Madame Secretary of State for International Cooperation, Ms Soraya Rodriguez
President of the International Development Cooperation Committee of the Congress, Ms Delia Blanco
President of the International Development Cooperation Committee of the Senate, Mr Jordi Guillot
Distinguished Members of Parliament
Ladies and Gentlemen,

It is a great honour to be with you today at the kind invitation of the Secretary of State for International Cooperation. Our meeting underscores the development goals shared by the Kingdom of Spain and IFAD: reducing poverty, eradicating hunger and managing natural resources sustainably.

Spain has recently demonstrated its commitment to those goals in a very concrete way. I want to thank you personally for the recent establishment of a trust fund of 300 million euros to support IFAD-supported projects in targeting rural poverty and hunger. I am here to talk about what we hope to achieve with this strengthened partnership. But first I want to highlight your country’s important role in supporting agriculture and food security.

Since the start of the food price crisis in 2007, Spain has been at the forefront of international efforts to cope with its effects on hunger and poverty. After the High-Level Conference on World Food Security in June 2008, Spain maintained the momentum by calling the High-level Meeting on Food Security for All in January 2009. Its purpose was to follow up on commitments, stimulate agricultural development and address obstacles to food access and adequate nutrition.

Spain was one of the first contributors to the special multi-donor trust fund set up by the World Bank in response to the call by the G20 in September 2009, which addresses the underfunding of agriculture and food security strategic investment plans.

Spain also increased its contributions to the multilateral institutions that have a food security mandate. You have activated special initiatives and proposed innovative financing solutions at a time of serious financial constraints in many countries.

All of these initiatives underscore that Spain is a reliable and consistent partner to IFAD and shares our core values.

IFAD’s mandate is to help reduce poverty and food insecurity in rural areas of developing countries. Our approach is to support the transformation of smallholder agriculture from subsistence farming to small business farming and to generate economic growth in rural areas. We believe that the smallholder farmers of the developing world can play a leading role in meeting the growing demand for food while improving their own livelihoods and providing a future for their children.

This transformation needs to happen quickly: by 2050 the world’s farmers will need to feed 9 billion people.

IFAD supports farmers by investing in efforts to improve their productivity. This includes helping them increase their access to natural resources such as land, water, forests and fisheries – and to do so sustainably in order to adapt to and mitigate the effects of climate change. We help them obtain locally adapted agricultural technologies and financial services.

We assist them in entering markets. We support farmers’ organizations to engage in policy processes. We provide grants for research on innovative approaches and technologies for smallholders. We support efforts to build the capacities of partner institutions such as community-based groups and non-governmental organizations.

We pay particular attention to women and support their empowerment. In virtually all rural societies, women are the primary caregivers, but they also perform a large part (and often most) of the agricultural work and produce the bulk of the developing world’s food crops.  And we place a special emphasis on youth given that they are the ones that will have to feed the 9 billion of 2050.

We have adopted a results-based approach to our interventions. We measure progress systematically in all the projects we support to ensure that poor rural people gain the basic food security they need to move into more risky but profitable agricultural business.

Over the years, the catalytic role of IFAD has dramatically increased. And I am proud to say that on average 1 dollar invested by IFAD mobilizes an additional 1.5 dollars in cofinancing by the governments of the borrowing countries, along with other international organizations and bilateral donors.

During the period from 2010 to 2012, IFAD’s approved 3 billion dollar programme of work will deliver programmes and projects worth 7.5 billion dollars. But only 1.2 billion dollars will be contributed by Member States. This testifies to IFAD’s efficiency in using those resources from our Members.

Now I would like to turn to the reason for my visit today: the Food Security Cofinancing Facility Trust Fund that Spain has established at IFAD.

The Spanish Trust Fund is the first time in our history that IFAD has entered into a borrowing agreement with a Member State to increase the resources available to finance our programmes and projects. IFAD is, indeed, funded through regular resources by Member States who replenish the fund on a grant basis every three years. In 2010 the Eighth Replenishment period started and, as previously mentioned, Member States agreed to contribute 1.2 billion dollars to IFAD’s programme of work. The Spanish contribution amounted to 58 million dollars.

In a period of growing need for investment and of scarcity of funds, the ability to mobilize additional resources through lending arrangements raises the bar for innovative solutions to providing resources for development. The Executive Board of IFAD lauded the Spanish initiative and recognized the added value of this financing mechanism. While it does not introduce any change in the governance and decision-making system of the organization, it substantially increases the resources available to finance the projects we support.

Over the next two years, the Trust Fund will make a major contribution to scaling up our operations. It will advance the Paris Declaration and Accra Agenda for Action on aid effectiveness. It will also prevent duplication of efforts and support a stronger role for multilateral partners. In addition, it will aid implementation of the Third Master Plan for Spanish Development Cooperation for 2009 to 2012, which is grounded in the principles of alignment, harmonization, predictability, management for development results and mutual accountability. Spain has asked us to manage the Trust Fund, and we appreciate this vote of confidence.

