Office of the Historian

201. Memorandum From Stephen Farrar of the National Security Council Staff to the President’s Assistant for National Security Affairs (Poindexter)1

Washington, March 14, 1986

SUBJECT

  • IDB Replenishment

Negotiations on replenishment of the Interamerican Development Bank (IDB) begin next Thursday, March 20, in Costa Rica. Treasury will be taking a tough position. A substantial funding increase—within USG budget planning ceilings—would be contingent upon:

—
Reform in lending policies (conditionality, faster-disbursing loans);
—
Reorganization of the IDB, including a new unit (headed by an American) to implement the new lending policies; and2
—
Changed voting rules to require 65% of votes for a majority instead of the current 50% (allowing the U.S. plus one other donor to block proposals).

The changes are necessary if the IDB, long one of the least efficient of the multilateral development banks, is to play a serious role in implementing the Baker Plan for resolving the third world’s debt crisis.

Preliminary soundings indicate that the IDB and Latin governments are prepared to accept tougher conditionality and reorganization of the IDB. Their positions on the voting change are less clear. Between now and March 20, the Latins are likely to test whether the USG is unified behind Treasury’s position. A display of unity is extremely important now. State appears to be firmly on board.

Philip Hughes concurs.
  1. Source: Reagan Library, Stephen Farrar Files, Chronological File, Farrar Chron March 1986; NLR–177–5–28–14–5. No classification marking. Sent for information. Sent through Danzansky. Farrar initialed for Danzansky.↩
  2. Poindexter highlighted this point and the previous point in the right-hand margin and wrote: “Are these growth oriented?” In a March 18 memorandum to Poindexter, Farrar wrote: “The U.S. is definitely pressing for policies that will promote growth and investment, as outlined in the Baker Plan. Reorganization of the IDB would be designed to ensure that those policies are implemented.” (Reagan Library, Stephen Farrar Files, Chronological File, Farrar Chron March 1986; NLR–177–5–28–13–6)↩