PLANETA FEATURE

Inter-American Development Bank
Sustainable Tourism Policies & Directions
Interview conducted by Megan Epler Wood

BANK WATCH FORUM

Interview with: Asunción Aguilá, Chief of the Environment and Natural Resources Division; Antonio Vives, Deputy Manager for Private Enterprise and Financial Markets in the Sustainable Development Department and Carmen Altes, Tourism Consultant in the Environment and Natural Resources Division

What is the relative importance of tourism to the economies of the countries found in the IDB region, in general terms? How does it compare with forestry and agriculture for example, and how is this changing?

The situation varies by country. In general terms, in the Caribbean, especially in small islands, the weight of tourism to the GDP is greater than in Central and South America, as well as the contribution of tourism to exports. In the case of larger countries, with a more diversified economy, the contribution of tourism to the GDP is usually lower (some leading sectors are manufacturing, agriculture, oil). But tourism can still have a significant contribution in terms of exports in most cases. Tourism has a clear role in the generation of foreign exchange as can be seen in the table below.

Tourism is certainly increasing. In the last 10 years, international tourist arrivals in LAC grew from 28 million in 1995 to 40 million in 2004 (Caribbean: 18 million, Central America 6 million and South America 16 million), excluding Mexico that receives 18 million of international tourists and it is the 8th destination in the world ranking. 9/11 had some impact, but the situation is recovering. The region has been able to maintain a market share around 5% in the international market since the 90s.

Does IDB envision that sustainable tourism will be a growing part of its portfolio of loans and grants? What is the level of demand from governments in your region?

It has been going up and down in the last few years. It depends on the priorities of governments. Certainly in some countries demand for tourism projects is picking up, for example, Brazil and Argentina, and all the Central American countries.

What countries are presently working with IDB on sustainable tourism?

There are 7 loans presently being executed for a total of $320 million:

Argentina
Belize
Brazil
Bolivia
Chile
Dominican Republic
Panama

There are 10 new loans under preparation for $450 million:

Argentina
Belize
Brazil
Dominican Republic
Central American countries

How are tourism projects identified for support?

The Bank undertakes a country strategy paper with each country as part of its programming activity, and when a new government comes in. There are annual reviews with government. There are internal papers on specific sectors worth supporting from the point of view of the Bank. There are many assessments, and new ideas come up and during each new programming exercise. In the end, the sectors supported must reflect the agreements that are made with each government.

Although the Bank might think that tourism is important because of its contribution to development (employment, balance of payments, etc), if the country does not give priority to tourism projects the Bank can not support them.

There was no activity in tourism for many years until the mid-1990s. Since the mid-1990s, there has been much more activity because countries are interested in developing specific niches like ecotourism as a way to support conservation and increase foreign exchange.

In any case, a Project enters the pipeline when the Bank receives a formal request from the Government. This is the starting point for the project preparation process. The specific areas of activity and investments are assessed and decided during that process.

Does IDB have a sustainable tourism policy? Can we have a copy? If not, will there be a policy in future? If so, what would the process be for updating it?

There has been a policy since 1994. It is available on the IADB website, and as it is can not be considered a sustainable tourism policy. Although it has not been updated, the activities of the Bank in the sector have evolved incorporating sustainable tourism development principles: project preparation based on participatory processes, basic and transport infrastructure for tourism development purposes that also contributes to improving the living conditions of the local population, training of local people, improving visitor facilities and protection of cultural and natural heritage that are tourism attractions, institutional strengthening including the improvement of the capacity of municipalities to manage tourism, and support the competitiveness of local tourism SMEs.

In the meantime, a host of other Bank policies apply to the tourism sector, such as the environment and safeguards policy and indigenous peoples policy. All considered, sustainability is in the forefront.
There is a backlog of updating policies. The tourism policy would not be updated before 2007.

There were a very large set of policies done in early 80s and 90s, and all of them need to be updated. IADB can only update about 3 per year. But due to all of the other policies in place, it is not a big void.

Does IDB see the need of additional internal expertise at headquarters or country offices to facilitate and review sustainable tourism loan and grant proposals/applications?

Based on the present demand from governments, it does not appear that more expertise is needed at IADB. If there is additional demand, the Bank will provide additional support. We try to get flexible staff, and individuals seconded in order to cover specific needs.

Have there been strategic assessments of the sector and how it operates in the entire region to guide decision making on a macro-economic and regional level? Are any of these documents available by link?

The Bank holds discussions by countries including all sectors as the basis for the preparation of the country strategy papers. Therefore assessment is made at country level, and for specific projects.

Are there benchmarking or monitoring systems for tourism loan project assessment that look at sustainable indicators including social, environmental and economic development perspectives? Is this available for our readers? How is it assured that monitoring is independent?

Each project has a monitoring system based on economic, social and environmental indicators that are included in a logical framework. The preparation of the logical framework is mandatory and is part of the project preparation process. Once a project is approved, the Project Document, including information about the environmental and social aspects, is made available to the public through the website of the Bank under Public Information Center/Projects (including the Logical Framework)

See for data base and search function: http://www.iadb.org/exr/pic/index.cfm?language=english

The control of environmental quality of project activities and the implementation of mitigation measures, conceived to minimize negative impacts, are usually monitored through independent parties (the environment authority or consultants) as part of the project management scheme. These arrangements are also defined during the preparation of each project.

However, the idea of independent monitoring is relatively new. Not all projects have this yet, it is just starting. In the case of a tourism project in Brazil, the participation of civil society is financed to monitor project activity. This has not happened in all cases. More and more civil society is participating, although not necessarily financed by IADB. It is now in flux. A panel recently advised on this. We are now in the process of reviewing how to do independent monitoring. The major stumbling block is how to pay for it.

