The Inter-American Development Bank has launched a series of initiatives to further private sector growth in Latin America and the Caribbean through direct lending, guarantees, technical assistance and trade promotion.
During 2005 the IDB Board of Governors raised the financial ceiling for funding private sector projects to $200 million from $75 million per project. Under exceptional circumstances the Bank’s Board of Executive Directors may also authorize loans and guarantees for up to $400 million per project.
The new ceilings are designed to enable the Bank to play a greater catalytic role in attracting new investment in the region.
During the past two years most borrowing IDB member countries have signed agreements with the Bank to jointly support an initiative to improve the business climate and achieve greater national competitiveness through legal and regulatory reforms, measures to promote competition, strong enforcement of corporate governance and improved access to financial and infrastructure services.
The Office of the Private Sector Coordinator ? a post held by Carlos N. Guimarães as of Jan. 1, 2005 ? was established to coordinate all Bank activities on behalf of the private sector by the IDB group, which consists of the Inter-American Development Bank, the Multilateral Investment Fund and the Inter-American Investment Corporation. The Coordinator also serves as the principal advisor to the Bank’s president on priority measures to increase the effectiveness of private sector operations and to achieve synergies and the harmonization of products, procedures and programs.
The Coordinator chaired a working group that is responsible for streamlining the approval process for projects and for increasing responsiveness to clients through the new Private Sector Committee of the Bank. He also led the establishment in 2005 of the Private Sector Advisory Council, composed of 40 business leaders from 20 countries, who have joined together with IDB to discuss development challenges for the private sector in the region and to offer guidance as the Bank continues its efforts to support the private sector.
Private Sector Department
The IDB Private Sector Department, established in 1994, provides direct loans and guarantees for private sector projects without government guarantees.
Since its inception the Department has approved financing for 83 projects for a total of $3.7 billion, including 63 senior “A” loans and 20 Bank guarantees. In addition it has approved $4.4 billion in syndicated “B” loans and co-guarantees. These projects mobilized more than $19.6 billion in total financing.
During 2005 the Department approved $683 million in A loans and guarantees to finance 17 projects that were also supported by $221 million in B loans. Reflecting a rise in trade financing, 10 of the 11 guarantees for the private sector during 2005 were approved under the umbrella of the $400 million IDB trade facilitation program, which increases the availability of short- to medium-term funding for exporters and importers.
Multilateral Investment Fund
The Multilateral Investment Fund, administered by the IDB, is the largest source of technical assistance for private sector growth in Latin America and the Caribbean. It has approved more than $1 billion in grants, investments and loans for over 800 projects since it began operations in 1993, focusing on support for small enterprises.
At the 2005 IDB Annual Meeting in Okinawa, Japan, donor nations authorized an additional $500 million to MIF resources that enable the organization to continue operations to 2020. Five new nations joined the MIF during 2005 ? France, Haiti, Sweden, Switzerland and the United Kingdom ? bringing total membership to 38 nations.
The MIF approved $114 million in financing during 2005, including 82 grants, for 130 projects and introduced two new project clusters, one for the promotion of dynamic business ventures and another to support competitiveness through public-private partnerships.
Inter-American Investment Corporation
The Inter-American Investment Corporation (IIC) is an affiliate of the IDB that focuses on assisting the growth of small and medium-sized enterprises through loans, investments and guarantees. The IIC approved a record level of financing during 2005 for a total of $341.7 million for 37 projects, channeling resources to hundreds of companies in 17 countries. The corporation also issued the first local currency bond in Latin America by a multilateral financial institution in which the proceeds ? 150 billion Colombian pesos, or US$70 million ? were reinvested locally through leasing companies that would in turn provide services to SMEs .