Joe Biden's foreign policy

By Luis Fierro Carrión (*)

Twitter: @Luis_Fierro_Eco

As I write these lines, the Presidency of the United States is about to be defined, between the current president, Donald Trump, and the Democratic candidate Joe Biden [on Nov. 6^th Biden clinched the majority of the Electoral College].

The results point to a narrow victory for Biden in the Electoral College (and a more significant lead in the popular vote), along with his running mate, Kamala Harris (whose parents were from Jamaica and India). She will be the first female Vice-President in American history; the second African-American in the Executive branch; and the first Indian-American.

Biden is a well-known figure for Latin America, given that he was Vice-President between 2009 and 2017, during the Barack Obama administration. In addition, he was an emissary of the Obama administration to the region. Before being Vice-President, he chaired the Senate Foreign Affairs Committee.

What can you expect from a Biden government? In general terms, a return to a foreign policy based on norms, alliances, and long-term strategies, as has been traditional in the United States, instead of Trump's Twitter storms, in which he vilified Latinos and rulers from Latin America (remember that, at the launch of his campaign in 2015, Trump said that Mexicans were rapists and criminals).

Instead of an emphasis on building a wall at the border and restricting immigration and asylum applications, it could return to a more humane immigration policy. The crime of ripping more than 3,000 underage children from the arms of their parents and locking them in cages will not be repeated. Shortly before the elections, non-governmental groups said that despite their best efforts, they had not been able to locate the parents of 545 children, who remained abandoned. In the second and final debate, Biden said he would do whatever he could to make amends for this crime.

Regarding trade issues, although Trump imposed restrictions on steel imports from several countries, and also threatened to eliminate NAFTA (North American Free Trade Agreement), in the end he adopted a very similar trade agreement, although he insisted on changing its acronym in English to USMCA (United States-Mexico-Canada Agreement).

With regard to the Bolivarian axis (Venezuela-Nicaragua-Cuba), which Bolivia will join again, Trump maintained a belligerent rhetoric, even threatening a military intervention in Venezuela; but, in the end, he did nothing, apart from recognizing (together with the governments of the Lima Group) Juan Guaidó as interim president. In conversations with his former National Security Advisor, John Bolton, Trump mocked Guaidó’s weakness and said he was impressed by Maduro's ability to stay in power. But he did not grant Temporary Protected Status (TPS) to Venezuelan refugees fleeing the dictatorship and proposed eliminating the TPS for Central American immigrants (including those from Nicaragua). Trump's main drive was xenophobia and not ideological issues (he has tried to do business in Cuba in the past).

Biden, by contrast, argued in a book in favor of addressing the problems of violence and poverty that affected Central America. "Of all the hot spots in the world, I had come to think that Central America presented the best opportunity." In 2015 he was instrumental in convincing Congress to pass an assistance package for the region for $ 750 million (which Trump later thwarted).

Biden and his team of experts “would take a broader approach to the problem of immigration and the region. They also say that they would address poverty and violence, the root causes of migration and instability, furthering the fight against corruption and investing in job creation and improved governance,” Ernesto Londoño wrote in the New York Times.

Rather than being a 800 pound gorilla imposing its ideas on the region, the United States would operate within the framework of mutual respect and shared responsibility, said Jake Sullivan, an adviser to Biden. Biden would propose a $ 4 billion assistance package to try to tackle the causes of unauthorized immigration.

Biden would also renew the United States participation in the Paris Agreement to tackle climate change, and support the region's efforts to combat it, including reducing deforestation in the Amazon (which might put him in conflict with Bolsonaro in Brazil).

Ecuador (depending on who is elected in 2021) could take advantage of this relaunch of U.S. foreign policy by championing the fight against climate change, against deforestation, and in favor of renewable energy. It could also push for a free trade agreement with its main trading partner, the US; and could complete integration into the Pacific Alliance.

One setback for Latin America under Trump was the appointment of a US citizen as President of the Inter-American Development Bank (IDB), a hardline Cuban-American ideologue, which by a "gentlemen's agreement" had previously been reserved for a citizen of the region. The Moreno government was an early supporter of the proposal, leading to the former Ecuadorian Finance Minister Richard Martínez being nominated as a potential vice president. This appointment is frozen, while it is determined if it violates IDB regulations (it does appear to violate the Constitution of Ecuador). But it remains to be seen if Biden keeps Claver-Carone in office (he could hold up U.S. support for a capital increase until Claver-Carone steps down).

