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Ilan Goldfajn was president of the central bank during Michel Temer’s government
Item information
- Author, Mariana Sanchez
- Role, from BBC News Brasil in Washington
3 hours ago
On the eve of his trip to the 28th UN Climate Change Conference in Dubai in the United Arab Emirates, InterAmerican Development Bank (IDB) President Ilan Goldfajn told BBC News Brasil that the institution he will lead will be the first multilateral bank triple the funds invested in financing projects to combat climate change, responding to a call by the G20 heads of state and government last September.
According to Brazil’s Goldfajn, the amount committed by the bank to sustainability will increase from $50 billion in the last decade to $150 billion in the next decade.
There are differences in the beneficiaries’ letter: $1.2 billion is allocated for the conservation of the Galápagos archipelago in Ecuador, and $350 million is allocated for Recife to reform its drainage and slope containment system.
There will be $400 million dedicated to decarbonizing the Dominican Republic and $750 million to sustainable small and microentrepreneurs in the Brazilian Amazon.
Faced with questions and calls for reform from global leaders, including Brazilian President Luiz Inácio Lula da Silva, multilateral banks such as the IDB and the World Bank were asked about their commitment to investing in economic and environmental sustainability.
Goldfajn acknowledges the need for reforms, but links them to the process of governments and society understanding the urgency of the climate discussion.
“It is true that there is a certain maturity on the issue of global warming, it is already very clear that the region (of the Americas) is facing a series of climate shocks,” he says, referring to the recent and devastating Hurricane Otis in Acapulco.
Goldfajn was elected president of the bank after his predecessor, Mauricio Claver Carone, appointed by Donald Trump, was removed from office amid corporate scandals.
However, he himself found himself in the political spotlight during the transition between the Bolsonaro government and the Lula government.
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COP28, the United Nations climate summit, is chaired by Sultan Ahmed Al Jaber
The former president of Michel Temer’s central bank, Goldfajn, saw his candidacy for the IDB jeopardized by a statement by Dilma Rousseff’s former finance minister, Guido Mantega, in which he suggested postponing the election of the Brazilian, the bank’s first president .
Thenelected President Lula later resolved the unease by sending messages that he was not against Goldfajn’s name.
About to assume the presidency of the group of global multilateral banks, Goldfajn is trying to keep a political low profile, refusing, for example, to comment on possible currency reforms such as dollarization promised by recently elected Argentine President Javier Milei. make.
Read below key excerpts from the interview given to BBC News Brasil in the IDB Presidential Room at the bank’s headquarters in Washington DC
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Lula is one of the world’s leaders calling for reforms and investments to address climate change
BBC News Brazil In September, G20 leaders called on multilateral banks to finance sustainable projects and end poverty. There is a perception that banks have not achieved their primary goal of development and that answers are needed. How does the IDB plan to respond to this?
Ilan Goldfajn I think everyone has to do their part. It is clear that the challenge is great and the various aspects of development must be taken into account, such as social sustainability, poverty issues, climate issues, and economic sustainability. And multilateral banks are a reflection of everyone, of all of us, of governments, of our ability to rise to the challenge.
When we talk about banking reforms, I would say that it’s a new global vision of what we want to do in terms of climate, because obviously the resources available often depend on your ability to capitalize, your ability to work, etc. Limits that they give you, on the risk capacity you have to take. Clearly there is much to improve in multilateral banks. We need to do things much more efficiently, consider the impact, make better use of resources and make the most of the bank’s balance sheet. So there’s the efficiency side, but there’s also a side of the whole system that looks and asks, “Are we doing enough?”
I think we have had a call from the G20 for some time to triple the resources available for climate finance. And we want to announce that we will reach the Bank’s $150 billion climate commitment in a decade.
10 years ago it was only $50 billion and we will triple it and announce that we are committed to this G20 vision. I don’t know of any other multilateral bank that has made this announcement, so we are ready to lead this process at the COP.
BBC News Brasil How was it possible to triple the amount available to finance these projects? Where will the money come from?
