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WASHINGTON (Reuters) – The Inter-American Development Bank (IDB) on Wednesday launched an initiative to remedy a relative lack of U.S. companies bidding on the $13 billion in projects financed by the development bank across Latin America and the Caribbean region.
THE TAKE
Despite major trade ties between the U.S. and Latin America, U.S. companies lag behind their peers in bidding on procurement contracts for projects financed by the IDB.
IDB President Ilan Goldfajn said increased bidding by U.S. firms will lead to increased competition and raise the quality of IDB-financed infrastructure projects. He said the program, called “BID for the Americas,” will also build natural business ties within Latin America and the Caribbean.
The effort has the support of the U.S. Chamber of Commerce, the U.S. Commerce Department and other federal institutions, including the U.S. Export-Import Bank. The U.S. is the Washington-based IDB’s largest shareholder.
CONTEXT
The move by IDB comes as China increases its influence in Latin America, through increased direct lending to Latin American governments and increasing trade ties to resource-rich South American countries. A Reuters analysis shows that outside of Mexico, China has overtaken the U.S. as the region’s largest trading partner.
KEY QUOTE
“We want to make sure that the infrastructure in Latin America, the Caribbean, has both dimensions of price and quality. We need to push for quality too, because when you don’t have quality, the price is higher, much higher for the (life) cycle of the project,” Goldfajn told a launch event in Washington.
BY THE NUMBERS
The U.S. exports more than $720 billion in goods and services to the region annually, far exceeding U.S. exports to both the European Union and China. U.S. firms win 61% of the IDB-financed contracts for which they bid, but these tend to be small, averaging $282,000 in the infrastructure sector. The average contract size won by Spanish firms is $4.7 million.
WHAT’S NEXT
The IDB plans to organize U.S. state-level road shows to raise awareness of bank financed procurement projects and to facilitate connections between U.S. firms and those in Latin America and the Caribbean.
On the trade and financing fronts, the IDB said it will work to connect U.S. investors, including venture capital and private equity firms to entrepreneurs in its member countries. It also intends to connect U.S. firms to local governments in Latin American countries.
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