World Bank

The World Bank (abbreviated: WB) is a multinational organization specializing in finance and assistance. Its stated purpose is to reduce poverty through low-interest loans, interest-free credit at the bank level, and financial support to developing nations. It is made up of 189 member countries. It was created in June 1944 as part of the Bretton Woods Agreements. It is headquartered in the city of Washington D.C., United States.

In 1945, within the framework of the negotiations prior to the end of World War II, what would be known today as the financial system of the Bretton Woods Agreements (named after the name of the hotel complex in the city) was born., New Hampshire, where it was conceived), made up of two fundamental institutions for understanding development policies that took place from the second half of the century XX: the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF).

Conceived at the beginning, the first one, in order to help the European nations in the reconstruction of the cities during the postwar period, little by little it was expanding its functions, creating more organisms that would work parallel to it, integrating what we know today as the World Bank Group (WBM).

Structure of the World Bank

The World Bank has offices in more than 130 countries and more than 10,000 employees and approximately 5,000 others serving on a temporary or consultant basis. The amount of World Bank assistance to developing countries for the year 2002 was US$8.1 billion and an additional US$11.5 billion in credits extended for a period of 35 to 40 years, with an additional 10-year grace period.

The World Bank Group is made up of:

• The International Bank for Reconstruction and Development (BIRF, 189 member countries). Created in 1945, it aims to achieve poverty reduction in developing and middle-income countries with credit capacity, providing financial advice on economic management. Without a doubt it is the main branch of the GBM, having to belong to it in order to be a member of any of the following organisms.

• IDA, 173 member countries. Created in 1960, its members are those who make contributions that allow the World Bank (WB) to provide between $6000 and $7 billion annually in credit, almost without interest, to the 79 countries considered to be the poorest. The IDA plays an important role because many countries, called “developing,” cannot receive financing under market conditions. This provides money for the construction of basic services (education, housing, drinking water, sanitation), promoting reforms and investments aimed at enhancing productivity and employment.

• The International Finance Corporation (IFC, 185 member countries). Established in 1956, this corporation is responsible for promoting the economic development of countries through the private sector. Trade partners invest capital through private companies in developing countries. Its functions include providing long-term loans as well as providing guarantees and risk management services for its customers and investors.

• The Multilateral Investment Guarantee Agency (MIGA, 181 member countries). Created in 1988, this agency aims to promote foreign investment in underdeveloped countries, entrusting investors to losses caused by non-commercial risks such as: expropriation, currency inconvertibility, transfers restrictions, wars or disturbances.

• The International Centre for Settlement of Investment Disputes (ICSID, 154 member countries). Created in 1966. ICSID has as its main goal to take care of foreign investment in countries by providing international conciliation and dispute arbitration services, related to that item. This institution has a strong research area that publishes topics on international and national legislation (according to the country), on investment.
• The Independent Evaluation Group of the World Bank Group (IEG). Created in 2006. The IEG is an independent unit within the World Bank Group that aims to assess the effectiveness of the activities of BIRF, AIF, IFC and MIGA to improve their services and outcomes, which are not and why.

The IFC and MIGA, in turn, have the Office of the Ombudsman and Advisor (CAO *) that has independent advisory functions and attention to claims made by affected communities.

Board of Governors

Each member country is represented on the Board of Governors, they have the power to make the final decisions of the Bank. Its functions include admitting or suspending member countries, making financial authorizations and budgets, as well as determining the distribution of IBRD income.

The governors meet annually or when a representative majority, at least two-thirds of the total votes, so require. The duration of his position is stipulated for five years with the right to re-election. The Board participates together with the Executive Directors in the election of the president of the Bank.

The Board of Governors delegates responsibility for projects and decisions to the Executive Directors with the exception of: admitting new members, increasing or decreasing the Bank's share capital, suspending a member, and determining the distribution of net income to the Bank.

CEO

The Executive Directors have the goal of developing the projects and carrying out the operation and management of the Bank. The Board of Directors is made up of 12 titular executive directors and 12 substitutes (the latter participate in decision-making, but do not have the right to vote), their election takes place every two years. As of November 1, 2010, the number of directors was increased to 25. The increase in the number of elected executive directors requires the decision of the Board of Governors by a majority of 80% of the total voting power. Prior to November 1, 1992, there were 22 CEOs, 17 of whom were elected. In 1992, in view of the large number of new members joining the Bank, this number rose to 20. The two new seats, Russia and a new group around Switzerland, brought the total number to 24. The number increased by one, totaling 25, as of November 1, 2010.

