Regional Development Banks
Regional Development Banks
During the seventies and eighties, there was a dramatic increase in the num-
ber of development banks, and they have become an important source of
financing for the developing countries, especially the riskiest developing
countries. Although many of the development banks are national in scope,
there are also a number of regional development banks. In Europe, the most
important regional development bank is the European Investment Bank,
which offers funds for private and public industrial and infrastructure projects
in Europe and to over 70 nations associated with the European Community.
Latin America has five active regional development banks: (1) the Andean Development Corp., (2) the Caribbean Development Bank, (3) the Inter-American Development Bank, (4) the Central American Bank for Economic Integration, and (5) the Banco Latinoamericano de Exportaciones. There are a number of other similar development banks in Africa and Asia.
An example of a regional development bank is the Inter American Development Bank (IDB). The IDB was organized in 1959 to give countries in the Western Hemisphere (principally the United States and Latin America) the same types of services the World Bank provides. However, the IDB projects are wider in scope and tailored for member countries. Loans are made from ordinary capital resources to private and public entities of the 44 member nations. These loans are generally made at favorable rates of interest and are repayable in the currencies lent. Procurement sources of goods and services are limited to those countries that contribute funds to the IDB.
The cumulative sectorial breakdown of IDB loans is as follows for 1961— 1988: 27 percent for energy projects; 21 percent for agriculture and fisheries; 15 percent for industry and mining; 13 percent for transportation and communications; 11 percent for environmental and public health; 4 percent for education, science, and technology; 4 percent for urban development; and 5 percent for other projects. The largest borrowers are Brazil, Mexico, and Argentina.49
LOOKING TO THE FUTURE
The difficulty in describing global capital markets is the speed of
change. As world trade increases and global interdependence rises, the velocity of financial transactions also must increase. The next two decades should use the rise in importance of the German mark and the Japanese yen relative to the U.S. dollar. In addition, the Japanese financial insti-! tutions will continue to strengthen their position among the biggest and best | of the global financial-services firms at the expense of the Europeans and ; Americans. However, the changes taking place in Europe should result in a ! consolidation of European financial institutions and the establishment of formidable competitors to the largest Japanese and U.S. financial-services firms. In addition, a liberalization of the financial-services industry in the United States should help to strengthen the position of U.S. banks vis-a-vis those of different countries.
Even though national financial markets are deregulating at a rapid pace, there will still be a strong need for Eurocapital markets. The high degree of competition in those markets should be very healthy for MNEs, because the financial-services firms will be forced to develop new financial products at cheaper prices in order to maintain their market share. This will result in new financial instruments to finance growth as well as to protect the underlying debt and equity instruments issued by the corporate clients of the banks and securities firms. Although there are some mixed signals on the future of the Eurobond market, there is no doubt about the future of equity trading. The current existence of a global equity market means that traders can trade on stock markets virtually 24 hours a day. However, the traders typically take place in the securities of a market when that market is open. The globalization of markets will expand when trades in the securities of market A take place 24 hours a day, whether that market is open or not (which is what we are moving toward). As information technology expands, as we see stock exchange listing requirements standardize, and as accounting standards become more harmonized, we will see the global trade of securities increase dramatically.
During the seventies and eighties, there was a dramatic increase in the num-
ber of development banks, and they have become an important source of
financing for the developing countries, especially the riskiest developing
countries. Although many of the development banks are national in scope,
there are also a number of regional development banks. In Europe, the most
important regional development bank is the European Investment Bank,
which offers funds for private and public industrial and infrastructure projects
in Europe and to over 70 nations associated with the European Community.
Latin America has five active regional development banks: (1) the Andean Development Corp., (2) the Caribbean Development Bank, (3) the Inter-American Development Bank, (4) the Central American Bank for Economic Integration, and (5) the Banco Latinoamericano de Exportaciones. There are a number of other similar development banks in Africa and Asia.
An example of a regional development bank is the Inter American Development Bank (IDB). The IDB was organized in 1959 to give countries in the Western Hemisphere (principally the United States and Latin America) the same types of services the World Bank provides. However, the IDB projects are wider in scope and tailored for member countries. Loans are made from ordinary capital resources to private and public entities of the 44 member nations. These loans are generally made at favorable rates of interest and are repayable in the currencies lent. Procurement sources of goods and services are limited to those countries that contribute funds to the IDB.
The cumulative sectorial breakdown of IDB loans is as follows for 1961— 1988: 27 percent for energy projects; 21 percent for agriculture and fisheries; 15 percent for industry and mining; 13 percent for transportation and communications; 11 percent for environmental and public health; 4 percent for education, science, and technology; 4 percent for urban development; and 5 percent for other projects. The largest borrowers are Brazil, Mexico, and Argentina.49
LOOKING TO THE FUTURE
The difficulty in describing global capital markets is the speed of
change. As world trade increases and global interdependence rises, the velocity of financial transactions also must increase. The next two decades should use the rise in importance of the German mark and the Japanese yen relative to the U.S. dollar. In addition, the Japanese financial insti-! tutions will continue to strengthen their position among the biggest and best | of the global financial-services firms at the expense of the Europeans and ; Americans. However, the changes taking place in Europe should result in a ! consolidation of European financial institutions and the establishment of formidable competitors to the largest Japanese and U.S. financial-services firms. In addition, a liberalization of the financial-services industry in the United States should help to strengthen the position of U.S. banks vis-a-vis those of different countries.
Even though national financial markets are deregulating at a rapid pace, there will still be a strong need for Eurocapital markets. The high degree of competition in those markets should be very healthy for MNEs, because the financial-services firms will be forced to develop new financial products at cheaper prices in order to maintain their market share. This will result in new financial instruments to finance growth as well as to protect the underlying debt and equity instruments issued by the corporate clients of the banks and securities firms. Although there are some mixed signals on the future of the Eurobond market, there is no doubt about the future of equity trading. The current existence of a global equity market means that traders can trade on stock markets virtually 24 hours a day. However, the traders typically take place in the securities of a market when that market is open. The globalization of markets will expand when trades in the securities of market A take place 24 hours a day, whether that market is open or not (which is what we are moving toward). As information technology expands, as we see stock exchange listing requirements standardize, and as accounting standards become more harmonized, we will see the global trade of securities increase dramatically.
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