The operation is the largest ever for the country and is provided under the Bank’s new deferred drawdown option
The Inter-American Development Bank (IDB) has approved a $550 million operation for Uruguay to fund the Program for Strategic International Positioning, which aims to substantially increase investment and exports by strengthening the regulatory and institutional framework, promoting and facilitating trade, and boosting entrepreneurial innovation.
The operation is notable for the following:
- It is the first IDB operation structured as a programmatic policy-based loan with a deferred drawdown option, which enables countries to draw on the resources as required.
- It is the first to use the new Reallocation Program approved by the IDB in July 2012, which provides that countries can prepay debt with the Bank to give them access to resources additional to the IDB’s regular allocation for the country.
- It is the Bank’s first policy reform operation in the area of trade and integration that carries out the mandate of the IDB’s Ninth General Increase in Resources.
"This operation is part of a comprehensive and long-term effort that the Bank has been carrying out in the country in the field of investment promotion and trade facilitation, which includes both technical and financial support," said Pablo García, IDB project team leader.
One program component will support Uruguay's efforts to consolidate a set of sweeping reforms designed to strengthen the overall policy framework for attracting investments.
Other activities include the signing of bilateral investment and trade treaties to prevent double taxation. This will improve transparency in the taxation of investment in line with global standards of fiscal transparency.
In addition, the program will support the consolidation of the regulatory framework for the development of large investment projects in infrastructure through public-private partnerships.Two other components include actions to support trade promotion and facilitation, as well as improve capacity for business innovation.
The program is expected to help increase the country’s average annual investment rate from 19 percent of GDP in 2009-2011 to 22 percent of GDP in 2014-2016. It is also expected to increase annual exports from $12.8 billion in 2011 to $16.5 billion in 2016. Other results will include reducing time and costs required for export activities and increasing business innovation.
The operation consists of two loans: one from the regular IDB allocation for the country and the other from the Bank’s Reallocation Program. The loan from the regular allocation is for $183.75 million; it has 20-year term, an interest rate based on Libor, and a three-year term for using the resources, which is renewable for an additional three years.
The loan from the additional allocation provided through the Reallocation Program, in which Uruguay has opted to prepay its debt with the IDB, is for $366.25 million; it has an 11-1/2-year term with a one-year grace period, an interest rate based on Libor, and a non-renewable term of three years for using the resources.