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Michael Fairbanks

Michael Fairbanks

A member of the President's Advisory Committee in Rwanda, Michael Fairbanks is co-founder of The SEVEN Fund, a philanthropic foundation run by entrepreneurs. His most recent book is In the River They Swim: Essays from Around the World on Enterprise Solutions to Poverty.

Luis Alberto Moreno: Business solutions to poverty

Luis Alberto Moreno, the president of the Inter-American Development Bank (IDB), said only a week ago, "It is Latin America's time to shine."

Moreno's perspective is worth taking seriously, since he is the most influential development banker in the Western Hemisphere. Trained in media and management sciences, Moreno has held positions in the Colombian cabinet and as Ambassador to the United States. These were grueling apprenticeships that prepared him to be president of the IDB in Washington. It is time to evaluate his vision and review his accomplishments as he prepares for possible re-election to a second five-year term on July 6th.

Luis Alberto Moreno
Moreno became, after a stint as a Niemen Fellow at Harvard, Minister of Development of Colombia during the reign of terror of Pablo Escobar. As Colombia entered "the apertura," he focused on the difficult transition from a strategy of import substitution to fostering an open trade environment. President Cesar Gaviria asked him to lead the effort to learn and understand the strategic issues facing the private sector.

I first came to work for Moreno when he introduced the concept of competitiveness to Colombian firms, created a broad consultative process between the public and private sectors, and made an agenda for legislative reform, which included privatization.

Moreno reasoned that Colombian firms were not succeeding beyond domestic markets, and only an in-depth understanding of their challenges would allow the government to play a meaningful role in building competitiveness. As Moreno improved the understanding of the strategy issues, he communicated the insights broadly to the public and the government: Colombia's leather producers were getting squeezed because they didn't have the design capability of Italy, or the cost advantages of China. Flower exporters were losing the advantages of labor costs to Ecuador, and the middlemen-wholesalers in Miami kept all the good customer information. Colombia had no advantages of scale in petrochemicals, and rival nations were subsidizing the cost of feedstock.

Tourism, despite amazing natural advantages of location, sunshine and beauty, was beset by problems of security. Textile producers created a broad scope of products for a protected environment, and didn't invest in the world-class machinery required for small batches and fast turnarounds to more demanding international customers.

The list was long, but one by one, Moreno took on these issues, with investments in skills, regulatory reform, and improved access to capital. To this day, most of these sectors remain among the most important parts of the Colombian economy.

Through this experience, Moreno realized that strategy for creating prosperity for all citizens of any nation had to include the private sector. "Enterprise solutions to poverty" was a paradigm shift. Until then, most other decision makers in Latin America believed that government officials should set competitive strategy. Moreno was one of the first leaders in the world to observe that it wasn't working. Poverty rates were increasing. Traditional positive values were under assault. Social cohesion, itself, was threatened.

Next, he became Colombian Ambassador to the United States and an architect of the multi-billion dollar relationship between Colombia and the United States called Plan Colombia. He did this by uniting the interests of hundreds of American congresspersons with the needs of his country. His goal was to learn about each political leader's goals for his district, and to inform her about Colombia's needs and why they mattered to his constituents.

Colombia is now the third-largest recipient of American "investment in peace," and has a system of trade agreements that offers unique incentives for the private sector to grow. Colombia has strong leadership, an emerging peace dividend, and has managed to avoid many of the economic pitfalls of other nations in the region.

As President of the Inter-American Development Bank in Washington with assets of $84 billion, Moreno shepherded a $4.4 billion debt relief operation for the Bank's poorest member countries, and a 55 percent increase in 2009 disbursements to almost $12 billion.

Moreno embodies one of the tenets of leadership. Great leaders need good followers and good followers don't want pithy maxims; they want to know that leaders are willing to change, too. He says, "During this time of global competition for resources, a time characterized by technology disruption, a widening gap between the rich and poor, and increased private flows of investments, we in the leadership of nations and in the multi-lateral system can no longer dictate changes upon the world. We can no longer preach the merits of change without being willing to change ourselves."