Goldfajn I think the funding comes from our own resources, we can finance this amount from our own resources. We are already forecasting growth in lending capacity, both due to the way we have leveraged our balance sheet and the capitalization of BID Investe (the bank’s recently launched sustainability financing arm aimed at private partners). We are managing to significantly increase lending and a good portion of this can be transferred to climate financing.
BBC News Brasil And why hasn’t more been done in recent years? Do you recognize that this debate is maturing in the markets about the urgency of the matter? Do you see the view that this type of investment can also be profitable?
Goldfajn Firstly, it has always increased significantly, but that does not mean that it is not increasing. It started from a level in 2013 when, for example, a billion dollars was lent, it rose and reached $11 billion by the end of the decade. So you already have an effort that didn’t start today. There have been these efforts over the last decade, but I think it is also true that there is some maturity on the issue of global warming. It is already very clear that the region is facing a number of climate shocks.
There are always droughts, hurricanes and fires. Every month there is something, we just helped Mexico with the Acapulco issue, we faced droughts in Uruguay and Argentina. Therefore, I think that the problem of global warming has become much more obvious and therefore the whole world is more aware of it.
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Rising sea levels have displaced residents on the coasts of countries like Mexico
BBC News Brasil And which projects would potentially benefit from this increase in resources?
Goldfajn Some things are already defined. For example, we have a $400 million partnership with the French Development Agency for the Dominican Republic to set their climate decarbonization policies. We have invested $325 million in Recife to improve the city’s infrastructure so that it is not affected by recent rains and landslides.
We have Amazônia Semper, an umbrella program that deals with financing nature in eight countries, where there are projects ranging from the bioeconomy in Ecuador, an alternative activity project for people, to $750 million for the Amazon a project in partnership with BNDES, announced as part of the Green Coalition.
We have projects to combat deforestation in Colombia, sustainable development projects for indigenous communities, so I give very specific examples. And there are also things associated with financial innovation. We conducted the largest debt swap with Ecuador to protect the Galapagos Islands. It was $1.2 billion to protect the Galapagos Islands.
But it is a debt, you exchange the bad debt for good debt and we guarantee that the resources will be invested in the Galapagos Islands. We have linked several loans with a clause that guarantees that payment will be deferred in the event of a climate event.
We have made such loans with Barbados, with the Bahamas and with Honduras. And we also have our climate project, which stipulates that the cost of debt will fall if the country achieves its goals (reducing carbon emissions). It is a great incentive to do something to achieve the climate goals.
I divide it into two groups, on the one hand concrete projects on deforestation, bioeconomy, sustainable development, climate policy and on the other hand financial innovations for debt conversion and incentive clauses such as the climate project. When you add those two things together, that’s the $150 billion value we’re announcing.
BBC News Brazil Developing countries are complaining about being held accountable for emissions reduction targets, pointing out that rich countries that bear the biggest environmental liabilities have not done enough to fund efforts in the socalled global south. Could multilateral banks play a more important role in this compensation?
Goldfajn It has two main axes. The first axis is scaling, we’re talking about tripling (the amount), where exactly it goes, how big it is, because the challenge is big and you have to become aware, mature and have an awareness of the system into which everyone moves in the same direction, otherwise we won’t get there. So scale. But the other axis is impact.
It’s about making sure the resources actually have the impact you need. And then you need to work on the impact in several ways: First, you need to know whether the projects you are doing affect fundamental areas.
Secondly, whether the resources you are using are having the intended effect.
The third is to work on the question of the implementation capacity of the countries, because often you can provide resources, but the countries do not have the capacity and the projects are not implemented. That’s why we’re increasingly talking about project funding programs that provide (with financing) technical resources and support people in carrying out projects.
We used to make the cross so that someone could carry the head. Now we hit the cross and also run to support the header. On the one hand the financing and on the other hand the project that helps. There is no loose end.
BBC News Brasil As the sustainability agenda becomes more popular, cases of socalled greenwashing a green conclusion to processes that are not truly sustainable or irregularities or inconsistencies under the acronym ESG (abbreviation in English for Environmental, Social and Corporate) are emerging. ? How can the impact on IDBfunded projects be measured?
Goldfajn Let’s think, for example, of the Amazônia Semper program, where I want to reduce deforestation. With this, I would like more people in the region to be involved in bioeconomy programs that represent a sustainable economy in the region. I need better infrastructure in the cities in the region that keeps people in the city, I need more sanitary facilities for these people, I need more family farms. There are several very clear measures.