Paul Krugman indicates that a Biden Presidency is likely to return the US to its role as a promoter of multilateralism, by returning to bodies such as UNESCO and the World Health Organization. In a more immediate term, we shall see if Biden joins the international agreements for the distribution of an effective vaccine for Covid-19 (something that Trump has refused to do, by prioritizing "America First”).

 (*) A Spanish version of this article was published on November 6, 2020, in "Diario El Universo" of Ecuador.

https://www.eluniverso.com/opinion/2020/11/06/nota/8038237/politica-exterior-biden

Quarantine, Death and Reactivation

By Luis Fierro Carrión (*)

There is an etymological similarity between the Spanish (or Italian) words "quarantine" and "lent" (cuaresma).

For Christians, Lent is a 40-day period of penance, reflection, fasting, and abstinence, between Ash Wednesday and Holy Thursday.

Jews commemorate Passover, which was the liberation from slavery in Egypt and the survival of the 10 plagues, including the death of the firstborn, from which the Jews were saved by placing lamb blood on their doorsteps, to indicate their faith (the “Angel of Death” passed over those homes). Christians believe in the death and resurrection of Jesus.

These ceremonies are linked to pagan practices on death and rebirth of life, reflecting the passage from winter to spring in the Northern Hemisphere (Easter eggs and chocolate bunnies reflect this emphasis on fertility).

Quarantine refers to the 40-day isolation of people and property suspected of carrying the bubonic plague in Venice, during the 14th century pandemic (the worst pandemic in recorded history, in terms of percentage of the population that died).

In 2020, a forced quarantine of the population has been put into effect in many countries of the world, starting with China. In the case of Ecuador, these measures were taken as of March 12, with the suspension of classes, mass events and flight restrictions; and a curfew from March 17. We have already had more than 40 days of these restrictions (as of May 4, a system of "traffic lights" was established by municipalities, but as of May 7^th all remained in "red", or full lockdown and curfew).

Despite the restrictions, there were a large number of excess deaths, most of which can be attributed to COVID-19 (perhaps a fraction correspond to people with other illnesses or accidents who did not have access to hospitals, especially in the provinces of Guayas and Santa Elena).

Between January and April, in the province of Guayas there were 10,655 deaths above the average in the same period of 2018-19. The following was Santa Elena, with 613 excess deaths; Manabi 385; Pichincha 308; and El Oro 146; in Santo Domingo de los Tsachilas, Pastaza and Galapagos there were 2-4 excess deaths. In the other provinces, the number of deaths decreased, probably due to fewer deaths from accidents and homicides (for which reason it is also possible that the figure attributable to COVID-19 exceeds 12 thousand).

Considering a case fatality rate between 1 and 2%, this would mean that there have already been more than 600,000 cases of COVID-19 in Ecuador (even with a high case fatality rate of 3%, taking into account the poor health infrastructure , we would have more than 400,000 cases). Considering that until May 6 only 81 thousand tests had been taken, the official figures for COVID-19 cases and deaths have scant meaning.

The economic impact of the quarantine will be devastating. According to Econ. María de la Paz Vela in a seminar organized by the consulting firm Multiplica and Revista Gestión, Ecuador's GDP could fall by 7% (I estimate between 11 and 15%, based on a prolonged recession that would also continue to impact the price of oil and other exports). Adequate employment will fall from 38.8% to 35.4%, while open unemployment would increase to 3.8% to 9%. The poverty rate, which had already risen from 22% in 2017 to 25% in December, would now rise to 35% (reversing a decade of progress).

Tax revenue would drop by $ 7 billion; the fiscal deficit would triple to $ 8,652 million; financing requirements would reach $ 17 billion. This makes unavoidable a process to renegotiate the external debt (with private and bilateral creditors), and rollover the internal public debt. The government has proposed a “Humanitarian Law” to raise funds from people with the higher incomes, and from companies with profits of more than $ 1 million, but the fate of the law in the National Assembly seems uncertain.

Exports would fall by 26%, but imports would only decrease by 13%. Remittances from emigrants would drop by 9%. A reduction of the international reserves is estimated at $ 1 billion.