The five members with the largest number of shares (currently the United States, Japan, Germany, France, and the United Kingdom) appoint five chief executive officers. One of them is, since 2011, Caroline D. Anstey. China, the Russian Federation and Saudi Arabia elect their own CEO. The rest are named by the other members. The distribution of voting rights varies from agency to agency within the World Bank group.

President

The WB president is elected by its members and chairs the Executive Board, but without the right to vote. Among his functions is conducting business; Organize, appoint and dismiss the officers and employees of the Bank, playing a role of chief of staff.

Advisory Council

The Bank's structure includes an Advisory Council made up of a minimum of seven people appointed by the Board of Governors. This includes banking, commercial, industrial, agricultural and labor interests in order to advise the Bank on general policy matters. These directors hold office for two years with the right to re-election.

Money and votes

All components of the World Bank Group are owned by member countries. When a country joins the Bank, it guarantees a capital subscription, paying only a small percentage of said guarantee. The rest of the money is payable on demand and serves as an armored guarantee, that is, it ensures the payment of the debt. The assigned capital subscription is proportional to the wealth of the country.

Bank members are divided into two categories, developed countries (Part I), and borrowing countries (Part II), according to IDA standards.

Most of the Bank's funds available for lending do not come from capital subscriptions. The money comes from sales of its own bonds on global financial markets. It then charges its borrowers a slightly higher interest rate than it must pay its own shareholders. Because the Bank's bonds are ultimately guaranteed by the world's governments, they are considered remarkably sound investments. Some private and institutional investors have access to purchase these bonds.

Voting

Capital subscriptions are proportional to the wealth of each country, determining the number of votes for each of these: for example, to date, the US controls 16.38% of the votes; Japan 7.86%, Germany 4.48%, France 4.30% and Great Britain 4.30%. In contrast, 24 African countries together control only 2.85% of the total.

Types of loans

Through its different agencies, described above, the World Bank manages five different types of loans, controlling investment, institutional development and public policy aspects of approximately 150 nations.

1) Loans for projects: this type of loan is granted to develop a specific project such as roads, fishing projects, infrastructure in general.

2) Sector loans, via IBRD and AIF: these loans govern an entire sector of a country's economy, that is, energy, agriculture, etc. These carry conditions that determine national policies and priorities for that sector.

3) Institutional Loans: these are used for the reorganization of government institutions in order to guide their policies towards free trade and obtain unrestricted access for transnational corporations (MNCs), to markets and regions. On the other hand, they serve to change government structures without parliamentary approval, under the Bank's guidelines.

4) Structural adjustment loans: this type of loan was theoretically created to alleviate the foreign debt crisis in order to convert national economic resources into production for export and encourage entry of transnational corporations into restricted economies. The countries of the South have experienced these adjustments and the consequent austerity measures.

5) Non-refundable Loans: This type of loan was created as a non-returnable monetary exchange method, a lender does not receive the borrowed money back.

In 1993, the IBRD listed as its largest borrowers in descending order: Mexico, India, Brazil, Indonesia, Turkey, China, the Philippines, Korea, Argentina, Colombia, Morocco and Nigeria. IBRD loans are negotiated on an individual basis, include a five-year period with no repayment required; then the borrowing governments have a period of 15 to 20 years to repay the debt at market interest rates. The Bank never restructures debt or cancels a loan. Due to its influence on public and private sources, the Bank is among the top creditors of its clients.

Presidents of the Bank

List of presidents:

• Eugene Meyer, 1945 - 1946,
• John J. McCloy 1947 - 1949,
• Eugene R. Black, 1949- 1963,
• George D. Woods, 1963 - 1968,
• Robert McNamara, 1968 - 1981,
• Alden W. Clausen, 1981 - 1986,
• Barber B. Conable, 1986 - 1991,
• Lewis T. Preston, 1991-1995
• James D. Wolfensohn, 1995-2005
• Paul Wolfowitz, 2005-2007
• Robert Zoellick, 2007 - 2012,
• Jim Yong Kim, 2012- 2019,
• David Malpass, from 2019-current.

History

John Maynard Keynes (right) and Harry Dexter White, the "founding fathers" of the World Bank and the International Monetary Fund (IMF).

The World Bank was created in 1944 at the Bretton Woods Conference, along with three other institutions, including the International Monetary Fund (IMF). The World Bank and the IMF are headquartered in Washington DC, and work closely with each other. It was not, however, until the international ratification of the Bretton Woods Agreements on December 27, 1945 that it began to function formally.

