Overview of the Overview of the

Regional Operations Department II (RE2) Regional Operations Department II (RE2)

February 10, 2004February 10, 2004Gilberto E. ChonaSenior Economist, Country DivisionRegional Operations Department II (Mexico, Central American Isthmus, Haiti, and Dominican Republic)

ContentsContents

I.I. IntroductionIntroduction

II.II. RE2 Sample ProjectsRE2 Sample Projects

III.III. IDB Strategy in the RegionIDB Strategy in the Region

Introduction. RE2 CountriesIntroduction. RE2 Countries

BelizeBelize

Costa RicaCosta Rica

Dominican RepublicDominican Republic

El SalvadorSalvador

GuatemalaGuatemala

HaitiHaiti

MexicoMexico

HondurasHonduras

NicaraguaNicaragua

PanamaPanama

Distribution by Total Amount (%) (Central America & Dominican Republic)

(1994 - 2002)

BCIE27%

World Bank25%

IDB48%

Introduction. IDB PresenceIntroduction. IDB PresenceThe IDB is the Largest Lender in the RegionThe IDB is the Largest Lender in the Region

Introduction. RE2 Main Activities Introduction. RE2 Main Activities

Preparation and administration of the Preparation and administration of the Bank’s Lending & Technical Cooperation Bank’s Lending & Technical Cooperation Programs for 10 Countries.Programs for 10 Countries.

Coordination of Co-financing and Trust Coordination of Co-financing and Trust Funds Activities for all LAC countries.Funds Activities for all LAC countries.

Policy Dialogue Papers.Policy Dialogue Papers.

Country (Bank Support) Strategies. Country (Bank Support) Strategies.

Introduction. RE2 Main Activities Introduction. RE2 Main Activities

Economic and Sector Studies.Economic and Sector Studies.Consultative Groups.Consultative Groups.Consensus Building.Consensus Building.Assistance for Emergencies.Assistance for Emergencies.Support for regional Support for regional Initiatives:Initiatives:

– Plan Puebla-Panama.Plan Puebla-Panama.– Transparency & Anti-Corruption.Transparency & Anti-Corruption.– HIPC Initiative.HIPC Initiative.– Poverty Reduction Strategy.Poverty Reduction Strategy.

Country Economic Assessments.Country Economic Assessments.

Sectors of ActivitySectors of Activity

ProductiveProductiveAgricultureAgricultureIndustryIndustry

Finance & Basic Finance & Basic Infrastructure Infrastructure SectorsSectorsEnergyTransportationTelecommunications

Social SectorsSocial Sectors

EducationEducationHealthHealthUrban DevelopmentUrban DevelopmentEnvironmentEnvironmentWater & SanitationWater & Sanitation

ReformsReforms

Modernization of state and decentralization

RE2 Portfolio RE2 Portfolio

Largest Portfolio in Execution (193 projects Largest Portfolio in Execution (193 projects for US$10.5 billion, aproximately 40% of the for US$10.5 billion, aproximately 40% of the Bank’s Portfolio).Bank’s Portfolio).

US$5.1 Billion Undisbursed.US$5.1 Billion Undisbursed.

Annual Lending Program is about 30 Annual Lending Program is about 30 projects for US$1.2 to US$1.9 billion.projects for US$1.2 to US$1.9 billion.

Belice, 3% Costa Rica, 6%Dom. Rep., 9%

El Salvador, 11%

Guatemala, 11%Haití, 5%Honduras, 19%

México, 7%

Nicaragua, 18%

Panamá, 11%

RE2 Portfolio RE2 Portfolio

Distribution by Number of ProjectsDistribution by Number of Projects(as of sep. 2003)(as of sep. 2003)

Belice, 1% Costa Rica, 6%Dom. Rep., 8%

El Salvador, 11%

Guatemala, 9%

Haití, 3%Honduras, 6%

México, 44%

Nicaragua, 7%Panamá, 6%

RE2 Portfolio RE2 Portfolio

Distribution by Total AmountDistribution by Total Amount(as of sep. 2003)(as of sep. 2003)

RE2 Portfolio RE2 Portfolio

Distribution by Sector(by Total Amounts as of Sep. 2003)

INFRASTRUCTURE

17%

SOCIAL

56%PRODUCTIVE

12%

REFORM

15%

PREINVESTMENT

0%

OTHERS

1%

RE2 Operations RE2 Operations Cumulative Loans & Disbursements *Cumulative Loans & Disbursements *

(1961-2002)(1961-2002)

*After cancellations and exchange adjustments. Totals may not add up due to rounding, includes private sector loans.*After cancellations and exchange adjustments. Totals may not add up due to rounding, includes private sector loans.