The IMF approved a quick financing loan for $ 663 million; The IDB has approved $ 700 million, and $ 500 million is expected from the World Bank [plus a $ 6 million grant] and $ 300 million from CAF [later increased to $400 million]. An announced Chinese loan (of up to $2 billion) has not yet crystallized.

Resources will be required for economic reactivation. The creation of a guarantee fund for bank loans to SMEs has been proposed, with resources from IDB Invest, IFC, CAF, EIB and other entities.

A gradual reactivation requires making way for Internet sales, home delivery or pick up at the door of stores, and home delivery of food and prepared food.

(*) This is the English translation of an opinion column published on May 11th in Diario El Universo of Ecuador:  

https://www.eluniverso.com/opinion/2020/05/11/nota/7837575/cuarentena-muerte-reactivacion

OECD and CPI estimate climate finance in 2014 at $62 billion

The OECD and Climate Policy Initiative (CPI) have just released in Lima a report on mobilized climate finance provided to developing countries.

http://www.oecd.org/environment/cc/Climate-Finance-in-2013-14-and-the-USD-billion-goal.pdf 

They estimate that the total for 2014 was $62 billion, which is getting closer to the $100 billion per year committed by Developed Countries at Copenhague and Cancun.

This report is a very detailed, robust and transparent exercise.  It presents the most  reliable figures available concerning climate finance.

- It is a remarkable improvement over previous studies, since it does not "estimate" a "leverage factor" of private financing, but rather counts the private co-financing project by project.

- Multilateral financing is adjusted to reflect the part that may be "attributed" to developed countries.

- It excludes some amounts of finance for coal power plants (that had previously been reported by Japan and Australia).

- The part considered as official development assistance (grants and concessional loans) is estimated at $ 20 billion.

In summary, I think it is a significant improvement over previous studies.

INFORME DE LA OCDE Y CPI SOBRE FINANCIAMIENTO CLIMATICO

La OCDE y la Iniciativa de Políticas Climáticas (CPI) acaban de presentar en Lima un informe sobre financiamiento climático provisto a los países en desarrollo.  

http://www.oecd.org/environment/cc/Climate-Finance-in-2013-14-and-the-USD-billion-goal.pdf

Estiman que el flujo total de recursos movilizados en el 2014 fue de $62 mil millones, lo cual ya se va aproximando a la meta de $100 mil millones anuales comprometido para el 2020 por los países desarrollados en Copenhagen. 

A mi me parece un informe muy detallado y robusto.  Presenta las cifras mas confiables disponibles en cuanto a financiamiento climático.  

- Es un avance notable con respecto a estudios previos, dado que no "estima" un "apalancamiento" (leverage) de financiamiento privado, sino que calcula el co-financiamiento, proyecto por proyecto.

- el financiamiento multilateral es ajustado por la parte que se puede "atribuir" a los países desarrollados.

- se excluyen ciertas formas de financiamiento reportadas (por Japón y Australia) para plantas generadoras de carbón (!).  

- la parte considerada como Asistencia Oficial al Desarrollo (donaciones y prestamos concesionales) se estima en unos $20 mil millones.

En resumen, me parece un buen avance con respecto a estudios anteriores.

Innovative instruments for climate finance

By Soledad Aguilar (*), Luis Fierro (**) and Virginia Scardamaglia (***)

Funding to address climate change was one of the main topics of discussion at the recent COP20 in Lima, Peru. One focus of climate negotiations in recent months has been the capitalization of the Green Climate Fund (GCF), which during the COP reached an initial resource mobilization of US $10.2 billion; as well as the efforts to scale up climate finance in order to reach the goal of joint mobilization of $ 100 billion annually by 2020.

It is worth noting that, today, not only developed countries are mobilizing resources but some developing countries are doing so as well. Thus, three members of AILAC announced contributions to the Green Climate Fund: Colombia and Peru will contribute US $ 6 million each; and Panama will provide a million dollars. Other developing countries such as Mexico, Mongolia and South Korea also announced contributions to the GCF.

