Link to IFC's 2002 Annual Report
Washington D.C., September 18, 2002—
Latin America continues to be the largest recipient of funds from the International Finance Corporation (IFC), the private sector financing arm of the World Bank Group, according to the Corporation’s
2002 Annual Report
, released today in Washington D.C.
As Latin America faced a difficult economic period and a slowdown in foreign private capital flows in the last Fiscal Year 2002 (July 2001-June 2002), IFC continued supporting the region’s private sector by supplying and mobilizing much needed long-term capital, amounting to US$1,474 billion, nearly a third of all of IFC’s global funding in that time period which amounted to $3,6 billion in projects worldwide. IFC’s mission is to promote sustainable private sector investment in developing countries.
Brazil, Colombia, El Salvador, the Dominican Republic, Jamaica and Mexico, were the region’s largest recipients of IFC financing in FY 02, in sectors ranging from the financial, to infrastructure, including airports, maritime ports and telecoms. IFC also invested in education, health care, agribusiness, retail, manufacturing, and small and medium enterprises, among others. In Argentina, where private sector activity has grounded to a halt, IFC continued its support, bringing its first external financing since the devaluation.
IFC’s 2002 Annual Report
, in Latin America and the Caribbean the Corporation committed financing for 47 projects amounting to $1,144 billion for its own account and $330 million in syndicated loans, with a total of $1,474 billion. This marks a 45 percent increase from last year’s commitment of $1,017 billion, reflecting IFC’s confidence in the private sector potential of the region.
Peter Woicke, head of IFC and Managing Director of the World Bank
, said: “IFC is responding to the diverse challenges in Latin America, and will continue supporting a sound and vibrant private sector in the region. The difficult situation in the region created a strong demand for our products and services, and we will keep supporting projects in sectors and companies that demonstrate both a sustainable impact and strong financial prospects.”
Among the challenges the region is facing in the future, IFC’s Annual Report stresses: “Private sector development is urgently required in Latin America. Critical to the region’s development is stronger growth through higher investment and savings as well as a better distribution of the benefits of that growth. Failure to make progress in economic, financial, environmental, or social sustainability will undercut the ability of some countries in the region to remain competitive.”
Confidence in the Latin American private sector
In FY 02, Brazil was the largest recipient of funds, with a commitment of $619.6 million in 13 projects, followed by Colombia with $219.75 million in four projects, and El Salvador, with one commitment totaling $120 million for helping expand the national electricity distribution network.
Argentina was the fourth largest recipient with commitments of $80.5 million in two projects, while the fifth was the Dominican Republic with an $80 million commitment in two companies. The private sector in Mexico received funding of $77.66 million for eight projects, while Jamaica received $70.78 million for three projects, and Peru’s private companies received funding of $43.4 million for 5 projects. This shows that in addition to IFC’s operations in larger countries in the region, it also continued providing substantial support for smaller countries.
Bernard Pasquier, IFC’s Director of the Latin America and Caribbean Department
Latin America has been and will continue as one of IFC’s top investment priorities.” Mr. Pasquier added: “Our demand for credit is greater when access to the external market is more difficult. IFC is a long-term partner and we will continue helping the regional private sector gain greater access to external private financing, supporting the development of local financial markets and helping firms grow and improve their international competitiveness.”
Sponsoring corporate governance standards has also been at the center of IFC’s operations in the region. IFC has advised governments and the private sector in several Latin American countries such as Chile, Brazil and Colombia, to develop private sector corporate governance codes. IFC believes that a modern regulatory framework and better corporate governance practices will go hand in hand to build greater public confidence in the securities market. IFC is currently assisting in the establishment of institutes of corporate governance that will provide training to company directors in the region.
IFC’s future strategy in Latin America and the Caribbean will focus on reaching smaller firms through financial intermediaries, including credit lines for small and medium enterprises (SMEs) as well as financing larger clients that have a major impact on growth and employment. With such financing, IFC will keep offering its expertise in corporate governance and sustainability practices. IFC will also focus its operations in the region by selective financing of smaller projects in high impact areas, such as microfinance, and in introducing innovative financing instruments like local currency financing.
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in
the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s committed portfolio at the end of FY02 was $15.1 billion.
IFC press releases are available on line at http://www.ifc.org/pressroom
Highlights of IFC in the Latin America Region
was the largest recipient of IFC’s financing in FY 02 not only in the region, but also globally. In Brazil, the perceptions of the possibility of contagion from the Argentina crisis, plus concerns in various places about the impact of the elections in the fall of 2002, coupled with global economic turbulence, resulted in a decline of foreign investment and availability of trade credit lines. As a consequence, Brazil's economy slowed down as Brazilian firms found it more difficult to raise long term financing as well as renew trade financing lines.