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

Cumulative Disbursments (1961-2002) Cumulative Loans (1961-2002)

millions of US$millions of US$

RE2 Operations RE2 Operations 2003 Loans & Disbursements*2003 Loans & Disbursements*

*Preliminary Information*Preliminary Information

$0

$200

$400

$600

$800

$1,000

$1,200

Belize

Costa

Rica

Domini

can R

epub

lic

El Salv

ador

Guatem

ala Haiti

Hondu

ras

Mex

ico

Nicara

gua

Panam

a

Loans 2003 Disbursments 2003

millions of US$millions of US$

Regional Operations Department IIRegional Operations Department II

II. RE2 SAMPLE PROJECTS

RE2 Sample Projects RE2 Sample Projects

• Community Education (Mexico, US$210 million)

• Equity Enhancement Basic Education Program (Dominican Republic, US$80 million)

• Rural Production Reactivation Program (PRPR) (Nicaragua, US$60 million)

• Program for Rehabilitation of Basic Economic Infrastructure (Haiti, US$70 million)

• Supporting Food and Agricultural Sector Competitiveness (Dominican Republic, US$55 million)

• Judicial System Modernization Stage II (Honduras, US$30 million)

RE2 Sample Projects RE2 Sample Projects

• Program Against Urban Poverty (Guatemala, US$46.8 million)

• Electric Interconnection between Guatemala and Mexico (Guatemala, US$37.5 million)

• Improvement Road Integration Corridor PPP (Panama, 37 million)

• Capital Expenditure Electricity Distribution (Guatemala, US$25 million)

• Modernization of the State and Fiscal Reform (Nicaragua, US$25 million)

• Low-Income Housing Program (Nicaragua, US$22.5 million)

RE2 Sample: Project in PipelineRE2 Sample: Project in PipelineIMPROVEMENT OF THE PPP ATLANTIC CORRIDOR (Sections of the CA-5 Norte Highway) IMPROVEMENT OF THE PPP ATLANTIC CORRIDOR (Sections of the CA-5 Norte Highway)

(US$30 million)(US$30 million)

PROCUREMENT OPPORTUNITIESPROCUREMENT OPPORTUNITIESPROJECT DESCRIPTIONPROJECT DESCRIPTION

Consulting services needed: Consulting services needed:

• • Expand the transportation capacityExpand the transportation capacity in in the congested areas;the congested areas;

• • Rehabilitation of the Rehabilitation of the pavement layerpavement layer;;

• • Building Building bridges and by-passesbridges and by-passes; ;

Rehabilitation and upgrading of Rehabilitation and upgrading of critical sections of the critical sections of the Carretera del Carretera del Norte (highway) CA-5Norte (highway) CA-5. Valley of . Valley of Comayagua, between Villanueva and Comayagua, between Villanueva and La Barca). La Barca).

RE2 Sample: Project in PipelineRE2 Sample: Project in PipelineHONDURAS: VOCATIONAL AND TECHNICAL EDUCATION PROGRAM (US$30,6 million)HONDURAS: VOCATIONAL AND TECHNICAL EDUCATION PROGRAM (US$30,6 million)

PROCUREMENT OPPORTUNITIESPROCUREMENT OPPORTUNITIESPROJECT DESCRIPTIONPROJECT DESCRIPTION

Consulting services needed:Consulting services needed:

• • Repair and expand school buildingsRepair and expand school buildings: : construct new classrooms in construct new classrooms in 50 schools50 schools;;

• • Technical advice to improve school Technical advice to improve school programs;programs;

• • Assessment of human resource allocationAssessment of human resource allocation for for the program;the program;

• • Provide Provide technical assistance and trainingtechnical assistance and training to to core staff.core staff.