At the same time, these countries are also recipients of resources for climate change. All the members of the AILAC group, comprising Chile, Colombia, Costa Rica, Guatemala, Panama and Peru, receive funding for mitigation and adaptation. Funding comes mainly from traditional sources such as: multilateral and bilateral development banks, particularly the World Bank (WB), the Inter-American Development Bank (IDB), the Andean Development Corporation (CAF), and the European Investment Bank (EIB); bilateral development agencies; and specialized funds, such as the Global Environment Facility (GEF), the Climate Investment Funds (CIF), and the Adaptation Fund.

The AILAC countries also promote innovative and creative approaches to climate finance. In the current negotiations, members of AILAC are among a group of countries that has proposed that financial contributions should not be limited to the traditional group of donor countries, but others countries in a position to do so may also provide financial resources and other means implementation. Chile, for example, established various trust funds at the Inter-American Development Bank (IDB), and the UNASUR countries jointly provided financial assistance to Haiti after its devastating earthquake, along with material support.

Some of the newer instruments used to finance mitigation and adaptation by governments in the region include the carbon tax introduced by Chile, the first of its kind in the region. Several countries in the region, such as Colombia and Peru, have launched National Climate Funds. In the case of Colombia, the National Adaptation Fund (www.fondoadaptacion.gov.co) was created, which will complement the existing Calamity Fund, designed for emergency assistance in the event of a natural disaster; and in the case of Peru there is the Fund for the Promotion of Natural Protected Areas of Peru (www.profonanpe.org.pe).

Among the investments of funds from public sources, some interesting examples to highlight are the following:

• The European Union (EU) launched the Latin American Investment Facility (LAIF), which provides a grant as part of a financing package which includes hybrid loans, concessional loans, grants, guarantees, equity investments, risk mitigation, and technical assistance from European and Latin American public financial institutions.
• The implementation of a Program for Climate Change and Clean Energy, funded by the German Development Bank (KfW) and CAF for members of that institution in the region.
• The EU, Germany and Norway created the Global Fund for Energy Efficiency and Renewable Energy (GEEREF). Its aim is to anchor new private equity funds for renewable energy and energy efficiency.
• Debt for nature swaps, as was the case of a swap with the participation of Germany and Guatemala,
• CAF and KfW are launching a new Geothermal Development Fund for Latin America. The fund intends to mitigate risk for the development of geothermal energy in Chile, Colombia and Peru, among other countries.

Among the investments of private, or mixed, sources, we highlight the following:

• The Multilateral Investment Fund (MIF) created, along with other public and private institutions, the Eco-Business II biodiversity fund, which invests venture capital for the growth of sustainable ventures in unique business niches, such as organic agriculture, non-timber forest products, sustainable forestry and eco-tourism. The instruments used are quasi-equity, convertible notes and long-term debt, among others.  Several AILAC countries have participated in the operations of this Fund.
• Althelia Climate Fund backed carbon credits for Peru's Cordillera Azul National Park.
• In Peru, the International Finance Corporation (IFC) of the World Bank Group issued its first "Green Bond" denominated in Peruvian soles, with Rimac Seguros.
• Peruvian wind energy producer Energia Eolica SA (an indirect subsidiary of Contour Global) issued a $204 million green project bond with a coupon of 6% and 20 year tenor.
• Another interesting example, although without AILAC country participation, is the Caribbean Catastrophe Risk Insurance Facility, supported by the governments of Caribbean countries and administered by the World Bank, which has allowed the pooling of risks to address natural disasters in the region such as hurricanes. This is a mechanism that could be replicated in other regions that share similar climate risks.

As we have seen, there are many new and creative sources of funding for mitigation and adaptation to climate change in Latin America and the Caribbean, and the countries of AILAC in particular, although thus far with a majority participation of public funds.

In the case of private investment, the necessary measures to attract such resources require a more proactive role of the State (and sub-national entities), to adopt regulations that create the market conditions necessary to attract investment in sectors that are not commercially viable in the absence of specific legislation or regulations (concessions, approvals, incentives, etc.). For example, it is necessary to adopt specific regulations to promote the development of renewable energy; build large infrastructure to prevent flooding; or develop the market for indexed weather insurance.

National development banks play a key role in creating the type of financial instruments needed (such as political risk guarantees and concessional/hybrid lines of credit) to encourage investment by the private sector.

