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Cofinancing

IDB stepped up efforts to include new partners, private sector

Cofinancing of IDB projects rose to $1.32 billion in 2003, a one-third increase over the $991 million secured in 2002. This represents approximately 20 percent of the Bank’s lending of $6.8 billion for the year. Of the total of cofinancing, eight bilateral agencies contributed $253 million and eight multilateral organizations funded $1.07 billion.

The Cofinancing Division promoted strategic partnerships between the IDB and donor institutions, emphasizing the advantages for borrowers of a partnership approach involving the Bank, donors and beneficiary countries. This reinforced the IDB’s working relationship with current bilateral and multilateral partners through various coordination meetings, 12 of which took place at IDB headquarters, while others were held in East Asia, Latin America and Europe. Discussions in all events focused ultimately on improving project execution, institutional arrangements, social equity, and development effectiveness.

The World Bank participated in five IDB projects for a total of $1.02 billion. Also approved were 16 cofinancing grants administered by the Bank for a total amount of $2.6 million. This included five private-sector contributions to help finance specific events and activities, such as high-priority conferences, seminars and publications related to microenterprise, corporate social responsibility and urban poverty alleviation.

In addition, a World Bank/IDB workshop was devoted to the establishment of a new cofinancing modality that entails joint project design, the use of a single executing agency, the adoption of a common set of sector policies, and pragmatic solutions to procurement eligibility stemming from differences in membership between the World Bank and the IDB.

In an environment of persistent scarcity of local counterpart funds that affected overall lending levels and the speed at which development projects could be implemented, the importance of cofinancing as a resource-enhancing instrument is contemplated at the Bank policy that recognizes third-party grants and concessionary loans as eligible counterpart equivalents.

Moreover, to assist member countries in transparently administering external counterpart contributions and alleviate local counterpart constraints, the Bank created a Local Counterpart Fund instrument for donors. During its first year of operation this instrument mitigated the counterpart needs of one of the poorest countries in the region; its relevance as an effective channel for steering bilateral resources to facilitate the implementation of high-priority projects and programs is expected to increase in the near future.

Furthermore, a special mission to European countries and institutions, in close coordination with the IDB’s Special Office in Europe, explored initiatives for private sector cofinancing, public/private partnerships and the reestablishment of cofinancing relationships with the European Investment Bank and the International Fund for Agricultural Development. Discussions were also held with various bilateral donor institutions to explore future development strategies, priorities and policies and regional initiatives in Central and South America.

Following up on the strategy outlined in a memorandum of understanding signed in 2002 between the IDB and the European Commission, in-depth discussions took place at EC headquarters to explore cooperation opportunities in the areas of social equity, poverty reduction, regional integration, consolidation-of-democracy issues, administrative decentralization, regional and country strategies, as well as overcoming obstacles to joint cooperation efforts. Exploratory cooperation discussions also took place with USAID, the United Nations Development Program, the Economic Commission for Latin America and the European Investment Fund.

In February the IDB’s Board of Governors approved the Internacional Trade Finance Reactivation Program for the Private Sector for a two-year period to address liquidity shortfalls affecting the region. The first operation under this new mandate was undertaken jointly with the International Finance Corporation for Banco Bradesco S.A. and successfully attracted 16 commercial lenders.

The IDB’s Private Sector Guarantee Program continued its growth with the approval of two operations, each involving the support of a co-guarantor. The IDB teamed up with Nederlandse Financierings-Maatschapij voor Ontwikkelingslanden N.V. of the Netherlands to provide a $20 million partial credit guarantee supporting a $50 million bond issued by Graña y Montero, a Peruvian construction company.

The IDB also teamed up with Ambac Assurance Corporation to provide a full wrap guarantee for a local currency bond issue entirely placed in the local Chilean market for the US$421 million Costanera Norte toll-road project.

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