• • Design Design promotion campaignpromotion campaign for the program; for the program;

• • TrainingTraining for the unemployed; for the unemployed;

• • Study on Study on SSTSS ReengineeringSSTSS Reengineering..

To promote higher levels of To promote higher levels of qualification and employment for qualification and employment for young people and adults. young people and adults.

RE2 Sample: Approved Project RE2 Sample: Approved Project NICARAGUA: MULTISECTORIAL GLOBAL PROGRAM (US$30 million)NICARAGUA: MULTISECTORIAL GLOBAL PROGRAM (US$30 million)

PROCUREMENT OPPORTUNITIESPROCUREMENT OPPORTUNITIESPROJECT DESCRIPTIONPROJECT DESCRIPTION

Consulting services needed: Consulting services needed:

• • Strengthen the institutional capacity Strengthen the institutional capacity of the FNIof the FNI, and to a lesser extent of , and to a lesser extent of IFIs;IFIs;

• • Design strategy to provide Design strategy to provide sustainable financing to businessessustainable financing to businesses in in all areas of the private sector; all areas of the private sector;

• • develop new develop new FNI financial productsFNI financial products such as partial guarantees for such as partial guarantees for securitization of the portfolio;securitization of the portfolio;

• • Develop Develop database on sources of database on sources of international financinginternational financing for the private for the private sector. sector.

To support the development of To support the development of private business, especially small and private business, especially small and medium-sized enterprises, by medium-sized enterprises, by expanding the supply of medium- and expanding the supply of medium- and long-term financing. long-term financing.

RE2 Sample: Approved ProjectRE2 Sample: Approved ProjectHONDURAS: SULA VALLEY CITIZENSHIP SECURITY (US$20 million)HONDURAS: SULA VALLEY CITIZENSHIP SECURITY (US$20 million)

PROCUREMENT OPPORTUNITIESPROCUREMENT OPPORTUNITIESPROJECT DESCRIPTIONPROJECT DESCRIPTION

Specialized consulting services needed: Specialized consulting services needed:

• • Training and awareness of workshops; Training and awareness of workshops;

• • Design and implement Design and implement processes and processes and procedures to manage preventionprocedures to manage prevention and social and social assistance activities. assistance activities.

• • Strengthen Strengthen monitoring and evaluation monitoring and evaluation systemsystem with regional coverage through the with regional coverage through the MSPS;MSPS;

• • Office equipment, a pickup truck, office Office equipment, a pickup truck, office supplies and materials supplies and materials for training workshops;for training workshops;

• • Civil WorksCivil Works: rehabilitation, lighting and : rehabilitation, lighting and construction of recreational infrastructure for construction of recreational infrastructure for social integration (multiple sports facilities, social integration (multiple sports facilities, soccer fields and multi-use areas) and other soccer fields and multi-use areas) and other social integration infrastructure (parks, social integration infrastructure (parks, community halls, cultural centers and community halls, cultural centers and libraries).libraries).

To improve peace, coexistence and To improve peace, coexistence and citizen security in the 17 citizen security in the 17 municipalities in the Sula Valley municipalities in the Sula Valley Region. Comprehensive activities for Region. Comprehensive activities for crime prevention and institution-crime prevention and institution-building for municipalities and building for municipalities and security institutions.security institutions.

Regional Operations Department IIRegional Operations Department II

III. IDB STRATEGY IN THE REGION

IDB Objectives in RE2 CountriesIDB Objectives in RE2 Countries

Acceleration of GrowthAcceleration of Growth

Poverty Reduction (income distribution Poverty Reduction (income distribution and absolute level of Poverty)and absolute level of Poverty)

Main Areas of Concentration Main Areas of Concentration

Social Sector reformsSocial Sector reforms (poverty reduction, local (poverty reduction, local development and community and private sector participation).development and community and private sector participation).

