Deep knowledge and excellent relations with Latin America and the Caribbean countries: the IDB is the oldest and largest multilateral lender to Latin America and the Caribbean. Its long-term relationship with its 26 member countries from the region helps mitigate political risks. The IDB has an outcome-driven approach, an in-depth understanding of political and economic fundamentals, financial and regulatory structures and excellent access to information. The IDB’s network of institutional and personal relationships in the region is extensive and deep, helping to develop project opportunities in every part of the region, including markets perceived as most difficult for business. The IDB invests significant effort to address and mitigate potential problems, such as obtaining access to foreign exchange needed to service IDB financing.
Access to competitively priced funding sources: Its solid financial position, with Aaa/AAA ratings by Moody’s and Standard & Poor's, and its diversified funding sources allow the IDB to offer extended tenors at market pricing and to provide credit enhancements to tailor its financing solutions to client needs.
Catalytic role: IDB operations help mobilize additional resources from other lenders, introduce new financial products and practices in the region, and explore flexible risk-sharing arrangements, which often leads to innovative transactions that can serve as demonstration to other private market players. Many of the world’s leading financial institutions and institutional investors have worked with the Bank, participating in syndicated loans (B loans) or as co-guarantors in IDB-financed transactions.
Internationally recognized environmental and social standards: the IDB’s environmental and social standards —including labor and health standards— provide comfort to governments, communities, borrowers, sponsors and lenders. The IDB’s strict environmental and social standards limit liabilities and bring added credibility to our clients and projects. The IDB’s reputation as an “honest broker” in complex transactions facilitates dialogue for implementation of critical projects by reconciling the views and interests of diverse organizations and stakeholders with the project’s design and standards.
Advantageous accounting and taxation treatment: IDB clients enjoy accounting and taxation advantages. Because of the Bank’s tax exempt status, principal and interest payments on loans made under subscription of participation agreements with the IDB (B loans) are exempt from withholding taxes in member countries. In addition, because of the Bank’s prestige and stature, regulators in most major financial centers exempt commercial banks participating as B-lenders in IDB transactions from certain loan provisioning requirements.
Wide range of financial products and services: The IDB can provide the type of long-term financing particularly suited to large-scale capital investments or restructurings of existing obligations. It also offers a wide range of risk mitigation products and services, such as partial credit and political risk guarantees. The IDB also has access to a wide range of reimbursable and non-reimbursable technical cooperation resources, which can be used to prepare projects for financing,address regulatory and business climate issues and strengthen the technical capacity of regional governments, among other activities.
SCF looks for highly developmental projects/transactions that contribute towards the Bank's strategies for economic and social development, and places emphasis in smaller countries in Latin America and the Caribbean.
For a more complete description of the general criteria, click here.
The IDB is able to provide comprehensive sector coverage that includes:
- Energy: generation, transmission, distribution, renewable energy, energy efficiency
- Water and Sanitation: Water supply and distribution, wastewater treatment, solid waste management
- Transportation: Toll roads, bridges and tunnels, ports and shipping-related facilities, airports, passenger and cargo rail systems
- Communications: telecommunications, postal services
- Social Sectors: health and education
- Financial Institutions: Lending facilities, subordinated debt (Tier II) and partial credit guarantees structured as risk-sharing structures to expand lending portfolios.
- Capital Markets: Credit enhancements for securitization of assets and future flow of receivables, corporate and utility bond placements, other structured securities, funding for liquidity facilities as well as warehousing facilities and other vehicles.
- Trade Finance: Credit lines to local banks, international funds active in trade finance, bank portfolio credit risk enhancement programs, export receivables securitization.
Productive and other sectors
- Tourism and the Hospitality Industry, Agribusiness, Bio-Energy, Oil and Gas, Pulp and Paper, Mining, Chemicals and Petrochemicals, Metals, Manufacturing.
Excluded sectors include those that are illegal under host country laws, regulations or ratified international conventions and agreements.
No. We lend to companies controlled by investors or governments from member countries, borrowing and non-borrowing, of the IDB.
Ranges. The IDB's participation in any single private sector project is limited to US$200 million; however, the Bank may increase that amount to US$400 million on an exceptional basis. The IDB limits its participation to 25% of total project costs, or up to 40% for projects located in certain countries —typically smaller economies with limited market access. For expansion projects and refinancings, the IDB may provide up to 50% of total project costs, subject to certain limits related to the total capitalization of the borrower or issuer for credit guarantees. Project limits that apply to credit guarantees are the same as those that apply to direct loans.
Fees.Some fees are applied to the loan as appropriate to each project, including analysis fees to evaluate the project, a commitment fee on the un-disbursed balance of the loan, a one-time front-end fee, a structuring fee payable on the financing from other commercial lenders, and annual administration fees on the facility. In addition, lenders are typically required to cover the due-diligence costs before financial closing including legal fees, technical analysis and others as appropriate to the transaction.
It will depend on the type of deal, sector and complexity of the transaction. Typically, it could take between two to eight months for the most complex transactions.