How does IDB view the role of SMEs in the development of tourism in the region relative to other important players? Are they primary or secondary players in the process of sustainable tourism economic development? What input have tourism SMEs traditionally been given in the formulation of IDB tourism loans and grants? Implementation?

The Bank is aware of how important SMEs are for economic development, and that one of the reasons why tourism is considered a development sector, is its capacity to offer business opportunities for small local entrepreneurs. For that reason, since the 90s, more importance is given to SMEs in tourism projects.

Many loan operations include activities targeting tourism SMEs (training, technical assistance, investment promotion, etc). By proportion, direct support for SMEs is low compared to total loan due to the fact that borrowers are governments and to the importance of investments in infrastructure.

However, The Bank also finances some smaller projects targeting tourism SMEs, for example $500K for micro entrepreneurs to build guest houses along certain corridors in the Dominican Republic. In Nicaragua, the Bank approved a project to certify SMEs to provide services to tourism. A new project is being prepared to help SMEs in Belize to serve cruise ship passengers (this is a MIF operation).

In any case, the private sector always participates in the project preparation process through consultation.

The MIF specially targets the private sector. It was designed as a new type of technical assistance mechanism to stimulate innovation The central goal is to use both grants and investments to demonstrate new ways to develop micro and small enterprise, build worker skills, strengthen environmental management and improve the functioning of financial and other markets.

In August 2000, a joint Donors-Management Working Group on MIF Strategy recommended that MIF focus on four core areas of activity: Small Business Development; Microenterprise; Market Functioning and Financial Sector Reform. They also introduced Project Clusters, a new concept whereby projects are identified, developed, implemented and evaluated as a group. Clusters in implementation include among other: Quality and Environmental Management; Clean Production Standards for SMEs; and Sustainable Tourism. The information about the MIF activities can be found in the website of the Bank: http://www.iadb.org/mif/v2/index.html

What is the role of indigenous people in the development of ecotourism in the region? How have they been involved in project formulation? Implementation?

Indigenous people are viewed as stakeholders as they may be affected by investments in tourism in a negative or positive manner, and are invited to participate in the consultation process.

Project preparation includes the assessment of how the project impacts those communities, their cultures and lifestyles. All projects have to pass the Committee on Environmental and Social Impacts (CESI) committee to ensure that the consultation process has taken into consideration the interests of the local populations and especially the indigenous people, and that the project has been formulated in a way allowing to maximize the positive impacts and minimize the negative ones.

In some cases, tourism projects include specific activities to allow indigenous communities to benefit from tourism by developing tourism services based on their traditions and culture. For example, in Bolivia, there is a tourism project that provides 90% of funding for projects aiming at improving the conditions of local communities to receive tourism (small infrastructures).

The Bank seeks to increase the participation of indigenous people and is about to approve a new policy for indigenous populations.

Has IADB considered creating a division or sub-division that takes responsibility for sustainable tourism similar to the sustainable development department? Has there been consideration of creating a web presence that includes policy items, project announcements, and existing project links?

No, a division or unit is not being considered. The Bank prefers to see integrated activities by countries, in many cases tourism is only a component of a broader project. When there is a need for specialized know how, the divisions hire consultants. There is one full time specialist within the Bank and others are hired as needed.

For a sustainable tourism web presence, there has been no consideration yet, but it is a good suggestion. However, with only 2-3 loans per year, the size of sector within the Bank is not that big yet. Although it is growing, it does not have the critical mass for many of the items noted. It is a question of economy of scale. None of the regions justifies this individually and with a three region structure, this makes it even more difficult. The sustainable development department supplies some of the services needed.

What is the role of MIF in sustainable tourism?

The role of MIF is to support SMEs. The MIF has supported several projects in tourism such as certification of professional skills and certification of sustainable tourism. A tourism cluster has been recently approved (of about 10 projects) to create networks of tourism SMEs to improve the competitiveness of the individual companies and gain market access. Michael Woscoboinick at MIF is in charge of the cluster. The new cluster has already approved projects in Peru and the Andean region, and in Suriname. There are projects in preparation for Brazil, Belize and in the Dominican Republic.

Does the Bank coordinate with MIF on the question of sustainable tourism project assessment or design?

Yes, the IADB often does the project assessment and design, but they also hire consultants. In any case, project preparation is based on MIF priorities. The MIF has a different membership than the Bank and it has its own donor committee.

What does the IDB think will be the most effective actions it can take to advance the development of sustainable tourism in the region? Mechanisms to achieve this?
There has to be dialogue with the tourism administration at national and local level (state and province).

Investments must be part of integrated approaches based on tourism plans to ensure that all destination planning and management issues as well as impacts are being properly addressed.

Strengthening the capacity of the public administration to plan, manage and monitor tourism development (organization, legislation, statistics, land planning). It is important to improve municipal oversight.

Apply lessons learned from other projects and best practices at international level. Teams are required to look at lessons learned from this sector and from other countries. For example, if a project loan request comes without adequate effort to measure infrastructure needs, if there are no zoning plans, no provision for supply of water, no concern for solid waste, and no concern for increase of traffic; the project will be modified. The project is adjusted looking at recommendations from similar situations in other countries.

AUTHOR

Megan Epler Wood, the founder and former president of The International Ecotourism Society (TIES), has specialized in donor policies and how they affect and influence ecotourism business for over 10 years. She writes and edits the EplerWood Reports which also features this interview.

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