IFC is helping the private sector in Latin America and the Caribbean increase its competitiveness and its role in social and economic development.
The region is in its fourth consecutive year of growth, but GDP per capita growth has been slower here in recent years than in all other emerging market regions except Sub-Saharan Africa. Persistent poverty and inequality are also increasing social and political tensions, and many groups do not perceive the benefits of economic growth.
Most governments in Latin America and the Caribbean recognize that the private sector is an increasingly powerful force for development, and the private sector itself is more actively addressing inequality and encouraging entrepreneurship. Investors in the region are identifying stakeholder engagement and sustainability as important strategies for establishing strong local ties, strengthening reputations, and improving bottom lines. And IFC is well positioned to help.
IFC's Strategy: An Ongoing Commitment
IFC puts clients' needs first in striving for strong growth with developmental impact. At the regional and country level, our strategic focus in Latin America and the Caribbean is on improving the business environment, infrastructure, access to finance, and the sustainability of private sector activity.
We continue to invest heavily and provide technical assistance to promote sustainable economic growth, helping reduce poverty and improve people's lives. In fiscal 2006, we committed a total of $2.6 billion—$1.75 billion for 69 projects in the private sector, and an additional $888 million from commercial banks through syndicated loans.
Latin America and the Caribbean remains the largest recipient of IFC financing among developing regions. The region's top countries for IFC financing this year were Brazil, Mexico, Argentina, Colombia, and Peru. Sectors of recent investments range from microfinance and housing finance to infrastructure and agribusiness.
Improving the Business Environment
IFC and the World Bank's annual Doing Business reports are comparing practices in countries worldwide to pinpoint ways that governments can make business regulation less burdensome. Reports focusing on Brazil and Mexico have recently been issued, and others on Latin America and the Caribbean are forthcoming.
IFC's technical assistance facility for the region is taking the lead in several countries to simplify business registration, helping move smaller businesses into the formal economy. In Peru, where more than 60 percent of businesses operate informally, we have helped them enter the formal sector by reducing the time needed to start a business in the capital city, Lima, from more than 60 days to two or less.
Learn more about the Technical Assistance Facility for LAC...
Increasing Access to Finance
In fiscal 2006, IFC committed a record $635 million for the region's financial sector through 25 transactions, including $59 million in syndicated loans from participating banks. About 70 percent of these commitments, or $410 million, were local currency transactions, including innovative projects in Brazil, Colombia, and Peru. We also developed a strong program with second-tier banks to make credit available to midsize enterprises.
We recently provided a seven-year loan of $10 million equivalent in local currency to Mexico's Banco Compartamos. This follows a previous investment of about $15 million, our first-ever structured bond from a microfinance institution in Mexico. The proceeds of these transactions are being used to fund some 400,000 small businesses, primarily owned by women in rural areas.
IFC is also increasing access to housing finance. We invested in Rio Bravo Securitizadora in Brazil to increase the pool of funding for developers of housing for middle-income people. This transaction also provided opportunities for local institutional investors to diversify their portfolios.
Strengthening Infrastructure
IFC's recent investments in infrastructure include a power company in one of Brazil's poorest states and several airports and airline companies in the Caribbean. We also advise governments on private sector participation in public services, as well as the restructuring of state-owned enterprises. These services are establishing public-private partnerships that help governments increase services despite budget constraints while benefiting from private sector expertise and finance.
IFC recently announced financing for the first road project in Mexico under the new public-private partnership framework. In Brazil, we are advising the federal government on two initiatives, a road in Bahia and an irrigation project in Pontal in the country's northeast.
In Guatemala City, we are working with the World Bank to finance construction of a mass transport system. The subnational financing consists of a partial credit enhancement to Banco G&T Continental through a risk-sharing facility. The transaction will help mobilize $46.2 million for a transit system that is expected to benefit 180,000 people daily.
Learn more about Public-Private Partnerships...
Promoting Sustainability
IFC is leading a number of corporate governance initiatives across the region and providing technical assistance to increase clients' access to markets. In Brazil, we provided financial support for development of the Business Sustainability Index, which was recently launched by Bovespa. The second index of its kind in emerging markets, it includes 28 local companies listed on the São Paulo Stock Exchange. It tracks corporate governance and environmental and social performance in addition to financial results.
IFC's recent work to set environmental and social standards is increasing the effectiveness of our financial and technical assistance. Our $4.6 million investment in Guyana Goldfields will support an ongoing exploration program and project feasibility studies. Because of our early involvement, we are working with the company on community and civil society partnerships, local economic development, and environmental management.
In high-risk and low-income countries, where IFC's investment opportunities are limited, we provide technical assistance to improve the sustainability of economic activity. In Nicaragua, for example, we are collaborating with the World Wildlife Fund on forestry initiatives.
50 Years of Private Sector Support
IFC's first investment in 1956 was a $2 million, 15-year loan to Siemens for the manufacture of electricity-generating equipment in Brazil. A half-century later, we have invested and mobilized $31 billion in Latin America and the Caribbean, including nearly $600 million with 30 companies in the region's lowest-income countries, Bolivia and Haiti.
This year we presented our Client Leadership Award to a Latin American company for the first time—Argentina's Aceitera General Deheza—recognizing this successful firm's key contribution to sustainable development. IFC's work with AGD is just one of many long-term partnerships with the region's companies. Our support has helped many of them emerge as industry leaders and better corporate citizens, in their country, the region, or worldwide.
Read story on AGD and the Client Leadership Award...
For more information contact:
Adriana Gomez
Communications Officer
Washington, D.C.
E-mail: AGomez@ifc.org
Phone: 202-458-5204
Published October 26, 2006
