Mill Power

Sociedad Agrícola e Industrial San Carlos S.A.

With a talent for innovation, Ingenio San Carlos was the first Ecuadorian mill to build a hospital, a housing complex, and a grocery store for its workers early in the twentieth century. In 2004, the company emerged as a trailblazer yet again when it began selling energy on the wholesale electricity market. The novelty is that the electricity is generated from sugar cane bagasse—a crop residue. It is burned in the mill’s boilers and converted into steam and industrial energy. In recognition of its energy generation project, Ingenio San Carlos received the Ecuadorian environmental recognition award in 2010.

Established in 1897 in Guayas province on the Pacific coast, Ingenio San Carlos has a 34 percent share of the sugar market in Ecuador and a network of direct suppliers consisting of 350 small and medium-sized growers. In 2010, the IIC furnished the company with a seven-year, $7 million loan to improve the efficiency and productivity of its planting, harvesting, and cane processing activities. The IIC loan, together with local financing, will also help Ingenio San Carlos meet the large investment requirements associated with operating a sugar mill, which includes 12- and 16-megawatt boilers and turbogenerators that produce biomass energy.

SMEs as Agents for Recovery

Haiti Social Investment Fund

Following the devastating earthquake in January 2010, the IIC, in partnership with the IDB and the Government of Spain, agreed to establish the Haiti Social Investment Fund. Endowed with €51 million, the fund will provide financing to creditworthy SMEs operating in Haiti or benefiting the country’s private sector.

The fund seeks to support Haiti’s development and help bring the country’s productive sector into the formal economy. It will also channel resources supporting business development.

Through the IIC, the fund will book loans and guarantees to enable financial institutions in the country to provide attractively priced subloans ranging between $10,000 and $300,000. The fund complements the grants and financing offered by the IDB Group and other organizations to support Haiti’s public and private sectors. Spain will provide most of the resources (€50 million), and the IIC will contribute the balance. The IIC will also manage the fund and participate in its five-member Investment and Supervision Committee.

Smart Lights

Optima Energía

There was a time when Optima Energía engineers spent their days in luxury hotels. Now they spend their days on the streets of municipalities in central Mexico. Strangely enough, giving up glamouris a sign of growth.

Based in the northern city of Monterrey, Optima Energía creates systems that optimize the use of electricity, fuel, and water in Mexico—saving clients 50 percent on energy costs. Since it was founded in 1988, the company has completed more than 100 turnkey projects and executed nearly 20 results-based contracts in five- and six-star hotels.

Optima Energía’s success in reducing greenhouse gas emissions in the tourism industry caught the attention of Mexico’s public sector. Since 2009, the company has been implementing energy efficiency projects for the public lighting systems of twenty-five Mexican municipalities—and it expects to add 20 more by 2013.

In 2010, the IIC approved a nonrevolving credit line for up to $6 million to finance Optima Energía’s projects with municipalities, and the Korea-IIC SME Development Trust Fund is furnishing additional resources to study CO2 emissions. With this investment, the IIC is one of the first multilateral organizations to finance clean energy operations in Latin America and the Caribbean.

Innovating with FINPYME

Subsole Tracks Its Grapes (CH1088A-02)

At the annual meeting of the Asia-Pacific Economic Cooperation Forum, the Chilean SME Subsole showcased the fruits of combining its innovative capacity with FINPYMe’s additionality.

The packaged grapes subsole sells in Asia, Europe, and the United States carry a bar code that summarizes their story. Inputting the code in the company’s online database will render such information as grapevine location, planting and harvesting dates, variety, and phytosanitary treatments received. This traceability system is used at the most state-of-the-art agribusinesses in Latin America.

Subsole is Chile’s fifth-largest table grape exporter. It was part of the first FINPYMe pilot program back in 2001, when the company’s annual sales were less than $30 million. The diagnostic review carried out at the time provided a roadmap to improve subsole’s management. since then, the IIC has granted Subsole two loans totaling $8 million.

Subsole started out as a grape growers association. Today, it is a vertically integrated organization with nearly 200 growers that farm more than 3,600 hectares of land. Its production process has been updated in part, with four cold storage facilities to chill fruit, and it has modern export mechanisms, including its own shipping company. In 2009, Subsole’s sales totaled $117 million, 90 percent of which were exports.

 Technical Assistance for Ujarrás (CR3904A-01)

In 2008, Productos Ujarrás S.A., a well-known Costa Rican manufacturer and exporter of pasta, gelatins, and tropical fruit jellies, took part in the FINPYME Diagnostics program.

This was followed by a second technical assistance phase to help the company improve its competitiveness and implement ISO quality standards. After Productos Ujarrás implemented the recommended measures, sales rose by nearly 32 percent in 2009.

