Tuesday, Jun 25, 2019
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IDB seeking to double financing to regional companies

The Inter-American Development Bank(IDB) group expects to more than double its annual financing to companies in Latin America and the Caribbean over the next four years, a move that will help it fulfill its mission to promote development though the private sector in the region.

Private sector financing by the IDB Group–including loans and grants–is expected to exceed$3 billion per year by 2015 from$1.4 billion in 2010. The group is comprised of the Inter-American Development Bank(IDB), the Inter-American Investment Corporation(IIC)and the Multilateral Investment Fund(MIF).

The IDB is expected to increase its operations without a sovereign guarantee in small and vulnerable countries in the region, and boost lending to private sector projects that will help promote greater social inclusion and poverty reduction, as well as help the region mitigate and adapt to the effects of climate change and improve its competitiveness with better infrastructure.

That means, for example, that the IDB will increase its support for traditional infrastructure projects, such as roads and airports, as well as projects in areas such as health care, education, renewable energy and energy efficiency.

“One of the biggest challenges for Latin America and the Caribbean in the next decade is to achieve a sustainable level of economic growth. Since the private sector creates on average nearly 90 percent of all the jobs in the region, increasing support for this sector can be a very effective tool to speed up the region’s lagging growth, create more jobs, and improve the lives of the poor,”said Steven Puig, vice president for the IDB’s private sector and non-sovereign guaranteed operations.

“We are looking to finance projects that can help improve the lives of people, integrate the poor into the formal economy and promote a type of development that is environmentally and economically sustainable.”

The increase in financing to the private sector in coming years will contribute to the IDB to fulfill the mandates set by the bank’s governors for its capital increase. Last year, the board of governors of the IDB agreed to a$70 billion increase of the bank’s ordinary capital, the largest expansion of resources in the IDB’s history.

Under the terms of the accord, up to 20 percent of the bank’s capital will be allocated to support the financing without sovereign guarantees. Given the current characteristics of the portfolio without sovereign guarantee, this means that the IDB could grow more than twice the volume of loans and guarantees to the private sector. In addition, the Governors of the IDB delegated the approval of future changes to this limit to the Executive Board of the Bank.

Under the capital increase, the IDB is expected to boost total lending to small and vulnerable countries to 35 percent of its total lending by the end of 2015. Lending in support of climate change adaptation initiatives as well as projects in renewable energy and environmental sustainability is expected to reach 25 percent of total lending by 2015, from an average of 5 percent over the 2006 to 2009 period.

Lending for poverty reduction and equity enhancement programs is expected to increase to as much as 50 percent of the bank’s total lending by the end of 2015.

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