Santa Fe de Bogotá, Colombia, October 31, 2006
— The International Finance Corporation, the private sector arm of the World Bank Group, today announced during a visit to Colombia by its executive vice president, Lars Thunell, that it had invested $291 million in the country during fiscal 2006 ((July 2005 to June 2006). This amount brings IFC’s total investments in Colombia to $1.7 billion since 1959.
“The private sector in Colombia is the largest source of employment and plays a crucial role in the socioeconomic development of the country,” said Thunell. “IFC will continue its commitment to Colombia by supporting its private sector, investing in infrastructure and supporting the banking sector to provide greater access to finance that is indispensable to maintaining sustainable growth.”
Thunell added, “Strengthening the private sector is critical for a country’s economy and support the fight against poverty and inequality.”
During his visit to Colombia, where he began his first tour of Latin America, Thunell held meetings with President Alvaro Uribe Velez, who expressed interest in IFC’s support for increasing access to finance for small and medium enterprises, as well as for the development of transportation infrastructure. The President also indicated an interest in benefiting from IFC’s experience in biofuels. As part of his agenda in Colombia, Thunell also met with executives from Fundacion Social and the banks Caja Social and BCSC in order to evaluate their advances in microentrepreneurship that IFC has helped fund. He also met with other representatives of the country’s finance sector.
IFC’s strategy is to assist the sectors that contribute most to Colombia’s economic growth. In implementing this strategy, IFC focuses on five areas of activity:
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Financial sector support
. IFC will continue to support the consolidation of the banking sector and provide technical assistance to develop financial markets, facilitate SME access to long-term finance, and support the development of microenterprises through investment and non-investment products.
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Infrastructure.
IFC will support projects in transportation (roads, airports, ports, and railroads) and in electricity generation and transmission, with emphasis on establishing frameworks for public-private partnerships at the national and municipal levels.
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Extractive industries.
IFC aims to support local midsize oil and gas companies through equity and long-term financing, while assuring that projects meet high environmental, social, and governance standards, and that revenues are used transparently and effectively. In the gas sector, IFC plans to support opportunities for private investment that have been created by a new contract model that reduces the state’s share of hydrocarbon production.
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Local businesses
. IFC is working with large and midsize corporations as they increase their access to local financial and capital markets, amid an overall economic recovery and the strengthening of the financial sector. IFC will continue providing equity and long-term financing to facilitate firms’ expansion within the region and overseas and assist in the consolidation of certain sectors. IFC’s focus will be on export-oriented manufacturing (e.g., galvanized steel, food, and agribusiness), as well as on cement, retail chains, and petrochemicals.
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Environmental projects
. IFC supports the development of alternative fuels (such as ethanol and biodiesel) and is working to identify opportunities for projects in the carbon credit market and renewable energy.
IFC’s Innovations in Colombia
Since the 1990s, IFC has played a key role in the development of efficient capital markets in Colombia and of a solid regulatory framework, confirming the vitality of the country’s private sector and the government’s commitment to create favorable conditions that guarantee the participation of businesses in economic development. In the past few years, IFC has developed several important projects in Colombia:
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Helping develop the housing finance sector
-- IFC provided a partial credit guarantee to the Colombian Housing Mortgage Corporation, a secondary mortgage company, for the issuance of Latin America’s first non-performing mortgage loans securities. This investment has been instrumental in establishing a bridge between capital markets and the mortgage banking industry. The project has helped promote primary mortgage lending in Colombia, while helping build a pool of mortgage assets that will eventually benefit the country’s capital markets.
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Issuing domestic bonds
-- The increased use of guarantees and the issuance of domestic bonds have been key to developing local capital markets in Colombia, which have become a viable alternative to the banking sector, particularly for longer tenors. These financial products have also helped to improve the debt profile of many Colombian companies. To help, IFC supported the regional expansion of a leading privately owned Colombian multinational, helping it improve efficiency and upgrade the environmental standards of its existing facilities.
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Supporting the transformation of the mortgage sector
-- IFC provided a partial credit guarantee to Colombia’s leading mortgage originator, Banco Davivienda, to facilitate a domestic subordinated bond issue. The objective was to bolster Davivienda’s capital base and facilitate its expansion during the recovery of the Colombian financial system. With this operation, IFC supported the evolution of the Colombian mortgage sector, in which former savings and loan institutions are shifting their focus from financing mortgages to origination and securitization, and transforming themselves into universal banks.
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Helping improve corporate governance
-- IFC’s work to improve corporate governance in Colombia has been an integral part of our efforts to strengthen the country’s capital market framework. IFC has helped improve corporate governance practices at several of its client companies in the country and has sponsored training programs for high level executives in coordination with the local Chamber of Industry and Commerce, Confecamaras.
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Supporting microfinance
-- Microfinance promotes development impact by fostering entrepreneurial activity and income generation. IFC’s recent financing to the Colombian WWB affiliates is expected to have an exceptionally high impact promoting productive activities, generating employment, and improving social equity. IFC’s financing will allow the WWB affiliates to extend subloans to at least 70,000 microentrepreneurs, most of them women who live below the country’s poverty line. Given the gender focus of the WWB affiliates, the project will also have a major impact in increasing the economic participation of women. In addition, IFC’s financing will help the WWB affiliates develop new long-term credit products and expand their lending programs into new geographic areas.
About IFC
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit
www.ifc.org/lac