To meet these challenges, IFC strengthened its support to Brazilian companies. One example was the separate credit lines totaling $250 million for Banco Itaú and Unibanco to help finance projects in infrastructure, energy, industrial expansion and environmental upgrading. These lines are now being converted to trade finance lines in order to respond to the acute shortages of such financing under the current market conditions.
The credit lines to Itaú and Unibanco highlighted IFC’s commitment to the country’s economy and IFC’s ability to respond rapidly to the needs of its clients under shifting economic conditions, by making long-term capital as well as much needed trade financing lines available to the private sector. Another example was IFC’s financing to C.N. Odebrecht with $245 million, a major construction company affected by the regionwide withdrawal of capital. Other projects include: Sepetiba terminal with $40 million; chemical producer Synteko with $18 million; Escol@24horas a tutoring service for primary education students with $280,000, among others.
In addition to concluding a record volume of transactions in Brazil, IFC assisted inter alia in the launching of the Novo Mercado, a new stock exchange for companies meeting high standards of corporate governance
, the second largest recipient of funds in the region in FY 02, is becoming one of IFC’s key priorities in the region, not only through financing the private sector but also by working closely with the Colombian government and private companies to improve securities regulations and to develop private sector corporate governance codes. This year’s IFC’s commitment of $219.75 million, tripled the investment of the previous fiscal year which amounted to $73 million.
In Colombia, as in other middle-income countries, market conditions made it difficult to finance expansion and to obtain international capital. The internal conflict complicated this scenario.
IFC stepped in to boost confidence in the prospects of the private sector in Colombia.. Companies supported by IFC in Colombia included Suramericana de Inversiones, which received $100 million in debt and equity to support the company’s reorganization strategy and the adoption of corporate governance standards. This operation was one of the largest and more complex investment and advisory projects in Latin America this fiscal year. Most recently, IFC along with Citigroup and J.P. Morgan Securities Inc. arranged and syndicated an additional $218 million in senior secured facilities to support this project.
IFC has a keen interest in supporting the modernization efforts of the Colombian private enterprises in order to strengthen the back-bone of the Colombian economy and to introduce international state-of-the-art governance and transparency mechanisms.
Other companies which received support in Colombia in FY 2002 were Banco Caja Social, a leading low-income and small business finance institution, with $7 million; Titularizadora Colombiana with $12.75 million, and $100 million to support the expansion plans of Grupo Bavaria.
even though IFC’s existing country portfolio has been affected by the economic crisis, the Corporation is working closely with its clients to help them overcome the harsh economic conditions, as shown by recent support to Aceitera General Deheza, a major Argentine exporter of soy products. This operation was the first new financing made available for the Argentine private sector since the devaluation.
IFC has reaffirmed its commitment to working with clients through a difficult period in Argentina, noting that IFC’s long-term commitment and ability to invest in markets where private capital has become scarce can help restore confidence if there is a genuine government commitment to good policies.
, the seventh largest recipient of funds with $77.66 million, it was the second largest country in terms of number of projects financed, with funding for 8 companies in a variety of sectors. Ecomex, a natural gas company pioneering an environmental friendly public transportation in Mexico city, is a landmark of IFC’s sustainable development projects with an investment of $6.5 million. Ecomex understands that improved air quality and public health can be a business opportunity.
Other projects financed by IFC in Mexico include: a $30 million investment to support the expansion plans of the retail company Coppel and $1.96 million for Mexico’s second largest mortgage lender Hipotecaria Su Casita, to help expand its ability to provide mortgages for low-income households.
While risk-averse investors were discouraged by developments in many parts of the region, Mexico proved more resilient than other countries, attracting stable net private capital inflows, the IFC’s 2002 Annual Report says. “Mexico proved more resilient than other countries attracting stable net private capital inflows,” the Report notes. “Prudent fiscal management and past reforms reinforced the private sector. But Mexico faces new challenges to sustaining the competitiveness of its business in a global economy. It will be equally challenging for Mexico to provide its population–half of which is still poor- with an adequate standard of living, a prospect plausible only with sustained private sector-led economic growth,” IFC’s Report concluded.
Commitments by Region – FY02 - $ millions
· Sub-Saharan Africa 252
· East Asia and the Pacific 740
· South Asia 267
· Europe and Central Asia 739
· Latin America and the Caribbean 1,474
· Middle East and North Africa 137
· Global 2