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IDB announces historic expansion of lending to private sector and subnational entities


The Inter-American Development Bank has adopted guidelines that will permit an unprecedented expansion of its lending program. New lines of business will include lending to private companies in previously restricted economic sectors and to sub-national public entities without sovereign guarantees.

In the past, the Bank’s policies constrained its ability to lend directly to municipalities, provinces and state-owned and mixed capital enterprises, for projects that were not backed by a sovereign guarantee. Likewise, the IDB’s Private Sector Department was limited to lending in infrastructure, capital markets and trade financing.

A decision by the Bank’s Board of Governors at the IDB’s Annual Meeting in April in Belo Horizonte, Brazil, lifted these restrictions. The guidelines approved last week enable the IDB to lend directly to companies active in all sectors, including oil and gas, agribusiness, mining, manufacturing, tourism, technology and services, among others.

The guidelines also allow the Bank to meet the growing demand for credit among sub-national entities that have been strengthened by the decentralization that has swept Latin America and the Caribbean in the past two decades. Many of these municipal and provincial governments are now actively seeking financing for projects to improve basic infrastructure in areas such as water, sanitation, electricity, roads and transportation—often in partnership with the private sector.

“Sub-national governments represent one of the most dynamic areas of investment in Latin America today,” said IDB President Luis Alberto Moreno. “They are eager to deliver concrete results to their constituents, and they tend to embrace innovative solutions that make smart use of public and private resources. By providing loans to these governments and to companies in virtually every sector of the economy, the IDB will help to catalyze the kind of partnerships that have proved most effective in accelerating development.”

The new guidelines cap a year-long overhaul of the IDB’s policies intended to make the Bank a more agile and responsive partner to governments, private companies and public-private ventures throughout Latin America and the Caribbean. Recent policy changes have included raising the ceiling on IDB loans and guarantees to private sector projects from $75 million to $200 million (and in certain circumstances $400 million), and permitting the Bank to finance up to 50 percent of the cost of expansion projects. The Bank also adopted policies that allow it to disburse loans and denominate partial credit guarantees in local currencies, and to provide debt refinancing to firms in the region.

Moreover, donor countries recently authorized a $500 million increase in the resources of the IDB-administered Multilateral Investment Fund, which is the largest source of technical assistance to the private sector in Latin America and the Caribbean. And a $20 million Infrastructure Fund was created to support the preparation of projects and promote public-private partnerships to sponsor investments in infrastructure.

“Taken together, these measures have positioned the IDB to play a much more vital role in channeling private resources toward areas that will generate jobs and economic opportunity in the region,” said Carlos Guimarães, the IDB’s Private Sector Coordinator. “This opens a new frontier for the IDB in its relationship to the private sector in Latin America.”

As with other Bank programs, projects selected for financing under the new guidelines must have a development impact, such as contributing to competitiveness, job creation and the adoption of new technologies. Potential borrowers will also have to demonstrate creditworthiness and meet IDB requirements in areas including corporate governance and environmental protections.

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