The Inter-American Development Bank has for the fifth straight year substantially increased is support for private sector growth in Latin America and the Caribbean.

The Bank’s Private Sector Department raised its level of financing in loans and guarantees from ordinary capital during 1999 to $634.7 million compared with $576.2 million in 1998.

The syndicated loans of the Private Sector Department, in which funds are provided by other financial institutions under subscription of participation agreements with the IDB, totaled $599.4 million, bringing the total number to 50 financial institutions involved in the Bank’s syndication efforts. This included the first participation of U.S. institutional investors with three private placements for two Argentine utilities for a total of $391 million

In February of 1999 the IDB Board of Governors enhanced the program of lending directly to the private sector in several ways:

• The capacity of the Bank for private sector loans and guarantees was increased to up to 5 percent of outstanding loan balances. Previously the ceiling was 5 percent of annual lending levels.

• The per project limits for partial guarantees was increased from $75 million to $150 million, or 50 percent of project cost.

• The project limit for direct loans from ordinary capital was increased from 25 percent to 40 percent of project cost, up to a maximum of $75 million, for small and less developed countries.

Among the new types of operations and new areas of expansion of the Private Sector Department in 1999 were the following:

• First telecommunications project, a loan of $25 million to Comunicación y Telefonía Rural of Chile to provide service to rural areas in the south. The loan is also the first operation in Chile.

• First operation in the Dominican Republic C a $150 million partial risk guarantee for financing the construction of a 300 megawatt combined thermal power plant by La Compañia de Electricidad de San Pedro de Macporis, Ltda.

• First loan guarantee for a firm in Brazil a $100 million guarantee for currency convertibility and transferability and funds expropriation risk associated with financing the expansion of two electricity distribution companies – Companhia Paulista Força e Luz and Rio Grande Energia.

• First financing of a private toll bridge a loan of $33.1 million from ordinary capital and a syndicated loan of $40.7 million to Puentes del Litoral S.A., for construction of the Rosario-Victoria toll bridge and connecting highway over the Parana River.

An emergency loan of $1.2 billion was approved for onlending by Banco Nacional de Desenvolvimento Econômico e Social to support small and medium-sized enterprises in Brazil. The operation was the largest single one ever by the IDB in support of the private sector.

The Bank also approved a $240 million loan to Chile’s Corporación de Fomento de la Producción to support onlending for building export capacity and productive investments by small and medium-size enterprises.

The Multilateral Investment Fund, established in 1992 to accelerate private sector development and help improve the climate for investment in Latin America and the Caribbean, in the past six years of activity has approved 306 projects and two lines of activity totaling $530 million for projects valued at $1 billion. Among these were commitments of $119.6 million for eight investments in microfinance institutions, three microfinance investment funds, and 21 small business funds.

During 1999 the MIF approved 89 projects % a substantial increase compared with the previous year % for a total of $132 million.

Among the innovations in private sector development support by the MIF in six years of activity are the following:

• Establishment of a regional network of Alternative Dispute Resolution Centers.

• Establishment of Bangente, Venezuela’s first commercial bank dedicated to micro-finance.

• Introduction of labor competency certification systems in Chile and Argentina.

• Establishment of specialized investment funds to support capital, bond and guarantee issues for micro-finance institutions.

• Introduction of skills standards, certification and credentialing in the Caribbean tourism sector

• Establishment of the first "eco-fund" for small environmental business in Central America.

• Establishment of the first bio-diversity investment fund in South America.

• Introduction of the use of vouchers for up-grading the productivity of micro entrepreneurs in Ecuador.

• Creation of a private sector consortium in El Salvador to upgrade professional training.

• Introduction of international environment and quality standards (ISO 9000 &14000) for small and medium enterprises.

• Establishment of a bio-technology fund and a technology transfer program in Brazil.

• Introduction of international standards for audit and accounting in Nicaragua.

• Introduction of vertical integration for processing and marketing for small coffee producers of El Salvador, Honduras and Nicaragua.

The Inter-American Investment Corporation, a member of the IDB Group that supports the growth of small and medium-sized companies and promotes technological innovation, approved 22 transactions during 1999 for a total of $190 million. Fifteen transactions with financial institutions and three private equity funds will allow the IIC to channel more than $350 million to small and medium-size enterprises. These include the first agency line approved by the Board of Directors and an innovative lease receivables purchase mechanism for Central American nations.

The total cost of the projects for which the IIC approved financing in 1999 is $1.1 billion. As they are implemented, these projects will create 18,000 jobs and generate annually $1.5 billion million in value added and close to $800 million in foreign currency income in the IIC's regional borrowing countries.

In 1999 the IIC Board of Governors approved a $500 million capital increase for the Corporation, raising its paid-in capital from $200 million to $700 million. A 10-year program has been designed to effectively deploy the increased resources in the Corporation’s target market of small and medium-size companies.