Private Infrastructure and Inter-American Development Bank Group Support
By Antonio Vives, Jorge Rivas (04/98, En) See also Infrastructure and Financial Markets
Since the Inter-American Development Bank (IDB) was founded in 1961, infrastructure support has been the largest component of its lending operations. For instance, between 1971 and 1994, the IDB invested an average of $1.8 billion annually (1993 dollars) in infrastructure projects (i.e. transport, power, water and sanitation and telecommunications). This assistance has traditionally been provided through the public sector, extending loans for specific infrastructure projects and creating the appropriate regulatory framework through sector lending and technical cooperation operations. However, in the last few years there has been a significant increase in the participation of the private sector as manager and owner of infrastructure services. With the establishment of the Inter-American Investment Corporation (IIC) in 1989 and the Multilateral Investment Fund (MIF) in 1994, and the Private Sector Department of the Bank, also in 1994, the Bank Group has responded to this particular trend approving specific operations to encourage private sector participation in infrastructure. As a result, the beneficiaries of Bank financing have changed significantly.
The Bank is currently providing direct lending and guarantees for infrastructure projects with private sector participation through the Private Sector Department. It is also supporting the development of the proper environment and regulatory framework through sector lending and technical cooperation operations provided by its public sector arm. For the years 1995-1997, average annual infrastructure financing was $1.6 billion, with the private sector taking an increasing portion, (starting at $128 million in 1995 and reaching over $280 million in 19971), and the public sector staying relatively constant at between $1.3 billion and $1.6 billion in the last three years.
Similarly, since 1989 the IIC has taken loan and equity participation in small and medium-sized infrastructure projects and has provided financial advice for infrastructure transactions on several occasions. It is currently participating in 13 infrastructure projects with a commitment of $61.5 million out of a total project portfolio of $570 million. Lastly, the MIF addresses regulatory reform and, in some cases, privatization issues to facilitate private sector participation by providing grants through its technical cooperation window (Window I). MIF support for infrastructure accounts for 36% ($33.8 million) of its current total project portfolio.
This report provides a review of IDB Group activities supporting private participation in infrastructure between 1990 and 1997. It is intended to serve as a reference in the development of its infrastructure strategies. By compiling in a single document all the actions that promote private participation in infrastructure, a better appreciation will be developed, inside and outside the IDB Group, for the contribution it has made and the degree to which more action is required. Section II comments on the financial needs and sources of financing for infrastructure in Latin America and the Caribbean, highlighting the increasing importance of private financing. Section III is the core of the report, describing IDB Group actions for private infrastructure since 1990. This section is divided in four subsections according to the different fronts of activity as follows: (1) the IDB Group strategy, (2) the lending program, (3) the technical assistance program, and (4) nonfinancial activities. Section IV presents some conclusions and highlights that derive directly from a global overview of the Bank's seven year experience. Finally, the Annexes provide summary tables and a brief description of each project.
Last updated: 05/08/07
