LENDERS ARE entitled, as a matter of principle, to a veto over the way a borrower uses their money. The Inter-American Development Bank wants to double its lending to Latin American countries. But the U.S. Treasury, which would be the leading contributor of the new capital, wants more control over the uses to which the money is put. Negotiations between the Treasury and the IADB have deadlocked, and there's a widespread impression that nothing will be resolved until the next American president takes office.
Those are the circumstances under which the IADB has, wisely, chosen Enrique V. Iglesias to be its next president. Currently the foreign minister of Uruguay, Mr. Iglesias is an economist and diplomat of great skill and experience. It will be his job to find the means of reassuring the United States without enraging the borrowers and damaging the institution.
The IADB -- unlike the World Bank or the International Monetary Fund -- gives control of policy to the borrowing countries. It was set up that way deliberately, as an American gesture of support for Latin development. But over the years the lending processes became less than rigorous, as lenders hesitated to criticize each other. The Reagan administration, and notably James Baker, the secretary of the Treasury, have wanted to use this kind of lending actively to provide incentives for reform in Latin economies. That's why the Treasury has been demanding a vote in the IADB large enough so that, with the support of any other lender, it can block a loan. The borrowers have refused to relinquish their present control, and in response the United States declines to expand the bank's lending power.
Mr. Iglesias was for 13 years the head of the United Nations' Economic Commission for Latin America and the Caribbean. There he did a good deal to persuade Latin governments to move away from the tradition of inward-looking, highly protected economies and, in the interest of fast growth, to open their doors wider to world trade. Since that is the direction in which the Treasury wants to see these economies evolve, Mr. Iglesias is not likely to find himself in conflict with it over basic purposes. The trick is to find a formula that will bring American support for expansion without alienating two-thirds of the bank's members. If he can do that, he will have done a great service to borrowers and lenders alike.