The Inter-American Development Bank (IADB) and the People’s Bank of China (PBC) have approved a co-financing fund for Latin America and the Caribbean.

This is the first fund established by China and a multilateral development bank, and aims to support public and private sector projects that promote sustainable economic growth in the region.

Through the agreement, China will provide US$2bn of capital to complement the IADB’s own resources for projects seeking to cut poverty and inequality, boost private sector investment, improve competitiveness and social welfare, and support programmes to mitigate the impact of climate change and promote greater gender equality. This capital will be available for the next three years for public sector projects and the next six years for non-sovereign guaranteed operations.

The funds will be used to co-finance a total of up to US$500mn of IADB public sector loans and up to US$1.5bn for loans made by the IADB to private sector entities.

IADB president Luis Alberto Moreno says: “China is a key partner for the bank’s mission to alleviate poverty and inequality in the region. This partnership is another example of our efforts to promote greater south-south co-operation to narrow funding gaps in sectors with high developmental impact and enhance the social and economic impact of our projects. It will serve as a benchmark for future models of co-operation with China and other countries.