IDB approves $3.5 billion capital increase for investment arm

MEXICO CITY (Reuters) - The Inter-American Development Bank (IDB) approved a $3.5 billion capital increase for IDB Invest, its private sector arm, the bank's head, Ilan Goldfajn, told an event on Sunday.

With the capital injection, IDB Invest's size will double in the next few years, Goldfajn said, adding it will have more power to fund projects aimed at reducing poverty and addressing climate change.

"We need more resources to tackle global challenges, and we will only do it with the private sector," Goldfajn said.

The capital bump will allow IDB Invest to scale its ability to channel resources to the region to around $19 billion per year from the current approximate of $8 billion, according to a statement.

IDB's board of governors also approved up to $400 million for IDB Lab, its innovation and venture capital arm.

Taken together, the fresh capital, along with efforts by each institution to optimize their balance sheets, will enable the IDB Group to increase its financing capacity to up to $112 billion over the next 10 years, the statement said.

"Our region faces a triple structural challenge of rising social demands, scarce fiscal resources and low growth, with the additional major effects of climate change," Goldfajn said, adding the new funds will help the region address these challenges.

(Reporting by Valentine Hilaire and Deisy Buitrago; Editing by Josie Kao and Sandra Maler)