Trust funds channel $200 million in grants for anti-poverty programs, support for small business, and technological innovation
South Korea, which is hosting the Korea-LAC Business Forum on Oct. 20–21, is a fast-growing trade and investment partner for the 26 countries located in Latin America and the Caribbean (LAC). Its relationship with the region goes far beyond commerce, however: Korea is the second-largest Asian contributor of overseas development assistance to LAC after Japan.
Korea is an active and involved partner of the Inter-American Development Bank in a diverse range of economic development projects throughout the region. Korea joined the Bank in March 2005, simultaneously becoming a member of the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF), part of the IDB Group.
Upon joining, Korea contributed to the Bank’s ordinary capital and committed $200 million to trust funds administered by the IDB Group in close cooperation with Korean experts. The trust funds are for grants, not loans, and help pay for a wide variety of projects ranging from poverty reduction and support of small businesses to knowledge transfer in science and technology.
For example, a project completed in Ecuador in 2010 created a National System of Symphony Orchestras in the style of Venezuela’s youth choirs and orchestras. The operation received a grant from the Korea Poverty Reduction Fund (KPR), which financed the establishment of an academy with a network of provincial community centers. Musical instruments were provided and Ecuadorian teachers received training from their Venezuelan colleagues. The program was implemented as part of the fund’s social investment component, designed to offer underprivileged youth extracurricular activities that will help them develop into well-rounded adults.
The KPR Fund focuses on poverty reduction and social development, targeting the most vulnerable populations of Latin America and the Caribbean. In 2010, 21 percent of the fund’s resources went to Haiti alone. One grant helped build 100 emergency shelters for people left homeless by the January 2010 earthquake in Haiti. Fifty more shelters are expected to be built before year’s end.
Since its inception, KPR has supported 57 projects, with a total volume of $16.4 million in approved funding.
Harnessing Korea’s expertise in education and technology, the Knowledge Partnership Korea Fund for Technology and Innovation (KPK) aims to narrow the digital divide by transferring know-how from the Asian country to Latin America and the Caribbean.
KPK grants have been used to promote mobile banking in the region, making financial services available via mobile phones. A digital platform designed as part of one project took advantage of high cell phone penetration rates to improve access to financial services for poorer populations and bring down the cost for offshore laborers who send remittances to family members back home.
Between 2006 and 2010, $18.9 million were approved for a total of 62 KPK projects.
Korea and the Inter-American Investment Corporation (IIC) have also jointly established the Korea-IIC SME Development Trust Fund, which provides funding for a diagnostic tool designed to help small and medium-sized enterprises (SMEs) become more competitive. The FINPYME Diagnostics program features a methodology for the review of a company’s strengths and weaknesses with the goal of making it more competitive and providing it with a roadmap for its improvement.
With the help of the fund, Productos Ujarrás, a Costa Rican jelly and jam producer, was able to optimize its production lines and increase production capacity and speed. The company redesigned its plant based on the data provided by FINPYME, experienced a 31 percent sales increase within a year, and now is exporting to the United States and to several countries in Central America and the Caribbean.
FINPYME Diagnostics, which is carried out in conjunction with local universities and business associations throughout the region, began in 2007 in Costa Rica, Guatemala, the Dominican Republic, El Salvador, Honduras, Nicaragua, and Panama. In 2009, the program was expanded to The Bahamas, Barbados, Belize, Jamaica, Trinidad and Tobago, and Colombia.
Korea-IDB cooperation also includes the country’s $60 million contribution to the Multilateral Investment Fund (MIF). Parts of the resources have been used to analyze how Korean best practices and lessons learned in private sector development can be successfully transferred to Latin American and Caribbean economies. This has also allowed MIF to establish strategic alliances with key Korean partners, such as the Korea Small Business Institute and the Export-Import Bank of Korea (KEXIM).
Korea’s contribution to the IDB Group is enhanced through the participation of Korean experts and consultants who have collaborated in a wide array of technical cooperation programs. Their involvement has played a critical role in transferring knowledge, providing guidance and ensuring high operational standards in development projects.