The Inter-American Development Bank (IDB) has approved as much as $153 million in loans for the establishment of a new equity investment platform for Latin America and the Caribbean in partnership with the Export-Import Bank of China (China Exim).
The new platform is expected to mobilize as much as $1.8 billion from a diversified pool of investors, including Chinese investors, to fund equity investments that will support economic and financial integration between Latin America and the Caribbean (LAC) and China. The platform is made up of three regional investment funds that will deploy risk capital in infrastructure, mid-size companies and natural resource projects, including agribusiness, energy and mining, particularly in the pre-production stage.
The investments carried out by the platform will be environmentally and socially responsible and follow the highest standards of corporate governance. The IDB’s policies will guide the environmental and social investment practices of the funds and a process will be established to collect and publish information regarding developmental, environmental and social impact of the funds’ investments.
“The Platform is expected to mobilize a significant amount of long-term commercial resources to and within Latin America and the Caribbean to support sectors that are considered key for the development of the region and that, at the same time, will play an important role in the deepening of trade activities and financial ties between our region and Asia,’’ said Hans Schulz, General Manager of the IDB’s Structured and Corporate Finance Department.
The Funds are expected to have a life of 10 years extendable by another 2 years. Macquarie Infrastructure and Real Assets (MIRA) has been selected to manage the LAC-China Infrastructure Fund, which is expected to have a substantial impact on the development of the region by contributing to the enhancement of transportation and logistics facilities.
Darby Private Equity will manage the LAC-China Mid Cap Corporate Fund, Fund, which is expected to provide long-term financing so companies in this segment can boost productivity and compete in global markets. The fund is expected to provide assistance to improve management and governance and support expansion and modernization plans.
SinoLatin Investment Advisors (SLIA) have been selected to manage the LAC-China Natural Resources Fund, which is expected to help increase food production through investments in agribusiness, as well as the availability of raw material for industrial production through investments in mining and energy.
The investment platform is based on a letter of intent signed between the IDB and China Eximbank in 2011, when both institutions announced the plan to establish a mechanism to finance projects in the IDB’s 26 borrowing member countries in Latin America and the Caribbean. China Eximbank is in the process of seeking approval from the relevant authorities.
About the IDB
The IDB is the leading source of long-term financing for the Latin America and the Caribbean. Founded in 1959, the IDB has 48 member countries, of which 26 are borrowing member countries from Latin America and the Caribbean. China joined the IDB in 2009. The Structured and Corporate Finance Department (SCF) leads the IDB's non-sovereign guaranteed operations for large-scale projects, as well as those linked to companies and financial intermediaries.
Export-Import Bank of China (China Eximbank)
China Eximbank is a state bank solely owned by the Chinese government. Its international credit ratings are equivalent to the national sovereign ratings. As an important force in promoting foreign trade and economy and a significant component of the financial system, China Eximbank has been assisting Chinese companies and promoting Sino-foreign relationships and international economic and trade cooperation.