Once the business environment that enables private investment is established, a wide variety of instruments can be used to channel investments, including traditional bonds, equity investments and guarantees, as well as some newer instruments, such as green bonds, catastrophe or contingent bonds, securitization of resource flows for energy efficiency, the development of index insurance for climatic disasters, the development of carbon markets, and the aggregation of climate assets, all of which operate today in developed countries and have some incipient development in AILAC member countries.

(*) Soledad Aguilar, Lawyer (UBA), LLM (London School of Economics). Directs the Graduate Program on Law and Economics of Climate Change, FLACSO-Argentina. She currently leads a consultancy on Innovative Financial Mechanisms for AILAC.

(**) Luis Fierro, Climate Finance Adviser for AILAC. Economist (PUCE), M. A. (University of Oregon), M.Sc. and Ph.D. (c) (U. of Texas at Austin). Profile: www.linkedin.com/in/luisfierro. The opinions expressed do not necessarily reflect the position of the member countries of AILAC.

(***) Virginia Scardamaglia, Master in International Relations and Negotiations (FLACSO), research assistant at the Graduate Program on Law and Economics of Climate Change, FLACSO-Argentina. Works with Soledad Aguilar in a consultancy on Innovative Financial Mechanisms for AILAC.

Gearing up for the COP20 in Lima - Progress in Climate Finance

By Luis Fierro Carrión, Climate Finance Advisor for AILAC (*)

In recent months, there has been ​​significant progress on the issue of funding for mitigation and adaptation to climate change; but much remains to be done to cover the financing needs of developing countries, which exceed $ 500 billion per year.

Green Climate Fund

After Germany pledged to provide 750 million euro to the Green Climate Fund (GCF) during the Petersberg Dialogue in July 2014, during the Climate Summit of the United Nations held in September in New York, France announced a commitment of US$ 1 billion, and other countries also announced their pledges: South Korea ($ 100 million), Switzerland (at least $ 100 million), Sweden ($ 45 million), Denmark($ 70 million), Norway (at least $ 33 million in the first year), Mexico ($ 10 million), Luxembourg ($ 6.8 million), and the Czech Republic ($ 5.5 million).

In October, Sweden announced an increase in its pledge to the equivalent of US$560 million, which is thus far the most generous in terms of per capita contribution.

Of these announcements, we can highlight the cases of South Korea and Mexico, which although part of the OECD, are not part of "Annex 1" of the UN Framework Convention on Climate Change (UNFCCC) of "developed countries". Previously, Indonesia had also announcing a contribution of $ 250,000, and some other members of AILAC and the Pacific Alliance have also reported that they are considering making a contribution.

For his part, the Secretary of State of the United States, John Kerry, said that his country will announce its contribution during the Pledging Session for GCF Resource Mobilization, to be held on 19 and 20 November in Berlin. It is also expected that the United Kingdom, Japan, and other developed countries will announce their contributions in Berlin. The BRICS countries, although they announced that they will capitalize their "New Development Bank" at $ 50 billion, have not yet announced any contributions to GCF (see position of the BASIC group).

Meanwhile, the Board of the GCF has complied with the pre-requirements for the operation of the Fund, and held its 8th meeting in Barbados from 14 to 17 October, where, among other issues, governance, contribution policy, and operational programming issues were discussed (Decisions were reached on accreditation and other policies required for contributions to come in).  See a summary here.  Furthermore, the Directors for Norway and Peru were elected Co-Chairs of the Board.

Other announcements and commitments at the Climate Summit in New York

Apart from the GCF contribution announcements, during the Climate Summit held on September 23, 2014 in New York, other initiatives and commitments in the field of climate finance were presented:

• Peru announced a partnership with Norway and Germany to improve national forest management (with a contribution of $ 300 million from Norway)

• Chile announced a new carbon tax of $ US5 / tCO2, and that the country will generate 45% of its energy from renewable sources by 2025

•  The Multilateral Development Banks (which include 6 institutions, among them the World Bank and the IDB) announced that they awarded $ 23.8 billion in climate finance in 2013.

• The International Development Finance Club (IDFC), which brings together 20 regional and national development banks, including the CAF and KfW of Germany, announced that it provided $ 99 billion in "green finance" in 2013 This includes flows of $ 15 billion from institutions in OECD countries to developing countries.

