According to modernization theory, rapid, Western-style economic development in the world's poorer nations was a prerequisite for stable (and pro-American) democracy in those countries. Constrained in the early and mid-1950s by congressional efforts to curtail U.S. economic assistance and by the predominant attitude that private-sector foreign capital should drive development in the developing world, the Eisenhower administration provided little in the way of direct aid to developing nations. By the late 1950s, however, realizing that the private sector could not provide adequate developmental resources, U.S. officials stepped up their efforts to extract from Congress more funds for foreign aid.
A committee of the Inter-American Economic and Social Council created the Inter-American Development Bank (IADB, now the IDB) on 30 December 1959 in part because U.S. leaders wanted to form a development bank for the Middle East, and they knew that Latin American nations would be upset if they did not get their own bank. The IADB could only dispense multilateral, not bilateral, aid, thus avoiding the accusation by recipient nations that the United States would use its economic power to dictate internal policy. Washington's other motivating factor for establishing the bank was concern that rising, antiyanqui nationalist movements would exploit deteriorating economic conditions, leading to the destabilization of the region and potential communist-inspired uprisings.
In addition, three specific events caused U.S. officials to assent to setting up the bank. First, the hostile reception given Vice President Richard M. Nixon during a 1958 visit to Latin America raised fears of growing anti-Americanism in the region. Second, Brazilian President Juscelino Kubitschek's proposed Operation pan america, a multilateral lending agency, crystalized Latin American requests for a multilateral lending institution into a specific proposal. Finally, Fidel Castro's dramatic takeover of Cuba on 1 January 1959 led many U.S. policymakers to believe that leftist revolutionary movements could very well spill over into other nations in the hemisphere.
Housed in Washington, D.C., the IADB proved useful to the United States because it had to put up only 45 percent of the initial $1 billion in funds; the IADB was a multilateral enterprise. Since the U.S. contribution was the largest, however, it did maintain a controlling interest in the IADB. Over time, the United States exerted less influence over the IADB, and it became a more truly multilateral institution. It continues to be an important source of funds for infrastructure projects and economic development.
James F. Siekmeier
Kaufman, Burton I. Trade and Aid: Eisenhower's Foreign Economic Policy, 1953–1961. Baltimore: Johns Hopkins University Press, 1982.; Lafeber, Walter. Inevitable Revolutions: The United States in Central America. New York: Norton, 1993.; Siekmeier, James F. Aid, Nationalism, and Inter-American Relations: Guatemala, Bolivia, and the United States, 1945–1961. Lewiston, NY: Edwin Mellen, 1999.