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The Inter-American Development Bank

S%2BB%20Pyramid%20Hand.jpg Robert S. Katz is a Research Analyst with the Washington, D.C.-based World Resources Institute and editor of NextBillion.net -- Development Through Enterprise. His current research documents unmet human needs in low-income communities and identifies the corresponding market power of the poor.

Doing good while doing well – the triple bottom line – bottom of the pyramid business. These are, by now, common catchphrases, all of which communicate the idea that profit and sustainability can co-exist. (There are many more – perhaps too many.) From the environmental perspective, businesses and multilateral organizations are increasingly catching on. What about the development perspective – the idea that businesses can serve poor communities’ basic needs while turning a profit?

This is the central tenet of the “base/bottom of the pyramid” (BOP) hypothesis, advanced first by professors Stuart Hart and C.K. Prahalad in 2002. Since their first article and subsequent books, companies have begun to make strategy and business model adjustments to account for the 4 billion customers they’ve been missing. Mexico’s Cemex and the Philippines’ Smart are two oft-cited examples BOP-focused business models in action.

While business clearly gets the message, multilateral institutions have been slower on the uptake – at least, until last week. In a first-of-its-kind move, the Inter-American Development Bank pledged to incorporate private sector-led strategies into its lending. The announcement was made at a conference here in Washington, D.C., called “Building Opportunity for the Majority,” which also served as new IDB President Luis Alberto Moreno’s personal launching pad for reform at the Bank.

The IDB invests hundreds of billions of dollars every year in Latin America. If they do what Moreno says they will do, the results will be worldchanging – financial and training support for small enterprises; public-private partnerships for housing, water, and energy provision; legal and political reform that will unlock $1.2 billion in dead capital (disclaimer: my employer, WRI, worked closely with the IDB to help them develop this initiative).

Altering the course of a huge development bank is like turning the rudder of a supertanker – you won’t see the course change right away, but when you do, it will make some big waves. That’s how I feel about this initiative, and with Moreno at the helm, the impact could very well alter the course of Latin American development for years to come.

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Comments

Can someone comment on the Hewlett Packard business model?

I have heard that they have been using the 'tripple bottom line' (although in different words) for a very long time. This kind of business model, called a 'Type Z' business model, focuses on product innovation (the economics), development of people (the equity), and development of community (the environment) around the business organization.


Posted by: matt on 25 Jun 06

Does anyone have any resources on public-private-social partnerships on energy programs in Latin America? I know of a couple in Argentina and one in Brasil, but would love to expand my perspective.

Also, where can I find theoretical agruements for public-private-social partnerships, especially in Latin America? Or at least, public-private partnerships?


Posted by: Ryan on 25 Jun 06

Responding to Ryan:
You may find papers in diverse areas of Brazilian and Latin American Economics in www.ipea.gov.br/ You may also check Instituto Torquato di Tella (?) in Argentina and CEPAL based in Chile. They do approximately the same thing.
Truly there has been long I do not enter that site which belongs to a applied economics institute IPEA of Brazilian Planning Ministry.
In general papers are written in Portuguese, which I am sure, you will master after a few try outs.
Cheers,
GF


Posted by: GFranco on 25 Jun 06

So after the neoliberal policy of structural adjustment didn't work (it took ages for the people at these institutions to recognize this), now development banks are turning to this discourse. Nothing new really.
Thank god it's a discourse from the past, because both governments and people alike in Latin-America are rejecting the capitalism-benefits-the-poor agenda.
It's nice to see that no Latin-American government takes the IDB seriously (both Morales and Chavez have already exposed it as a new strategy of capital to get a foothold on the continent).
It's normal, because people there have experienced what it really means when capitalists start acting against their fundamental nature.

Whenever there's a private component that interferes with public goods and with social justice, disaster is guaranteed. (There are countless examples - from water to housing, health and education. The case of Manila's publiprivatized water utility, which resulted in more poverty for poor, and more profit for the publiprivatizing ideologues who say their capitalist venture speaks for the poor).


Posted by: Lorenzo on 26 Jun 06

extremely poor choice of image.
the lives (and fate) of 4 billion poor people rests in the hand of the IDB - like the hand of god...


Posted by: justus on 26 Jun 06

Thanks GFranco. I live pretty close to Torcuarto di Tella (incredibly close compared to the rest of you) so I'll swing over there to see what they've got.

I was mostly wondering if there are any seminal works that I should be aware of, as the works of Hart and Prahalad are to BOP.


Posted by: Ryan on 26 Jun 06

maybe the gates foundation will help multilateral institutions along? http://www.rushkoff.com/box.html


Posted by: smerkin on 28 Jun 06



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