The bank's operational efficiency has always been worse than its peers. So in 2007, Moreno implemented a major restructuring of the IDB, making the institution more agile and attuned to the needs of new clients beyond the traditional core of government agencies. He reorganized senior management, brought in more people from the outside, and made all hires subject to competitive processes. The Bank now has a more robust anti-corruption framework, new and more specific ways to measure the effectiveness of its work, and mechanisms to reach out to civil society.

This approach has, of course, created some hardships. Some people who thought they had jobs for life didn't. Others resented having to compete with outsiders for positions that they believed should rightly be given to them. Moreno can also be demanding. A senior manager joked, "If President Moreno wants an elephant in his office in 15 minutes, you better have one in his office in 10; and if he doesn't like that one, you better have another elephant waiting in the hallway!"

But he does seem to get the best out of his colleagues: Moreno maintained the IDB's Triple-A rating, and helped make more funding available to member countries. This enabled the regions to weather the storm caused by the global financial downturn better that most of the industrial states.

Moreno has launched a number of specific initiatives for sustainable climate change, water, and opportunities for the majority. I worked with him on the latter program, which is designed to inspire private initiatives to meet public challenges in housing, energy, education, and finance.

I watched him develop the idea, build a team, and shape the discussion with the executive board and senior management. As is often the case, there were legacy systems, different values, and competing interests within the bank. Moreno uses moral purpose, new insights, clear incentives and an encyclopedic knowledge of everything else that has been attempted to persuade people to try new things.

He says, "I reasoned, based on my experiences with the private sector and watching the beginning of the open trade movement, that the private sector was still not recognized by the development community for its potential to eradicate poverty, indeed, as a source of wealth creation for the poor."

The program is on track to invest $250 million by year-end, which is small by bank standards, but holds the promise of an important new approach to human development.

Moreno has more than doubled the annual grants available for Haiti since the earthquake. He has promoted a successful debt forgiveness initiative, visited Haiti four times to see the needs for himself and worked closely with the government and the international community on an ambitious $2 billion education initiative to provide tuition-free schooling for all Haitian schoolchildren. No less than President Bill Clinton has said, "I think that he has been unbelievably visionary."

I asked him once if he plans to write a book about his experiences in poor countries on leadership in ambiguous situations. He said to me, curtly, "You write it." Moreno is too busy, too intuitive, and too interested in outcomes.

Moreno has been criticized by some for the IDB's nearly $2 billion in portfolio losses at the height of the global crisis. A closer look shows this criticism was taken out of context. The losses were mostly never realized, and the bank has recouped much of these investments. Moreno used the experience to strengthen the bank's risk management and investment policies. The episode never affected its ability to serve the region, and the end result has been a stronger bank.

Moreno successfully negotiated the bank's largest capital increase in its history. This will ensure that countries have the resources they need to take on challenges like fighting poverty and inequality, improving competitiveness, and embarking on a path of sustainable development. The capital increase, against the backdrop of scarce funds from donor nations, represents a tremendous vote of confidence in the Bank's work from the U.S. and the IDB's 47 other member nations.

Praise is coming from different latitudes: The Canadian foreign affairs minister Lawrence Cannon says, "Under Mr. Moreno's leadership, the Bank has helped regional member countries emerge from economic crisis and rebuild from natural disaster." And, Ernesto Cordero, the finance minister of Mexico, says, "Mexico values how President Moreno has run (the IDB)."

Moreno sums it up, "I began to see patterns in my ability to create change: optimism, seeing failure as something not to fear, but from which to learn. Simon Bolivar said, 'Good judgment comes from experience, and experience comes from poor judgment.' I also believe in an action-orientation, a willingness to learn new things, building strong teams on which I can rely, and building new coalitions of, sometimes, unlikely partners."

If President Clinton is right about Luis Alberto Moreno, then "Latin America's time to shine" might be more than a pithy maxim.

By Michael Fairbanks

 |  June 4, 2010; 6:36 AM ET
Category:  Leadership personalities Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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