CAF announces creation of Fund for Human Development

(Caracas, April 5, 1995).-- CAF President & CEO Enrique García today announced in Israel the setting up of the Fund for Human Development (FONDESHU), whose objective is to finance preparation and execution of projects which promote sustainable human development among the socioeconomically marginal sectors of CAF member countries.

The news, which was announced at the IDB Governors Annual Meeting, was welcomed as an innovative and unique mechanism in the Andean Group, as well as an urgent need because the existence of poverty in the region holds back generation of sustainable development in the long term.

García said the institution he heads was working hard to harmonize economic growth with social development and protection of natural resources. Eliminating poverty "is an arduous, complex task and the responsibility of society as a whole, so it is essential to have a high degree of national consensus and the participation of all the agents involved." Lastly, he said that the state institutions executing social policy had to adopt efficient and competitive procedures, and eliminate the vices of state paternalism.

The Fund will be initially formed by a US$10 million contribution from CAF’s 1994 net earnings and will be increased to US$50 million within four years. The idea is that the Fund will become a catalytic element for attracting funds from a variety of sources, especially multilateral finance organizations.

In general, the FONDESHU funds will finance investment projects and support programs for microenterprise and for improving the quality of life of groups in extreme poverty, institutional strengthening operations for bodies eligible to receive these contributions, and increases in the educational and technological levels in an effort to generate acceptable levels of productivity.

The beneficiaries of these funds include private entities, financial intermediaries, cooperatives, governments of small rural localities and official bodies which develop programs to improve the quality of life of groups in extreme poverty, such as the Bolivian Social Investment Fund, Colombian Social Solidarity Network, Ecuadorian Emergency Social Investment Fund. Peruvian National Fund for Compensation and Social Development, and Venezuelan Fund for Financing Marginal Sectors.

For the microenterprise sector, FONDESHU will support projects with technical, environmental and financial sustainability, which generate income and create opportunities for permanent employment. Small productive units have greatly expanded as a source of qualified employment in the region, doubling their supply of jobs in the 1980s.

The economically active population of Latin America totals 160 million workers, including a high proportion of unemployed or underemployed. The region’s cumulative social debt, that is, the amount of funds needed to overcome poverty and achieve an acceptable degree of social equity, is around US$200 billion. This figure requires the design of very specific action plans, a strict rating of priorities and imaginative responses to raise the standard of living of the population.