• According to the Climate Bonds Initiative (Climate Bond Initiative) in 2014 it is expected that $ 45 billion in "green bonds" will be issued globally. With emissions of the European Investment Bank (EIB) for $ 1 billion and the German Development Bank (KfW) for $ 1.5 billion in October, the total has reached $ 32 billion to date. At the summit, it was announced that private banks expect to issue $ 30 billion this year.

• This is part of a broader "Climate Related Bonds", which includes some bonds that are not rated as 'green', but they are intended, for example, to finance renewable energy, public transportation and energy efficiency. These were estimated at $ 502 billion. A significant portion corresponds to national bonds issued to finance railways in China, so it is not clear if they would have been classified as "green bonds" (given that much of the power generation in China uses fossil fuels).

• The commitment of institutional investors to reduce their carbon investments by $ 100 billion by the end of 2015 and to measure and report the carbon footprint of at least $ 500 billion in investments.

• Insurance associations pledged to increase their green investments to $ 84 billion by December 2015 and reach $ 420 billion in climate investments by 2020;

• Three large pension funds in Europe and North America indicated that they will accelerate low-carbon investment to more than $ 31 billion by 2020.

• The German government said it would stop providing concessional financing for new power plants based on coal. Other countries (including the United States) had already announced that they will no longer provide concessional financing for high emission technologies, and have pressured the MDBs to also cease such financing.

• The European Union reiterated its intention to donate three billion euros to help developing countries reduce their emissions over the next seven years (2014-2020).

• Similarly, the United States government offered to provide to the World Bank $15 million to help fund a new pilot program to reduce methane emissions.

• The World Bank coordinated an initiative of 74 countries and over 1,000 companies in favor of "putting a price on carbon", i.e. establishing a tax or a market system for exchange of emission rights.

Some summaries of the results of the Summit can be viewed at the following links: http://goo.gl/ejuviH, http://goo.gl/WsxluV, http://goo.gl/CmPVH7, and http://goo.gl/zHxVBR.

Standing Committee on Finance of the UNFCCC

From 1 to 3 October in Bonn, the Eighth Session of the Standing Committee on Finance (SCF) met, to review a number of documents to be presented to COP20 in Lima (more info here). These included the first report of "Biennial Assessment and Review of Climate Finance Flows" (BA), in which the total climate finance flows derived from various sources are estimated.

According to preliminary figures published in the draft Summary and Recommendations on the UNFCCC website , these flows are estimated as follows:

• Annual flows from developed countries to developing countries through public institutions (bilateral, multilateral funds, multilateral, regional and national development banks) are estimated between $ 35 and $ 50 billion. This includes amounts previously mentioned for the multilateral, regional and national development banks.

• Additionally, it is estimated that private flows from developed countries to developing countries reach between $ 25 and $ 125 billion per year (the uncertainty in the range is due to different sources and methodologies used). The "green bonds" used to finance projects in developing countries would be included here.

Progress was made ​​toward identifying elements for a definition of climate finance, with this base definition:

"Climate finance is finance that aims to reduce emissions and enhance sinks of greenhouse gases, and that aims to reduce vulnerability of, and to [maintain/] enhance the resilience of human and ecological systems to, climate change impacts."

Progress was also made ​​in defining the work program for "measurement, reporting and verification" (MRV) of the financial support provided by developed countries to developing countries. This will be critically important to determine whether the goal of "mobilizing $ 100 billion a year" by 2020 of climate finance will be achieved; and, within this total, what amount of private resources were directly mobilized or leveraged by public resources.

According to the GCF, it is estimated that to achieve the goal of keeping global warming to below two degrees C above the pre-industrial level, this will require that developing countries receive annual funding for mitigation of at least $ 350 billion; while that for adaptation, the World Bank has identified requirements of at least $ 70-100 billion a year. Given the magnitude of resources required, a greater commitment by developed countries (and others in the ability to do so) to provide public resources is necessary; but it is also necessary to boost the channeling of private resources. 

Large institutional investors (pension funds, insurance companies, sovereign wealth funds, etc.) manage resources for $ 83 trillion. Therefore, if they devoted at least 1% of those resources to climate finance, this would come close to the required number (considering that this is a stock, not an annual flow).

