The Inter-American Development Bank will support the establishment of a $150 million facility to provide short-term trade financing and medium-term investment loans to sugar and bioenergy companies and exporters in Brazil, Mexico and Central America.
The IDB’s Board of Executive Directors on Wednesday approved a senior loan of up to $75 million for the facility. LACFIN Holdings, a company owned by Reservoir Capital Group, will invest $75 million in the program, which will be run by Latin American Capital Management LLC (LACAM).
Depending on future market conditions, the program may be expanded to $250 million, with additional loans from commercial banks and further capital contributions from LACFIN.
The facility will offer different types of loans, although it will place an emphasis on short-term pre-export and inventory financing for sugar and biofuels producers and exporters, at a time when lending for the agricultural sector is drying up due to the global financial crisis.
The program will also provide medium-term loans for replanting sugarcane fields, building drip irrigation systems, upgrading sugar mills and ethanol distilleries and increasing their energy efficiency through bagasse-burning co-generation power plants.
The IDB’s Sustainable Energy and Climate Change Initiative will help finance feasibility studies for projects involving co-generation plants and biofuels production. The program will also follow the IDB Biofuels Sustainability Scorecard to ensure that projects are in line with the Bank’s environmental and social sustainability criteria for such investments.
In order to achieve greater geographical diversity, the program’s managers will make special efforts to identify clients in Guatemala, Nicaragua, Dominican Republic, El Salvador and northeastern Brazil, a region where one in three workers is employed in the sugar industry.
The IDB is the leading source of long-term financing for economic and social projects in Latin America and the Caribbean. The Structured and Corporate Financing Department is responsible for its non sovereign-guaranteed operations, which include loans and partial credit guarantees for private sector companies and state-owned enterprises.
Reservoir Capital is a New York City-based investment firm that manages funds for university endowments and individual investors. The New Jersey-based LACAM specializes in structuring and originating commodity financing.