Background on the BID and Urban Challenges in Latin America
More than a decade ago, the Inter-American Development Bank (BID) estimated that 85% of Latin America’s population would live in cities, with over ten megacities (urban areas with more than 10 million inhabitants) in the region. Now, as the future has arrived, it’s time to rethink the development of these urban areas.
Adding to this scenario, it is expected that 140 emerging cities in the region, which had less than 2 million inhabitants a decade ago, have grown two to three times faster than megacities. This rapid growth has exacerbated Latin America’s primary issue: inequality.
BID Launches “Cities and Regions” Program
In response to these challenges, the BID has launched the “BID for Cities and Regions” program. This initiative will provide up to $1,000 million in investment loans and guarantees from the BID to finance projects that contribute to sustainable growth in Latin American cities.
“This program is a significant addition to the BID’s suite of financing tools for development,” said Ilan Goldfajn, President of the BID. “By providing direct access to financing and strengthening institutional capacity, we are equipping subnational governments with the tools they need to lead transformative development in their own communities.”
Program Components
- A $1,000 million investment financing window for eligible state governments to fund urban infrastructure projects and service delivery.
- A technical mechanism to support institutional reforms, capacity building, project design, and preparation.
Pilot Phase
According to the bank, in a pilot phase, the organization will approve around ten operations. The BID conditions financing on projects that comply with national legal and fiscal frameworks, demonstrate high development impact, have the potential to attract private sector financing, and contribute to improving local government efficiency.
Moreover, the program will also support private sector financing for local governments with limited access to capital markets.
“Leveraging its extensive experience with local governments, the BID aims to be a genuine private sector development bank, not only financing more private sector projects directly through BID Invest but also strengthening conditions for private sector investment,” added Goldfajn.
By incentivizing private investor interest through support, technical assistance, and project lifecycle supervision, the BID aims to establish rigorous standards, robust risk management, transparency, and accountability.
Key Questions and Answers
- What is the BID’s new initiative? The “BID for Cities and Regions” program, which provides up to $1,000 million in investment loans and guarantees for sustainable urban development projects.
- What are the program’s components? An investment financing window for state governments and a technical mechanism to support institutional reforms, capacity building, project design, and preparation.
- What is the purpose of this initiative? To address urban inequality and promote sustainable growth in Latin American cities.
- How will the BID ensure project success? By providing direct access to financing, strengthening institutional capacity, and establishing rigorous standards, robust risk management, transparency, and accountability.