The Gold Room at the Mount Washington Hotel where the International Monetary Fund and the World Bank were created.

Although many countries were represented at the Bretton Woods Conference, the United States and the United Kingdom were the most prominent in attendance and dominated the negotiations.

1944–1969

Prior to 1969, development and reconstruction loans provided by the World Bank were relatively small. Bank staff were aware of the need to build trust in the bank. Fiscal conservatism governed, and loan requests followed strict criteria.

The first country to receive a loan from the World Bank was France. The bank's president at the time, John McCloy, chose France over other applicants: Poland and Chile. The loan was for 250 million dollars, half the amount requested, and was accompanied by very strict conditions. France accepted to achieve a balanced budget and had to prioritize the repayment of this debt before other governments. The World Bank closely monitored the use of the funds to ensure that the French government met the conditions. In addition, before approving the loan, the US State Department demanded from the French government that those members associated with the Communist Party would have to be removed. The French government complied with the demand and removed the Communist Party from the coalition government. The loan in France was approved in a matter of hours.

When the Marshall Plan was deployed in 1947, many of the European countries began to receive aid from other sources. Faced with this competition, the World Bank shifted its focus to countries outside Europe. Until 1968, its loans were devoted to the construction of revenue-producing infrastructure, such as ports, highway networks, and power plants, that would generate enough revenue to enable the country to repay the loan.

1968–1980

From 1968 to 1980, the bank focused on meeting the basic needs of people in the developing world. The size and number of loans to borrowers increased to a large extent as loans aimed at expanding the infrastructure of social services and other sectors.

These changes can be attributed to Robert McNamara, who was appointed to the presidency in 1968 by Lyndon B. Johnson. McNamara asked the bank's treasurer, Eugene Rotberg, to look for new sources of capital beyond the northern banks which had been the usual primary sources. Rotberg used the global bond market to increase the bank's available capital. One consequence of this period of poverty alleviation was a rapid increase in Third World debt. From 1976 to 1980 the world debt of the developing world increased at an average annual rate of 20%.

In 1980, the World Bank Administrative Tribunal was created to adjudicate disputes between the World Bank Group and its staff over allegations of non-compliance with occupancy contracts or the terms of agreements.

1980–1989

In 1980, McNamara was succeeded by Alden W. Clausen, United States President Jimmy Carter's nominee. Clausen replaced many members of McNamara's team and instituted a new ideological approach. His 1982 decision to replace the bank's chief economist, Hollis B. Chenery, with Anne Krueger was an indication of this new approach. Krueger was noted for her critique of development financing and for describing Third World governments as "rent-seeking states."

During the 1980s, the bank focused on lending to pay off Third World debt, and structural adjustment policies designed to optimize the economies of developing nations. In the late 1980s, UNICEF reported that the World Bank's structural adjustment programs had been responsible for the "declining health, nutritional and educational levels of tens of millions of children in Asia, Latin America, and Africa".

1989–present

In early 1989, in response to harsh criticism from many groups, the bank began to include environmental groups and NGOs in its lending to mitigate the earlier effects of its highly criticized development policies. an agency to implement, in accordance with the Montreal Protocol, measures to protect the ozone layer and the earth's atmosphere by reducing by 95% the use of ozone-depleting chemicals in the atmosphere, with a target date of 2015. Since then, in accordance with what is known as the "Six Strategic Themes," The bank has applied several additional policies to preserve the environment while promoting development. For example, in 1991, the bank announced that to protect against deforestation, especially in the Amazon, it would not finance any commercial development or infrastructure project that would have a negative impact on the environment.

To promote global public goods, the World Bank tries to control contagious diseases like malaria by delivering vaccines to various parts of the planet and joining forces to combat them. In 2000, the bank announced a 'war on AIDS', and in 2011, the bank joined the Society to Stop Tuberculosis.

In this vein, in 2010 he launched a project in the Seychelles to promote local tourism called MAGIC. This was followed by the TIME project, launched in 2012.

Traditionally, and by tacit agreement between the United States and Europe, the president of the World Bank has always been selected among the candidates proposed by the United States.

On March 23, 2012, US President Barack Obama announced that the United States would appoint Jim Yong Kim as Bank President. Jim Yong Kim was elected on April 27, 2012.

