Inter-American Development Bank: The edict of Nancy

Almost a year ago this month, the Inter-American Development Bank (IDB) said goodbye to staff association president Isabel Larson, after 30 years' loyal service. Staff and guests at a ceremony in the bank's huge glass-roofed atrium included IDB president Enrique Iglesias and vice-president Nancy Birdsall, who in the past two years has conducted the biggest upheaval in the IDB's 37-year history. Birdsall probably expected fond words and perhaps a few tears from Larson.

If so, Larson must have surprised her. "Before I conclude," she said, "allow me to make a few personal remarks. This is my last act and I retire ... with mixed feelings." Along with many of her colleagues, she said, she was "not convinced by the results of the reorganization". The changes had been "too traumatic"; the impact of them might have "profound and adverse consequences on the institution". She expressed concern at the "balkanization ... into small and powerful feuds, where agendas pursued are not necessarily those of the governors, the executive directors and the president of the bank". She worried that "worldbankalization" of the IDB was growing, a development that could rob the "great Latin American institution" of its unique identity.

Nobody was in doubt about Larson's target. No names were mentioned - the reference to "worldbankalization" was enough. Birdsall spent nearly 14 years as an economist at the World Bank, before making the leap to join the IDB as vice-president in 1993. There she pushed through a restructuring in just two years, creating new departments, abolishing others. It was dramatic - even so she says she cannot understand Larson's attack. "I don't know where it came from. I don't agree with her point of view. I was quite surprised to hear her say this," she says.

Yet Larson said publicly what others have whispered in private. As president of the staff association, her reference to a "large number of colleagues" thinking along similar lines carries weight. Her fears are echoed by former staff member Sebastião Vital. Once deputy finance minister of Brazil, and until November 1993 deputy manager at the bank, Vital left in sorrowful mood because he felt the IDB was going the wrong way. "I spoke to a colleague in the bank only a couple of weeks ago, " he said, "That person said, 'Sebastião, you won't believe it, it is even worse'."

In July an internal bank review, based on interviews with 63 of the banks' most senior executives, pointed to the "climate of stress" at the IDB. "The bank's products and service could be adversely affected unless the climate improved," it noted.

Doing more with less

The IDB appears to be in great shape. Only seven years ago its relations with the US were in tatters, some on Capitol Hill even advocated closing it down. Few thought it could successfully negotiate a capital replenishment of $41 billion. But it did. In 1994, it managed to boost its capital to $101 billion. And its loans have never been higher. The average annual lending for the period 1985 to 1989 was $2.5 billion. Today the IDB can lend up to $7.2 billion a year. The confidence of the non-regional shareholders has never been greater. "The capital replenishment was a huge achievement by president Iglesias," says one staff member. "The last replenishment [the eighth] was path-breaking. In principle, we can lend from $6 billion to $7 billion a year without necessarily going back to shareholders for support every four years."

'Hemos hecho más, con menos [we have done more, with less]' is the slogan being bandied around by Birdsall. "We are a bank that is growing," she says. "By 1998, the portfolio of loans will be twice that of 1992." Indeed, the portfolio has grown by about 10% a year since 1992. Birdsall also points to new activities: the IDB offers educational courses through its newly opened Inter-American Institute for Social Development and has sponsored high-profile conferences that have proved important forums for "intellectual leadership" in the region.

Administrative cost-cutting has accompanied expansion. The 1994 budget was equal, in real terms, to the 1993 budget; the 1995 budget was about 3% smaller, after taking inflation into account. This year, the budget is nominally larger but is still lagging inflation. "These budgets reflect our member governments' determination to make our bank, as well as other multilateral and bilateral development institutions, as efficient as possible," says Birdsall, adding that the budget grew by 40% between 1988 and 1993.

According to one long-serving bank executive this approach is letting the bank float along nicely. "You may have a ship sailing with a great deal of unhappiness in the crew, and people may think the first mate is a fool. But the ship itself has good direction. That's better than when the crew is having parties all the time and the ship hits an iceberg."

So what motivates this first mate, who upsets some staff with her worldbankalizing and impresses others with her efficiency?

By this August, Nancy Birdsall, 50, and a mother of three, will have been at the IDB for three years. She spent most of her career at the World Bank, and it's probably true to say that no-one expected a revolution when she walked into the IDB's luxurious Washington headquarters on New York Avenue and 13th Street. Yet it is clear she was intent on change from the start. A graduate of Newton College of the Sacred Heart, where she read American studies, she also has a Yale PhD in economics. Her work rate is reported to be hectic.

Birdsall's promotion was a surprise. At the World Bank she had been director of the policy research department, managing 85 economists. She was one of 59 department directors working under 17 vice-presidents, six managing directors, and the president of the bank. At the IDB she is the sole vice-president, answerable only to the president, in a bank that has 1,798 staff. She speaks passable Portuguese and is learning Spanish.