TUXTLA GUITIEREZ, MEXICO, Feb. 17—The International Finance Corporation today signed investment agreements for its US$5 million commitment to Fondo Chiapas, a for-profit investment fund targeting opportunities in Mexico's southernmost state. The IFC financing is part of a capital increase that will double the fund's resources for investing in local small and medium enterprises, leading over time to considerable job creation, new technology, skills enhancement, and other economic benefits in one of Mexico's poorest areas.
Income levels in Chiapas are less than half the Mexican national average, with health and education levels also far lower than those of the rest of the country. Fondo Chiapas began in late 1994, seeking to combat the state's chronic poverty by attracting new private capital to develop its largely untapped potential in agribusiness, aquaculture, tourism, light manufacturing and other industries. It was designed as a public/private partnership bringing together resources from the Mexican government, the local business community, and Mexico City business leaders.
Initially capitalized at US$2.3 million-equivalent, the privately managed fund has to date made four investments: in a local export promotion company; the conversion of ranchland into a rubber plantation; a plant that buys cashews from local campesinos and processes them for sale nationwide; and the state's first commercial shrimp hatchery. The fund's promotional activity has also led to private investors' reactivation of a large-scale tuna processing plant that had long been closed.
"Despite its less-developed status, Chiapas is rich in natural resources, labor, climatic conditions and tourist attractions," said IFC Latin America and the Caribbean Director Karl Voltaire. "We are glad to support this innovative local initiative. It makes an important contribution to development by providing early-stage equity capital for projects sponsored by skilled entrepreneurs able to build businesses out of the state's natural advantages."
"IFC is an essential partner in Fondo Chiapas, and we look forward to continued close collaboration in the years ahead," said the fund's chairman, Enrique Molina, CEO of Grupo Industrial Escorpion S.A. de C.V. in Mexico City. "We have an extensive pipeline of new investments planned that should help raise standards of living and increase private sector development in Chiapas."
IFC has been working with Fondo Chiapas since 1996, sharing its global expertise in project appraisal, fund structure and governance, and environmental impact assessment from work with numerous other investment funds in developing countries. The Corporation has also used grant resources from its trust fund with the Canadian International Development Agency to carry out a study of the investment potential and environmental issues of the local shrimp industry. This study has already led to an investment by Fondo Chiapas.
The US$5 million investment that IFC announced today is being matched by existing Fondo Chiapas shareholders as well as new investors that IFC attracted into the fund such as Grupo Minsa, Grupo Maseca and Grupo Financiero Bital. The capital increase will provide Fondo Chiapas with more than US$12 million to invest in local small and medium size enterprises over the next 10 years. Individual investments are expected to be in the US$400,000 to US$3 million range, with returns produced by the eventual sale of equity stakes to other strategic investors or in the Mexican capital markets.
IFC, a member of the World Bank Group, is the world's largest multilateral source of equity and loan financing for private sector projects in developing countries.