The IDB lends directly in the form of long-term U.S. dollar loans (also sometimes in Euro and Yen) or in local currency. Loans are tailored to meet the needs of individual projects and tenors typically range from 5 to 15 years, but may be extended to 30 years.
Interest rates: loans are made at fixed or floating interest rates and are priced according to existing market conditions. Interest rates are based market pricing and taken into several considerations reflecting the overall risk characteristics of the underlying project.
Greenfield and Brownfield projects typically require equity support from shareholders or the borrower. IDB financing is typically complemented with funds from other commercial lenders under the B-Loan structure of co-financing from other multilaterals or investors. For grant financing, the IDB requires that the beneficiary entity/ies share no less than 20% of the financial costs of each operation.
The IDB also has access to a wide range of reimbursable and non-reimbursable technical cooperation resources, which can be used to address regulatory and business climate issues, prepare projects for financing, and strengthen the technical capacity of regional governments, among other activities. The IDB will provide grant resources ranging between US$ 100,000 and US$ 1.5 million for projects that are eligible for financing and have a high probability of reaching financial completion.
Technical assistance or zero interest financing/resources are available to private and state-owned enterprises for pre-investment activities of selected highly developmental projects. Technical, economic, financial, credit, environmental, social and institutional studies are among the eligible activities under this facility. SCF grants will also support issues such as gender equality, road safety, solar efficient lighting, financial literacy for women and human capital development.
Counterpart financing: The IDB requires that the beneficiary entity/ies share no less than 20% of the financial costs of each operation.
Operations Size: The IDB’s contribution may be within the range of $100,000 to up to $1.5 million per project.
The Structured and Corporate Finance Department, through its existing range of risk mitigation products (A/B Loans, Political Risk and Credit Guarantees), brings the necessary flexibility aimed at mitigating the trade finance risks for international private banks so as to alleviate the current lack of funding availability for trade finance. In order to maximize the impact of our program, a menu of options is presented to take into account the different problems confronted by different countries and different size firms. The choice of instruments will depend on the problems identified by the project teams upon analysis of each specific case, including but not limited to the following alternatives:
Direct Bank Facilities (A/B Loans). In countries where the banking system is not experiencing a systemic crisis, the Bank may offer A/B loans to qualified commercial banks. Since the Bank would act as the lender of record, the preferred creditor status is extended to investors underwriting the B portion of the transactions, thus mitigating the country risk component. The objective is to protect existing lines of credit for trade from international sources or induce reopening of such lines. Proceeds can be used for working capital needs associated with pre-shipment imports of goods and services required for future exports among others.
Guarantee Facilities. Guarantees are an effective instrument for levering Bank resources and play an important role in mobilizing and facilitating needed funding for trade activities. The following are some examples of the type of proposed structures that may use Bank guarantees to support trade finance in the Region:
- The IDB considers trade activities to be crucial for the growth of local, national and regional economies in LAC countries. Complementing the IDB’s broader strategy to support trade and the financial sectors on all levels, the Regional Trade Finance Facilitation Program (TFFP) has been supporting the LAC region’s external sectors since 2005, by diversifying and stabilizing the supply of trade finance to the region’s banks. Under the TFFP, the IDB extends Credit Guarantees (“CGs”) in the form of Stand-by Letters of Credit (Stand-by L/Cs) in favor of Confirming Banks, to cover the risk they take on eligible trade financing instruments issued by LAC Issuing Banks. For more information, click here.
- Bond Issuance Facility (capital markets). This involves the creation of a funding vehicle that issues bonds guaranteed by the future flows of trade and trade related receivables of firms in a particular country. The Bank would provide a partial credit guarantee (PCG) covering some portion of interest and principal default for up to a determined percentage of the issue. The guarantee would only be called upon if neither the bond structure nor the funding vehicle can pay. The proceeds of these guaranteed bonds will be used by the issuing entity to finance trade activities. This funding option would have the cross-border exposure mitigated by the Bank’s guarantee.
Each project presented to the SCF Department must be evaluated, approved and monitored in strict compliance with environmental, social, safety, health and labor standards. SCF works with its clients to align their objectives with our social and environmental standards to ensure long term results.
These measurements are aimed at ensuring that the projects are viable and sustainable, maximizing their benefits and mitigating or controlling their risks and impacts.
The IDB seeks to ensure that the projects it finances in both private and public sectors make a positive contribution to the economic and social development in the region. Therefore, documenting the unique impact is an integral part of our work.
The IDB recognizes that it is our clients’ hard work on the ground that makes development happen. The IDB’s development effectiveness efforts make sure that the story of this work gets told. With the help of our clients, the IDB strives to highlight each project’s impact in the specific relevant local, national or regional context.
For example, the IDB seeks to measure a project’s delivery of better, more affordable or new products and services; direct and indirect job creation; reduced pollution or greenhouse gases; and many other effects that improve people’s lives. The IDB often contributes additional knowledge or resources to further improve such impacts.
The IDB also favors projects that have positive spillover effects on other companies, or on the business climate in general. Examples for such wider positive impacts can be the fostering of competition; the introduction of new technology or know-how; the improvement of financial or physical infrastructure; taking innovative approaches that can benefit society, etc.