New structure will maximize development impact of private sector activities, increase efficiency and improve coordination with public sector projects
BUSAN, Korea – The Boards of Governors of the Inter-American Development Bank (IDB) and the Inter-American Investment Corporation (IIC) today agreed to consolidate the IDB Group’s private sector activities in order to maximize their development impact and offer more efficient services to clients.
The consolidation will enable the IDB Group to achieve synergies and administrative efficiencies mandated by the Governors. It will ensure integrated planning and more effective coordination of the IDB Group’s activities with private and public sector operations in each country, while providing oversight functions with consistent standards and quality. It will also offer faster project processing and a single point of access to the full spectrum of products and services available for the private sector.
“Today more than ever, private enterprises in our region need strong, flexible and expert partners to finance urgently needed investments, improve productivity and contribute to inclusive growth,” said IDB President Moreno. “This historic consolidation will enable the IDB Group to make better use of our resources and become the preferred source of knowledge and credit for companies that are accelerating development in each of our member countries.”
The IDB Group’s private sector activities have until now been conducted through four separate windows: the IDB’s Structured and Corporate Finance Department, the IDB’s Opportunities for the Majority Department, the Inter-American Investment Corporation (IIC), and the Multilateral Investment Fund (MIF).
Under the agreement approved today, the first three windows will consolidate operations into the IIC in accordance with the IDB Group’s renewed vision for private sector operations endorsed by Governors in 2013. The Donor’s Committee of the MIF, which is administered by the IDB but has a separate governance structure, is currently reviewing the MIF’s funding and organizational structure with the view of potentially joining its activities with the consolidated organization.
The capitalization proposal for the consolidated organization was designed to preserve the financial strength of the IDB Group and maintain its lending levels. It includes a $2.03 billion capital increase for the IIC, of which $1.305 billion will consist of new contributions by IIC member countries payable over a seven-year period beginning in 2016. Of the total, $725 million of the increase will consist of capital transfers from the IDB starting in 2018, approved annually by its Board of Governors and consistent with the continued maintenance of the IDB’s AAA long term foreign currency credit rating.
The decision announced today is the culmination of aprocess that began in 2013, when the Boards of Governors of the IDB and the IIC instructed management to analyze a reform aimed at increasing the development impact of the IDB Group´s private sector operations and ensuring a more efficient use of its resources.
At its 2014 annual meeting, the IDB and IIC Boards of Governors defined a series of steps to be taken towards a consolidation of the IDB Group’s private sector activities. These included the hiring of independent experts to advise the IDB Group on different aspects of the reform, and the development of concrete proposals for an organizational structure and a capitalization model for the IIC under the renewed vision.
The IDB Group is comprised of the IDB, the IIC and the MIF. The IDB is the largest regional development bank and the main source of development finance to Latin America and the Caribbean. It has 48 member countries of which 26 are borrowing members.
The IIC promotes private sector development in Latin America and the Caribbean with a focus on lending, equity investments and advisory services to small and medium-sized enterprises. Currently, the IIC has 45 member countries of which 26 are regional developing members.
The MIF supports economic growth and poverty reduction in Latin America and the Caribbean through encouraging increased private investment and advancing private sector development through grants for microfinance, training, loans and equity funds. It currently has 39 donor countries.