduras to address ?The Moral Dimension.? Before today, I had no idea that the so-called moral dimension of development had anything to do with liberation theology. Cardinal Maradiaga made sure I had a good lesson this morning. His diatribe against corporations, governments, free markets, globalization, and pretty much anyone or anything that generates surplus income might make for a good sermon in Tegucigalpa, but it was a poor choice for a room of development practitioners and economists. Face it: you?re simply not going to be able to convince a room full of capitalists that Marx was right after all. Especially after the IADB president’s just spoken for 30 minutes about the need to incorporate markets into the region’s development. In any case, it was interesting to hear the Church’s position on wealth in Latin America (A typical quote: ?What goes beyond need is superfluous and belongs to the poor.?) According to friends familiar with Latin American politics and politics of the Church, this is nothing new–when I told them about the Cardinal’s speech tonight, they just laughed and shrugged it off as ?typical Latin Catholic dogma.?

As if Maradiaga’s speech weren?t underwhelming enough, he was followed by a man with incredible talent: Carlos Slim, Chairman of Telmex and the richest man in Latin America. His talent? How about the ability to say almost nothing of consequence during a rambling, 45-minute long economic history lesson that he tried to pass off as a speech titled ?New Business Models to Target the Majority.? Not once did Slim talk about business models. Rather, he talked about how we can best integrate our ?new? service-based economy with older models and future models. He touched on the need to scale up small and medium sized enterprises, but he didn?t offer any concrete ways to do so. He talked about human and physical capital being keys to sustained growth and increased opportunity for the majority–something we all learned in introductory microeconomics class. The speech was a total downer, especially in a room full of anticipation. A colleague of mine whom I was sitting with remarked, ?I can?t believe it just took him that long to say so little.? Couldn?t have said it better myself.

The morning session redeemed itself thanks to noted Peruvian economist Hernando de Soto. The ?Mystery of Capital? author came to Washington to deliver a speech entitled–unsurprisingly–?Unlocking Hidden Assets.? Unlike the previous two, however, de Soto actually had something to say. His Institute for Liberty and Democracy has been working with the IADB to produce a baseline analysis of extralegality and dead capital in Latin America. What did he find? The tools of wealth creation–property rights, the rights of businesses, and individual rights–are largely absent in Latin America, according to ILD’s analysis. (Hopefully their map will be available on the web soon–I?ll let you know when it is.) Without a functioning legal system under which businesses, investors, and citizens know what to expect when engaging the formal economy, the Latin American economy is doomed to slow growth at the BOP. De Soto makes a compelling case for institutional reform, peppering his anecdotes and examples with hard facts and data. I?ll try to write in more detail about his speech tomorrow–for now, rest assured that it was what everyone was talking about over lunch.

I?ll have more from Day Two tomorrow. Potential highlights include Bill Clinton, Jonathan Lash (my president–of WRI, that is) and the infrastructure and housing panels.