IDB and BRDE Execute $65 Million in Innovative Debt-Conversion Transactions

The Inter-American Development Bank (IDB) and the Banco Regional de Desenvolvimento do Extremo Sul (BRDE) have successfully executed four debt-conversion transactions totaling $65 million. These transactions strengthen BRDE’s debt-management strategy and establish a new benchmark for the IDB’s foreign-exchange-hedging operations.

Conducted between July 2024 and June 2025, the transactions involved converting variable-rate debt denominated in U.S. dollars into Brazilian reals across two IDB loans, while maintaining their original long-term maturities, 2037 and 2047. This approach provides a cost-effective financing solution, reducing foreign-exchange risk, and enabling BRDE to offer more affordable financing to local businesses. 

A significant portion of the converted funds supported the "Em Frente RS” program, designed to help micro, small and medium-sized companies to recover from the devastating climate-related disasters that struck the state of Rio Grande do Sul in May 2024. The program helped more than 780 businesses at a critical time for the region's economy, offering much-needed support for their recovery and continuity. 

“These transactions demonstrate how financial innovation can deliver real impact. By leveraging a contingent conversion mechanism with embedded options tied to the country’s credit risk, we secured conversion rates 120 to 200 basis points lower than conventional methods, enabling more competitive local currency financing,” said Gabriel Yorio González, IDB vice president for finance and administration. “This innovative operation was made possible through the close collaboration between the two institutions. It reflects our shared commitment to strengthening financial resilience and fostering sustainable development in Brazil and across the region," he added .

“These transactions represent an important step in BRDE's funding strategy, enabling innovative and more accessible financial solutions for companies in the southern region. The partnership with the IDB reinforces our commitment to fiscal sustainability, risk mitigation and, most importantly, directs support for the economic recovery of hundreds of micro, small and medium-sized enterprises affected by climate events. BRDE remains steadfast in its role as a regional development agent, with responsibility, innovation, and focus on social impact," said João Paulo Kleinübing, BRDE's financial director.

BRDE's opportunity to raise funds through currency conversion, mitigating exchange-rate risk while securing favorable financing terms, aligns with its broader objective of diversifying funding sources and enables the institution to contract credit operations without relying on the traditional on-lending model.

By pioneering risk management and currency-hedging strategies, the IDB continues to support financial stability and economic growth in Latin America. These transactions demonstrate the IDB’s commitment to sustainable financing and to ensuring its member countries have access to innovative solutions that enhance resilience and long-term development.