Another example is Decarboniza Pará. This is the agreement that we made with the Government of Pará to recall that Belém will host the COP30 to work on the carbonization target and how to work on it. The measures are very clear: reducing CO2 emissions, decreasing deforestation rates, number of people employed in sustainable activities, expanding basic sanitation in the Amazon, so the impacts are very clear.
I think we need to move away from this idea of just tripling resources. Of course, magnification is important. But triple for what? It has to have an impact because increasing size doesn’t mean you’ll perform better. And it can be done better without the size not being enough either.
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Reducing deforestation in the Amazon and promoting the bioeconomy are among the IDB’s goals, says Goldfajn
BBC News Brasil This specific region is extremely poor, there are unemployed young people and there seems to be a paradox between the preservation of the forest and the poverty of the people. Are you convinced that this is a false paradox?
Goldfajn It is becoming increasingly clear that this is a false paradox because the thinking of the past, which focused on deforestation and financed people to prevent deforestation, has been forgotten. Working on nature and biodiversity means working on the economy. If you don’t offer people an alternative, it’s not sustainable.
We have to offer an economic activity that makes people feel useful, that generates income, that has a job. We have already established that financing without taking people into account does not work. So in the Amazon program we always have five axes: first, monitoring deforestation; Second, monitor human development indices. third, increased economic activity; fourth, urban infrastructure; and fifth, family farming.
Only if you approach everything together will you solve the problem. And when you bring everything together, there is no longer any paradox. From a macroscopic perspective, the issue of sustainability is also an opportunity for the region. Our advantage in the region is exactly what the world needs: the ability to generate clean energy. We are changing the dynamic a little from “come and invest here, we are good, I promise you profitability” to something more in the sense of an exchange: Europe needs a lot of green hydrogen. Where does she come from to get it? In Latin America.
And once they come with that clear demand, a business opportunity is created and it explodes. So we have countries asking, “Help me finance,” “Help me with this,” or “Make a deal.” We are talking about Chile, Uruguay, Brazil. It became a big deal.
When thinking about this issue of sustainability and social problem, the paradox that previously existed in the new configuration becomes an opportunity.
BBC News Brazil Economists say Latin America has just experienced a new lost decade in the economy, with the region experiencing little growth and not yet overcoming many material problems. In this sense, talking about sustainability and green hydrogen seems far away. Is the green economy a real solution for the region or a panacea?
Goldfajn I don’t see it as a panacea because the opportunities are there, but they have to be used. It is nothing new in Latin America that an opportunity arises that passes and is lost. So what we need to do, and this is the job of the IDB, is to work with countries and governments to look at the opportunity that we have and actually take advantage of it.
The topic of green hydrogen: It will generate a lot of investment and a lot of jobs. But if you don’t look at it and don’t see the opportunity, you won’t sign contracts, you won’t organize, you won’t take advantage of IDB financing for investments and then the train will pass in a few years.
We must view the region as an opportunity because the world needs Latin America and the Caribbean and the region is part of the solution to global problems.
BBC News Brasil Is the lack of a legal framework, such as clear rules for the region’s carbon market or protection of traditional populations, an obstacle to the change that Latin America needs? If I could ask you, how much would you like to see this $150 billion invested in sustainability grow? What would be the ideal return?
Goldfajn Finally: There are two types of profitability. One is economic, the other is ecological/social. Much of what we expect from profitability is a profitability that goes beyond the results of the specific project. We call these externalities, meaning what you generate in return for the environment goes far beyond the project itself. In fact, if you don’t have a planet, there’s no point in getting a (financial) return because it won’t exist.
In fact, it is the clearest example of how private income does not equal public income. Public income is for the preservation of the planet, and if there is no planet, there is no private income. And that’s why public banks are investing in this matter with public funds.
This is where regulation comes into play. There is a need to work on carbon markets and set further mobilization milestones, and private capital will come. You have to work with the environment to generate private investment, but also invest where you think the market may not get the return you want and that it won’t come in because the social return is difficult (in the results) must be included.