The Inter-American Development Bank (IDB), the largest lender in Latin America, currently anticipates dramatically increased lending throughout Latin America and the Caribbean during the coming years. In preparation for this expansion, in July 2010 the IDB’s Board of Governors agreed to a $70 billion General Capital Increase (GCI) for the Bank. This is the largest increase in the Bank’s resources in its history and will enable it to double its pre-crisis lending in the region to $12 billion annually.
Meanwhile, IDB employees have reported that the institution is failing to address the risks of fraud and corruption in its lending and grant programs adequately and that its development efforts are often ineffective as a result. In April 2010, as part of its campaign for the GCI, the IDB strengthened its whistleblower protection policy, which is supposed to shield IDB staff members and external parties from reprisal when they report allegations of fraud or corruption in Bank activities. In October 2012, the Bank made additional changes to this policy. Unfortunately the policy still violates all four policy criteria set forth in US law for credible whistleblower protection at Multilateral Development Banks. The failure to meet the standards set out in U.S. law raise questions about the prospects for the U.S. contribution to the GCI.
Early reports show that the IDB’s internal process for protecting whistleblowers remains chaotic and ineffective. GAP is currently testing the policy by representing IDB staff members who suffered retaliation after they exposed critical vulnerabilities in the IDB’s investigative and ethics practices, as well as corruption and fraud in projects in Haiti , Peru and several other countries in which the IDB operates.
GAP has also helped whistleblowers to expose racial discrimination at the IDB. A 2009 GAP report found that the Bank fails to promote racial equality adequately in its hiring, retention and promotion practices. The report also found that IDB lending has failed, over the years, to reduce poverty and inequality in Latin America effectively, especially among Afro-descendant and indigenous populations.
GAP also monitors challenges to the IDB’s immunities and has been closely tracking the Vila v. Inter-American Investment Corporation (IIC) case in the U.S. Court of Appeals for the District of Columbia. The IIC is the private sector lending arm of the IDB.
Inter-American Development Bank Updates:
12/17/12: New Reports Contain Statistics Regarding Whistleblower Cases at the Multilateral Development Banks
11/29/12: Inter-American Development Bank Issues Fatally Flawed Whistleblower Policy
7/18/12: "Brand Spain" Questioned Following Corruption Scandal with Spanish Trust Funds at the IDB
5/9/12: Murky Management of the Spanish Trust Fund at the IDB
3/6/12: IDB Whistleblower Case Leads to Shady Dealings Going Public
2/9/12: PwC Escapes the Selective Sanctions Process at the IDB
2/8/12: Spanish Tribunal Will Audit IDB Trust Fund after Allegations of Illegalities and Impropriety
2/2/12: New US Law Requires World Bank, MDBs to Implement Whistleblower Protections Prior to General Capital Increases
1/31/12: Conflict of Interest in Management of Spanish Trust Fund at the IDB
12/12/11: Corruption at the Inter-American Development Bank: The Fox-in-the-Henhouse Syndrome
12/9/11: Clean Up the Development Banks before New Bailout
9/27/11: Whistleblowing and Retaliation at the IDB: The Case of Hada Mendoza
Inter-American Development Bank (IDB) whistleblower Hada Mendoza served as the executive secretary to the Bank’s Representative in Paraguay from 1998 until 2006. She began to suspect that Alvaro Cubillos, the IDB Representative in charge of the office in 2003, was diverting project funds through a personal relationship with Cecelia Guanes Mersán, a Paraguayan national well-connected to the Ministry of Foreign Relations in Asunción. Although the IDB claims to implement a whistleblower protection policy, after Mendoza blew the whistle about the Cubillos affair, retaliation was swift and serious.
6/8/11: Cronyism and Ineptitude Disable Inter-American Development Bank’s Anti-Corruption Offices
11/25/10: Camisea Problems Don't Fit IDB Claims
11/19/10: GAP Challenges IDB’s Fallacious Attack on Critical Camisea Piece
11/10/10: Whistleblowers Reveal Inter-American Development Bank (IDB) Covered up Deficiencies in Camisea Gas Project
11/08/10: Washington Times: U.S. Questions Development Bank After Troubled Gas Project in Peru | (En Español)
11/05/10: The IDB: Intrigue, Corruption and Persecution In Haiti
7/26/10: Jorge Vila vs. the Inter-American Investment Corporation Proceeds in District Court
6/4/10: Inter-American Development Bank Passes Improved Whistleblower Protections; Fatal Flaws Remain
1/26/10: Jorge Vila v. Inter-American Investment Corporation
10/28/09: Report Identifies Racial Inequality in IDB Projects and Employment | (En Español) | (Executive Summary in English, Resumen Ejecutivo en Espanol)
10/20/09: IIC's Efforts To Invoke Immunities Denied Again In Vila Case
6/22/09: District Court Forces IDB/IIC to Waive Immunity