Criticism

Protest against the World Bank in Jakarta

The World Bank's performance in less developed countries is the subject of criticism. The following aspects are pointed out:

• The BM has funded projects that caused massive environmental damage, for example:
  • The dam Sardar Sarovar on the Narmada River in India, which caused the displacement of more than 240,000 people to poor land sites, without drinking water and without electricity;
  • The Pole-west Development Schemein Brazil, which produced the colonization of the tropical rainforest and the deforestation of an area similar to that of Britain;
  • The dam Pak Mun on the Mun River in Thailand opened in 1994, which completely destroyed the river's fishing resources, reducing to poverty the fishers of the region and drastically altering the diet of countless people living in the river basin in Thailand, Laos, Cambodia and Vietnam;
  • In Singrauli In India, it hosts twelve open-pit coal mines. Mines have polluted water, harvests and ictícola fauna. More than 300,000 people had to be relocated to complete the project, many of which were to stop precarious settlements without access to land or basic sanitation facilities.
• BM promotes the interests of industrialized countries. Critics find that:
  • The export of hazardous or toxic waste to developing countries has been favoured;
  • The relocation of polluting industries from industrial countries in developing countries has been enhanced.
• MB projects worsen the conditions of small farmers.
  • Rarely, if ever, subsistence farmers receive irrigation and energy benefits from large dams;
  • The replacement of subsistence crops by industrial crops, even in areas that are not appropriate for this purpose, is encouraged, further impoverishing the peasants.
• The BM has provided money to governments that openly and permanently violate human rights:
  • Credits have been made to dictatorships recognized for violations of fundamental rights, such as Chile, Uruguay, Argentina and Paraguay in the 1970s, the Philippines under the dictatorship of Ferdinand Marcos or Indonesia under Suharto. In 2022 the World Bank spent more than US$ 18 billion on the Zelenski Volodimir regime in Ukraine.
  • Although the Bank argues that the money of loans has not been used in activities that directly harm citizens, in approving such funds resources were released that dictatorial governments could use in persecutory and repressive activities in addition to other adverse purposes.
• The forced relocation of people and communities has caused suffering and hardship:
  • There are examples of these policies in Indonesia (Transmigration, Transmigration program in the 1980s) and Brazil.
  • In general, displaced peasants end up in poorer and lesser agricultural areas.
• BM projects have threatened the rights of indigenous peoples:
  • While the Bank issued guidelines for projects affecting indigenous peoples in 1982 (in 1982)Tribal Projects and Economic Development Guidelines), in 1996 one of the lawyers of the BM publicly stated that they were never followed, and that domestically there are significantly weaker standards for the protection of the interests of indigenous peoples.

Perhaps the most intense criticism, shared by both the World Bank and the International Monetary Fund, is that the structural adjustment policies promoted by these organizations have imposed enormous social costs on vulnerable groups in developing countries.

The action of the World Bank is also often criticized for two opposite reasons. On the one hand, incumbent governments in many developing countries are reluctant to take action against corruption and to organize real elections. On the other hand, anti-globalization movements accuse the World Bank of better meeting the needs of large transnational corporations than those of the local population. The legitimacy crises in the WB (and in the IMF) generate reform projects that have in common the desire for transparency and democracy, on the one hand, and a questioning of the purposes and methods of intervention of these organizations, on the other.

Another widespread criticism is the great influence of the US. Many consider the World Bank to be under excessive political influence from the United States due to its ability to block its enormous weight in the ownership of the WB (a consequence of its weight in the world economy). Joseph Stiglitz criticized European countries for allowing this distribution of ownership and therefore accused them of being indirectly responsible for the bad periods experienced by the World Bank. In 2010 a shareholding reform was launched to give more weight and a better representation of developing countries.

The World Bank has been criticized for personnel issues as well. A hero in the fight against corruption in developing countries, Paul Wolfowitz was appointed president of the World Bank in 2005 by the US. Two years later he was implicated in a case of favoritism within the World Bank in relation to Shaha Riza, a collaborator with whom he had an affair, and had to resign in June 2007. Added to this is a 2018 report in which 25% of his employees reported having been victims of sexual abuse.

The appointment of Robert Zoellick in 2007 was also criticized. Joseph Stiglitz, Nobel laureate in economics and former head of the World Bank, said that the appointment of Robert Zoellick "is a continuation of that of Paul Wolfowitz. Robert Zoellick tooth and nail defended US farm protectionism when he was in charge of US trade negotiations.... How, as future World Bank president, will he call for the dismantling of farm subsidies that favor developing countries? developed against poor countries?

Despite the criticism, it is interesting to note that: "Latin American and Caribbean countries have received more World Bank loans than any other geographic area. Since its creation, it has provided the region with loans of about 32 billion dollars, which is equivalent to approximately a quarter of its loan portfolio".