Creating Opportunity in Latin America
JPMorgan Chase’s Priscilla Almodovar sat down with Inter-American Development Bank President Luis Alberto Moreno to discuss global economic opportunity and mobility.
Almodovar: In your 10 years at the helm of the Inter-American Development Bank (IDB), you have put a big emphasis on using public-private partnerships to drive economic development. Are there areas besides infrastructure that could benefit from this model?
Moreno: No question. First and foremost, we live in a world where governments have to do much more with less. There’s a huge space for public-private partnerships in both health care and education. With education, the challenge is that you find wonderful experiences in every country around the world for a thousand students, but never for 10 million students. I think there are real possibilities to use certain private sector interventions in this space.
Almodovar: What are some challenges of these public-private partnerships?
Moreno: Marrying the two is easier said than done, meaning that the risk appetite differs depending on who you talk to. You have the foreign exchange risk, design risks, regulatory risk and construction risk. If you decide to simply transfer risk to governments, maybe they’ll do that partnership but it will probably take 10 years because governments can’t take on all these kinds of risks. So, how do you find ways to mitigate these risks across the lifecycle of a public-private partnership so that you can invite more and more private sector actors in this? That’s the big challenge going forward. I don’t think we’re there, but I think doing this in a systemic way will certainly begin to take us there.
Almodovar: What is the IDB doing to address the disconnect between skills young people have and skills that the labor market actually needs?
Moreno: We think about this all the time. We have a program that we developed to focus on a million young people in the hemisphere. We’ve got a set of major corporations like Caterpillar who need mechanics. Students will take a mechanics course, followed by an internship. People who have gone through this typically have a better than 70% chance of finding a job. So you’ve got to really think about ways to provide the skills for the future. A million young people is a big endeavor for us, but it’s a drop in the bucket given the challenges in our hemisphere, which is almost 600 million people.
Almodovar: How has IDB’s work across sectors, especially in education, come together to address inequality?
Moreno: This has been a very big question, certainly in Latin America, for many years. We’re still the most unequal region of the world but with a caveat, and that is that over the past decade we started seeing that inequality slowly begin to narrow. Why did that happen? Because of economic growth. Clearly, part of the answer is education. Part of the answer is understanding that we are in a tsunami of a technological revolution, and as that takes hold we need to understand that the skills that the market will demand for the new generation are entirely different than what our schools are doing today.
Almodovar: In looking at your programs focused on large issues like access to health care, education and housing, how do you measure the impact of your investments?
Moreno: If you cannot measure, you cannot have good results. Each and every project the bank does has a baseline. We go in and we know exactly what we want a loan to do. We ask, what does the government or the private sector want to do with this loan? How are we going to measure success? How are we going to measure development impact? We have a whole set of indicators. By the way, that doesn’t mean that every project is a success, because development is not an exact science. We learn from the failures. But the bottom line is that, if we cannot measure what we do, we’re not doing development.