Private Sector Development

The IDB supports private sector development in Latin America and the Caribbean through three windows: the Structured and Corporate Financing Department, the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF). The Office of Vice President for Private Sector and Non-Sovereign Guaranteed Operations oversees all three, along with the Opportunities for the Majority Sector. It also develops and carries out the Private Sector Integrated Business Plan, as well as the business plans for each of the three above-mentioned windows.

During 2007, the IDB approved 17 non-sovereign- guaranteed transactions, consisting of 13 loans and four guarantees, totaling $2.1 billion. Nine out of the 13 loans had a B component, which mobilized $2.1 billion in additional funding from other financial institutions and resulted in a mobilization ratio of 1:6, which is the ratio of total B loan amounts over the total for A loans from the Bank’s Ordinary Capital. The average size of the loans was $97 million, and that of the guarantees $225 million.

Including 12 operations for $227 million under the Trade Finance Facilitation Program—through which the IDB extends guarantees to cover documentary and stand-by letters of credit, promissory notes and other instruments used in the financing of international trade transactions—the IDB approved private sector development operations in 14 countries during the year: Brazil, Colombia, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname and Uruguay.

Among the pioneering transactions in 2007 was a $400 million A loan to Peru LNG, the first liquefied natural gas export facility in South America. The project, which represents a significant step in Peru’s efforts to develop its energy sector, is the largest foreign direct investment ever made in the country and will act as a catalyst for attracting large amounts of additional investment. Also noteworthy was the first non-sovereign-guaranteed loan to a national public institution, the Instituto Costarricense de Electricidad in Costa Rica. The Bank also approved a $40 million A loan for a large Brazilian ethanol producer, Usina Moema Açúcar e Álcool Ltda.

Inter-American Investment Corporation (IIC)

The IIC is an independent multilateral organization affiliated with the IDB whose purpose is to foster the development of small and medium-sized enterprises (SMEs) as a means of furthering sustainable economic development. In 2007, the IIC posted its fifth consecutive year of profits and a record year for approvals, disbursements and profits. A total of 62 projects for $470 million were approved and IIC assets grew to $1.2 billion, more than double the $487 million in assets it had in 2004.

The IIC also achieved its goal of bringing greater amounts of resources to the smaller countries in the region. During the year, 47 percent of the number of the financing approvals and 32 percent of the dollar amount of the approved operations were in small countries.

Innovations included local currency financing in Peruvian soles, Argentine pesos and Brazilian reais; FINPYME, a program to evaluate SMEs in order to help them become more competitive and improve their access to sources of financing; and a joint loan with the IDB to Surinamese holding company C. Kersten & Co. N.V.

Multilateral Investment Fund (MIF)

The MIF uses technical cooperation grants to support improvements in the business environment and to increase the ability of the private sector to achieve sustainable growth and create jobs. It also offers investments for microfinance and small business loans and equity capital. Given the makeup of Latin American and Caribbean economies, the MIF continued to focus on the small business sector, which provides the greatest leveraging opportunities. In 2007, the fund approved 116 grants for a total of $100 million and 17 investment projects for a total of $35 million, for a combined total of 133 projects and $135 million in total MIF contributions. Disbursements in 2007 were $98 million.

To enhance its impact on grassroots business, the MIF began delegating authority to approve small projects to the IDB Country Offices. In 2007, the overall caps on these “mini-MIFs” were eliminated and all IDB borrowing countries given access to them. The program is expected to grow substantially to more than 50 projects per year and should contribute substantially to the MIF program to provide economic opportunities to those sectors of the population, constituting the majority, that are now working to overcome the barriers of low incomes, isolation and exclusion.