With approval of the Executive Board in September 2010 and in collaboration with the Spanish Agency for International Development Cooperation, we have set up a financing mechanism tailored to optimize the use of these resources. It is consistent with the terms and conditions IFAD applies regularly to borrowing countries, and it will guarantee full reimbursement of the loan to Spain.

Let me briefly discuss the terms of the agreement. The principal is 285.5 million euros, maturing in 45 years, on which a market-based variable interest rate will be paid to Spain. Over the next three years, the Government of Spain will transfer an additional 14.5 million euros to the Trust Fund, with the aim of lowering the average interest rate paid by IFAD to Spain.

The agreement also specifies that your Government will make available additional grant money in case of a negative balance of the Trust Fund. The financial model underlying the facility will therefore act as a warning system to minimize the risk of such an event. It will forecast and monitor the Trust Fund’s liquidity position to ensure that resources are available for debt service and to cope with unforeseen events. Appropriate guidelines for Treasury investment have been enacted.

I am also pleased to inform you that an annualized 3.25 per cent rate of return has already been recorded since the funds were transferred to IFAD in early January. Earnings are essential since the interest rate IFAD will pay back to Spain is higher than the average of the interest rates that borrowing countries pay to IFAD, many of which obtain loans on highly concessional terms. IFAD also provides grants to countries under the debt sustainability framework. The financing mechanism in place with Spain does not allow resources to be allocated to those countries whose indebtedness levels would not allow them to repay the loan.

I am sure you are curious about how IFAD plans to use this generous funding. The monies will primarily go to scaling up successful projects already under way in the countries where IFAD operates: 46 per cent for Africa, 37 per cent for Latin America, 11 per cent for the Middle East and Eastern Europe, and 6 per cent for Asia. The geographical allocation has taken into account Spain’s priorities, but the key decision criteria will be the need and scope for scaling up projects.

IFAD allocates regular resources using a performance-based allocation system based on performance indicators, population and per capita gross national income. The limits set by this system cannot be over-ridden even when there is an excess of demand for agricultural investments by countries whose allocation is limited with respect to their needs. This is particularly the case for middle-income countries where about one third of people live in absolute poverty, most of them in rural areas. Cofinancing funds like those made available by Spain with the newly created Trust Fund are not covered by the performance-based allocation system, and thus allow us to cope with this excess demand and to enlarge the scope of the activities we support.

At upcoming sessions, including one next month, the IFAD Executive Board will consider proposals for cofinancing through the Spanish Trust Fund for programmes and projects already approved in Botswana, the Dominican Republic, and Madagascar. Proposals are currently being considered for 2011 in Argentina, Bangladesh, the Plurinational State of Bolivia, Colombia, Ecuador, El Salvador, Georgia, Ghana, Mozambique, Senegal and South Africa. The list for 2012 is yet to be finalized, but we expect to finance projects in Brazil, Cape Verde, Equatorial Guinea, Gabon, Kenya, Lebanon, Mauritius, Mexico, Swaziland, Tunisia, Uzbekistan and Venezuela.

The monies from the Trust Fund will directly assist smallholder farmers. In the Dominican Republic, for example, 16 million dollars will be used to support a project helping small-scale producers grow crops with potential for adding value, such as coffee, cocoa, vegetables and fruit. Raising and selling these lucrative crops will generate employment and support microenterprise activities benefiting the very poor people in this area. It will also establish partnerships with other development programmes. This will be an expansion of efforts under an existing 14 million dollar loan from IFAD.

In Senegal, the Trust Fund will provide 10 million dollars to help smallholder farmers and their organizations obtain services and technologies and access markets. The programme is working in three agro-ecological zones, and it is expected to directly benefit around 50,000 smallholder households. Specific activities will include better use of water and other natural resources and improved management of rangelands.

Seeing the result of these efforts inspires all of us at IFAD, but we don’t deny the major challenges ahead. An estimated 1.4 billion people live on less than $1.25 a day. Around 1 billion people in rural areas depend on agriculture as their main source of livelihood. So achieving Millennium Development Goal 1, which calls for eradicating extreme poverty and hunger, will take a major commitment by all of us.

Investing in smallholder agriculture is pivotal to eradicating poverty and hunger. It is also fundamental to achieving global food security in the face of climate change and anticipated population growth. I have said it before but it bears repeating: if we are to feed the 9 billion people expected on the planet by 2050, small-scale farmers need to move beyond subsistence agriculture. They must be helped to become sustainable and profitable agricultural businesses.

This is IFAD’s major objective over the coming years. Building on our growing successes, we are now in consultations with member countries for our Ninth Replenishment, covering the period 2013 to 2015. With a strong replenishment, we can increase our role in promoting and scaling up effective and innovative approaches to agricultural productivity and rural economic growth. I am sure Spain will continue to support our efforts. I look forward to many years of partnership on behalf of the world’s poor rural people.

Thank you very much.

Madrid, 26 April 2011