That same year, the IIC approved a loan to help Productos Ujarrás step up production and expand its plant capacity. The company is currently striving to reduce its production costs, increase its efficiency, and develop new markets.

Sustainability, the Name of the Game

Microfinance Growth Fund

The Microfinance Growth Fund (MiGroF) seeks to promote microfinance development in more markets through synergies by helping to reduce risk premiums, as well as to step up lending in local currency so that less sophisticated microfinance institutions can protect their operations from foreign exchange risks. In both cases, it is all about protecting the long-term sustainability of microfinance institutions and clients.

Launched in April 2009, at the height of the global financial crisis, by U.S. President Barack Obama, MiGroF is an effort to pool resources to leverage up to $250 million in medium- and long-term loans for microfinance institutions across the region. The fund’s mission is to deliver financing to microfinance institutions with the capacity to bring resources to end clients—microenterprises and small businesses—and recover the loan funds.

The IIC, together with the IDB’s Multilateral Investment Fund, took the lead in structuring the fund and establishing its credit strategy, investment guidelines, corporate governance rules, and operating policies, as well as in selecting its manager, the Swiss firm BlueOrchard Finance. 

MiGroF’s equity structure rests primarily on a $125 million loan from the Overseas Private Investment Corporation, the foreign investment arm of the U.S. government. The IIC’s participation in the fund is up to $5 million, while the Multilateral Investment Fund is contributing up to $10 million and the Corporación Andina de Fomento is providing up to $10 million. Additional contributions are coming from a group of private investors, including Banamex, the Norwegian Microfinance Initiative, and the ACCION International network.

Partnerships: The Key to Technical Assistance Brief History of FINPYME

If the present is an accumulation of learning, then today’s FINPYME is the symbol of a decade’s worth of knowledge-building to help the IIC sustain its active, efficient value-adding strategy through partnerships, support for SMEs going beyond mere financing, and a determination to promote the sustainability of businesses as well as the environment.

The history of FINPYME is an accounting of this accumulation of lessons learned and a reflection of the IIC’s long-term strategy. In fact, the IIC understands that providing value-added services to SMEs is at the very core of its business, to help SMEs increase their competitiveness, gain greater access to commercial financing, and efficiently and effectively participate in the global economy.

In 2008, the IIC expanded its capacity by establishing the Technical Assistance and Strategic Partnerships Division (TAS). That year, TAS launched the fINPYME program in Central America, forming its first partnerships with major business schools: Universidad Latinoamericana de Ciencia y Tecnología in Costa Rica, Instituto Tecnológico de Santo Domingo in the Dominican Republic, Escuela Superior de Economía y Negocios in El Salvador, Universidad Rafael Landívar in Guatemala, El Zamorano in Honduras, Universidad Americana in Nicaragua, and Universidad Católica Santa María La Antigua in Panama. This IIC initiative was a first in the region.

Partnerships with local organizations, such as educational institutions and trade associations, have proven an efficient mechanism for ensuring the sustainability of the IIC’s technical assistance activities. In 2008, these types of partnerships made it possible for the IIC to perform 160 diagnostic reviews in Central and South America and begin providing direct technical assistance to SMEs in Costa Rica, El Salvador, Guatemala, and Nicaragua.

In 2009, FINPYME formed a growing number of partnerships, enabling the expansion of diagnostic reviews to Colombia and five Caribbean countries. key partners in academia and trade and business organizations have become an important part of IIC operations designed to add value to SMEs. The IIC also built partnerships with educational institutions such as Universidad de los Andes, Universidad EAFIT, Universidad ICESI, and the University of the West Indies, as well as with the Chambers of Commerce of Bogotá, Cali, and Medellín.

In 2010, just as the IIC was consolidating its FINPYME offerings under one brand, talks were under way to perform diagnostic reviews and provide technical assistance in Brazil and Mexico beginning in 2011 and 2012, and the partnership model will be replicated in those countries as well.

FINPYME: One Brand

SMEs require more than financing for sustainable growth. They also need technical assistance. Companies face many hurdles that hinder their ability to compete on open markets, including management, planning, and strategic challenges. Over the years, the IIC has identified several key areas in which SMEs are regularly in need of assistance. In response, in 2010 the IIC put together a comprehensive package of value-added services for SMEs under the FINPYME brand.

The FINPYME program consists of six value-added services: FINPYME Diagnostics, FINPYME Direct Technical Assistance, FINPYME ExportPlus, FINPYME Family Business, FINPYME Integrity, and GREENPYME, whose use throughout Latin America and the Caribbean is steadily increasing.