Competitiveness Competitiveness (regulatory framework for infrastructure (regulatory framework for infrastructure investments, frameworks for financial and capital markets).investments, frameworks for financial and capital markets).

Modernization of the StateModernization of the State (decentralization, tax (decentralization, tax administration, Public budget processes, transparency, administration, Public budget processes, transparency, accountability).accountability).

Regional Integration Regional Integration (environmental protection, disaster (environmental protection, disaster mitigation, National Reconstruction plans, -energy, transport mitigation, National Reconstruction plans, -energy, transport and telecomm integration)and telecomm integration)

ChallengesChallenges

Long-Term Policies (Structural Challenges)Long-Term Policies (Structural Challenges)

Financial Regulation and Banking Systems Upgrades Financial Regulation and Banking Systems Upgrades (Accounting, Disclosure)(Accounting, Disclosure)

Public Expenditure needs to be re-engineered Public Expenditure needs to be re-engineered (targeting, etc.)(targeting, etc.)

Tax Burden needs to be equitably increased: Tax Tax Burden needs to be equitably increased: Tax Reform vs IncentivesReform vs Incentives

Competitiveness and open trade: CAFTACompetitiveness and open trade: CAFTA

ChallengesChallenges

Short-Term Policies (All Difficult)Short-Term Policies (All Difficult)

Conservative Fiscal Policies: Spend less, Better; Conservative Fiscal Policies: Spend less, Better; Save more.Save more.

– Key constraint: how to increase tax revenues without Key constraint: how to increase tax revenues without economic growth, increasing exports?economic growth, increasing exports?

Relaxed monetary policies: to ease effect of Relaxed monetary policies: to ease effect of slowdown in private investment and cash flow of slowdown in private investment and cash flow of firmsfirms

Devaluation within inflation targetsDevaluation within inflation targets

IDB Strategy (National Level)IDB Strategy (National Level)

Country Strategies (CS): A National Support StrategyCountry Strategies (CS): A National Support StrategyMillennium Development Goals: Millennium Development Goals:

– Development Effectiveness and ResultsDevelopment Effectiveness and Results– Note to self- Millennium Challenge Account (US)Note to self- Millennium Challenge Account (US)

More Donor Coordination (SWAP approach) and More Donor Coordination (SWAP approach) and Consultative Groups (CGs)Consultative Groups (CGs)Debt & Poverty Reduction – HIPC InitiativeDebt & Poverty Reduction – HIPC InitiativeCompetitiveness: Triggers for GrowthCompetitiveness: Triggers for GrowthGovernance (Transparency, Anti-corruption, Rule-of-Governance (Transparency, Anti-corruption, Rule-of-Law for people and businesses alike)Law for people and businesses alike)

IDB Strategy (Regional Level)IDB Strategy (Regional Level)

Regional Programming Paper (RPP): A regional Regional Programming Paper (RPP): A regional Strategy.Strategy.

– Economic GrowthEconomic Growth– Human DevelopmentHuman Development– Sustainable DevelopmentSustainable Development– Competitiveness, Trade: A cross-cutting issueCompetitiveness, Trade: A cross-cutting issue

Plan Puebla Panama (PPP):Plan Puebla Panama (PPP):– Easy: Power (SIEPAC), Highways, Telecommunications.Easy: Power (SIEPAC), Highways, Telecommunications.

Difficult: Sustainable Development, Human Difficult: Sustainable Development, Human Development, Prevention and Mitigation of Natural Development, Prevention and Mitigation of Natural Disasters, Tourism, Customs.Disasters, Tourism, Customs.

Big AssumptionsBig Assumptions

Free Trade will come: More opportunities for Free Trade will come: More opportunities for good growth.good growth.

More, Better Governance: Executive, More, Better Governance: Executive, Congress, Judicial System Reform.Congress, Judicial System Reform.

Improved Investment Climate.Improved Investment Climate.

More Civil Society Participation: More Civil Society Participation: Accountability and Service Delivery.Accountability and Service Delivery.

For more information visit our website at:For more information visit our website at:

http://www.iadb.orghttp://www.iadb.org