WASHINGTON (Reuters) – The Inter-American Development Bank (IDB) on Thursday unveiled what it called the first-ever financial instrument to address liability concerns that have slowed the sales of COVID-19 vaccines to developing countries and emerging market economies.
IDB President Mauricio Claver-Carone said the regional development bank created the new “financial backstop” after concerns voiced by many of its 26 borrowing members, including Argentina, Peru and Brazil.
He told reporters the IDB was the first international financial institution to offer such partial credit guarantees for vaccine contracts, addressing companies’ indemnification demands and removing a hurdle in pandemic response efforts.
Latin America accounts for 8% of the world’s population, but it has reported 27% of global COVID-19 deaths, he said.
“Essentially, it’s a financial instrument that will provide guarantees for contingencies and liabilities, either with the countries or the pharmaceuticals,” he said.
“This would help both the countries and the vaccine makers resolve the indemnity obligations – and therefore remove that key obstacle to the vaccine contract negotiations,” he said. “Hopefully this will help with the bilateral negotiations.”
Claver-Carone conceded the instrument was not “a silver bullet” and said the IDB, Latin America’s main development lender, would continue work with borrowing countries on other vaccine issues, as well as helping them set up regulatory frameworks.
Argentina and other countries in Latin America have raised concerns about what Claver-Carone called “more and more onerous” contractual demands made by pharmaceutical companies in their negotiations for the sale of COVID-19 vaccines.
“It could very well be a game-changer,” he said, referring to the bank’s decision to offer partial credit guarantees. “We really think that this can break … the most significant bottleneck that exists for their negotiations.”
He said the bank had been working closely with Argentina, El Salvador, Belize, the Bahamas, Panama, Ecuador, Trinidad and Tobago, and the Dominican Republic on vaccine concerns since announcing $1 billion in additional funding for the purchase and distribution of COVID-19 vaccines in December.
Claver-Carone, who became the bank’s first U.S. president in October, also welcomed legislation introduced by U.S. senators that would boost the bank’s capitalization to $20 billion from $12 billion.
Joseph Stiglitz, a Nobel laureate and professor at Columbia University, dismissed the liability issue as “a red herring,” saying that most countries had taken on the liability issues.
Claver-Carone pushed back against that characterization, saying the issue featured in his bilateral talks with all 26 borrowing members in recent weeks.
He said the new instrument could ensure repayments over decades if the credit guarantees were triggered, and the IDB could also use some of the $1 billion it had set aside for the vaccine drive.
Reporting by Andrea Shalal; Editing by Paul Simao