LAAD expansion

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	27365
Company name	Latin American Agribusiness Development Corporation S.A.
Country	Latin America Region
Sector	Finance & Insurance
Environmental category	FI-2
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	January 8, 2009
Projected board date	February 20, 2009
Previous Events	Invested: June 18, 2009 Signed: May 28, 2009 Approved: April 21, 2009

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project consists of an IFC investment of up to $20 million to the Latin American Agribusiness Development Corporation S.A. (“LAAD” or the “Company”), an existing IFC client, to be on-lent to small and medium (SMEs) exporting private agribusiness enterprises in Latin American countries. The IFC investment will directly support the Company’s portfolio growth.

LAAD is financial intermediary specialized in lending to agribusiness SMEs, which are the economic engine of rural Latin America and earn hard currencies to their home countries. LAAD operates in 15 Latin American countries. LAAD supports farmers producing a variety of products, ranging from soybean and grains to livestock, fruits & vegetables and flowers and ornamental plants for exports. LAAD supports local, in many cases family-owned, businesses and long term investments in agribusiness. LAAD offers medium to long term financing. In turn, LAAD’s main longest term funds providers are IFC, Rabobank and Bank of America.

Anticipated development impact of the project

The project will strengthen access to medium and long term capital to players of a size and in an industry that traditionally have limited access to adequate funding. IFC will also help scale up LAAD, a successful financial intermediary that is continuing its regional diversification throughout Latin America, thereby contributing to the development of financial access throughout the region.

The monitorable indicators of the development impact of the project will be:
- financial return and economic return;
- loan portfolio growth;
- non-performing assets;
- number and amount of disbursements;
- number of permanent and seasonal jobs created by LAAD’s sub-projects; and
- environment compliance monitoring.

IFC's expected development contribution

Without the IFC financing, LAAD would not be able to extend credits beyond 5 years to its clients. The IFC loan allows LAAD to better manage its assets/liability match, and provide adequate maturities to some projects with longer term pay back. Since LAAD is working with IFC, LAAD has been applying IFC’s Environmental & Social guidelines to its entire portfolio, not only those that are financed by IFC, thereby going beyond compliance.

Environmental and social issues - Category FI-2

This project has been classified as a category Financial Institution (FI) project according to IFC’s environmental & social review procedure. IFC has analyzed the activities proposed by the company with IFC financing and has determined that the applicable requirements would include a combination of

- the IFC exclusion list;
- the applicable national laws and regulations where funding takes place; and
- the IFC performance standards.

From the appraisal, IFC is satisfied with the capacity of the company to identify and appropriately address environmental & social risks. The company will need to enhance its Social and Environmental Management System (SEMS) to accommodate IFC’s current Performance Standards and Environmental Guidelines. Specifically, the company will need to:

- Upgrade SEMS practices to the satisfaction of IFC;
- Commit to implement the revised SEMS to ensure the investments are in compliance with applicable requirements;
- Commit to take action to remedy any gaps in the SEMS on an on going basis;
- Once the SEMS has been revised, submit to the IFC examples of the first 3 projects processed with the upgraded SEMS; and
- Submit an Annual Environmental Performance Report (AEPR) to IFC as per format provided by IFC.

Through the implementation of the SEMS, LAAD will manage environmental and social risks. As appropriate IFC may require additional information on specific projects. Following the implementation of revised SEMS, some selected site supervision visits may be carried out jointly by IFC and LAAD staff.

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