Lima Climate Finance Week (LCFW)

From August 26 to 28, the Lima Climate Finance Week took place, as well as the Informal Dialogue on Finance (some presentations are available here ). The Presidency of COP20, the Government of Peru, identified as key issues for the Ministerial High Level Dialogue of Lima (to take place during the second week of COP20) the transparency and enabling environment of climate finance. These issues, among others, were discussed during the week and the Informal Dialogue.

The week opened with high-level speeches by ex-President of Mexico, Felipe Calderón, and the Ministers of Economy and Finance (Luis Miguel Castilla), and Environment (Manuel Pulgar-Vidal) of Peru. Minister Castilla said that the countries of the Pacific Alliance (Colombia, Chile, Mexico, and Peru) are exploring making a contribution to the GCF. Calderon said that the economy cannot develop without protecting the environment. He said there are rising costs of natural disasters associated with climate change. He called for the removal of subsidies to fossil fuels and to establish a carbon price. He stressed that in the coming decades, the world must invest $ 90 trillion in infrastructure, so it is preferable to develop new low carbon technologies.

Abyd Karmali, Director of Climate Finance for Bank of America & Merrill Lynch, said there is the capital required to finance mitigation and adaptation, mobilizing additional $ 120 billion per year. However, this requires dealing with the risks and other impediments:improving policies and regulations, reducing costs, and aggregating projects to achieve liquidity. He cited as examples the Green Bonds, structured finance to reduce risk, insurance mechanisms, and aggregation structures for small-scale opportunities.

David Wilk, from the IDB, said that currently 25% of IDB operations are related to climate change (CC), renewable energy and the environment, with a volume of approvals between USD $ 1,200 and USD $ 2,100 million a year. The Bank manages two grant funds for Sustainable Energy and Climate Change (SECCI). Loans have been approved to support the reform of environmental policies in several countries, including Colombia, Guatemala and Peru.

Several speakers highlighted the importance of creating an atmosphere or environment conducive to receiving resources (investment, concessional loans, grants). This includes:

• development of climate change strategies and  policies;
• clear and stable regulatory policies;
• incentives and risk reduction for a proper relationship between risk and return;
• development of institutions capable of handling resources (e,g, through accreditation of national implementing entities for multilateral funds);
• development of a list of "bankable" programs and projects, i.e. able to receive external funding.
• establish policies and procedures in domestic financial institutions (policies for environmental and social safeguards, audit, risk management, transparency, monitoring and evaluation of operations, etc.).

Mohamed Nasr, from Egypt, said that finance is a key to advance to the 2015 Climate Agreement.  He said that clarity is needed about the scaling-up and the trajectory required to reach $ 100 billion in annual climate finance agreed for 2020 -as well as with respect to the initial capitalization of the GCF. He said there has been a long process of negotiation in terms of "Long-Term Financing" (LTF), and what is required is to have predictable, adequate and accessible financial resources. He added that Finance must be one of the elements anchored in the 2015 Agreement, which is required to advance in the transformation of production and energy.

In the closing session, the Vice-Minister of Environment of Peru, Gabriel Quijandría stressed that public resources are required to create the enabling environment for private investment. He noted that the Summit of the Secretary General of the United Nations and the COP20 will be opportunities to signal that climate finance will increase. He said GCF capitalization should continue. He stated that developing countries have to deal with many challenges, to which climate change is added. Adjustments are needed to ensure economic, environmental sustainability, and to deliver social benefits.The long-term horizon requires funding, and efforts to generate bankable projects. He concluded that a transition is needed towards a low carbon and resilient economy.

Summaries of the Week have been prepared by IISD and Thomas Kerr from IFC.

Conclusion

There has been progress in the provision of financial resources to developing countries, to carry out activities to mitigate and adapt to climate change. About $ 50 billion a year are being mobilized through public, bilateral, multilateral and development banks sources. A similar figure is being provided through private resources, which could increase if several of the initiatives announced at the summit come to fruition. However, there is still a gap to achieve the financing required by developing countries to achieve the objectives of mitigation and adaptation, which goes far beyond the $ 100 billion per year committed in Copenhagen and Cancun, and exceeds $ 500 billion per year. 

(*) The views expressed in this article are the author's and do not compromise the AILAC Group or any of the countries that are part of the group. Originally published in Spanish at: http://climatefinance.info/profiles/blogs/avances-en-el-financiamiento-climatico-2014