CAMIF

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	26590
Company name	Central America Infrastructure Fund
Country	Central America Region
Sector	Collective Investment Vehicles
Environmental category	FI
Department	Infrastructure
Status	Pending Approval

Date SPI disclosed	November 19, 2007
Projected board date	December 21, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The Central American Mezzanine Infrastructure Fund (CAMIF or the Fund) is being created as a mezzanine fund focused on medium sized infrastructure projects/companies in Central America, Dominican Republic, Mexico and Colombia.

The Fund is designed to invest mainly in one or more of the energy, transportation, utilities and telecom sectors; and to consider other opportunistic investments in infrastructure related sectors such as natural resources, housing, agribusiness and tourism.

Anticipated development impact of the project

Infrastructure investment remains among the most important challenges facing Central America. The region’s ability to grow, compete, and reduce poverty is constrained by bottlenecks in the power, water, road, ports and rail sectors. Services such as water and energy, which are essential for modern industry and commerce and improve health and social welfare, need to be improved. The infrastructure needs are expected to become even more significant in the context of further regional economic growth and integration. While the public sector still has a large role to play, private sector involvement is required in order to address the infrastructure challenge.

A key challenge facing developers of private or public-private partnership infrastructure projects has been the availability of subordinated debt and/or equity capital which have remained a scarce commodity in Central America. This project will thus address a key constraint to the increasing involvement of the private sector in the development of infrastructure projects in the region. This will free public sector capital to be invested in other priority sectors.

The Fund’s portfolio companies will benefit from having an investor capable and willing to share its industry and financial expertise as well as to play an active role in strategic development, implementing change, and establishing contacts with partners. The fund’s participation in these activities would help the client companies to be more competitive both on the regional and international levels.

CAMIF is also expected to impose market discipline on investee projects, leading to better alignment with demand for infrastructure services, more efficient management and lower operating and maintenance cost.

IFC's expected development contribution

IFC will support the development of the first dedicated regional infrastructure mezzanine fund for Central America and of a new asset class in the region. IFC’s participation in the Fund is expected to bring comfort to other potential investors in a socially relevant new fund sector. With its knowledge of infrastructure, Central America, structured finance and mezzanine investments, IFC’s participation is expected to encourage the Fund to invest more aggressively in Central America and in particular in frontier countries and socially relevant infrastructure sectors such as utilities. IFC will also participate on the Advisory Board to provide guidance on governance issues.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will determine how the Core Investment Team will adapt and expand EMP Global's existing environmental and social management systems for risk analysis to the Fund, analyze the activities proposed to be supported with IFC financing for types of transactions and infrastructure sectors, and determine the applicable requirements, that are expected to be:

- The IFC FI Exclusion List,
- The applicable National Social and Environmental Laws and regulations of the countries were investments are made, and
- The IFC Performance Standards (PS).

IFC will also review the capacity of CAMIF to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, CAMIF will be required to:

- Develop or upgrade, if necessary, the SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that investments supported by IFC financing are in compliance with the Applicable Requirements;
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis; and
- Submit a periodic report to IFC describing the environmental and social performance of CAMIF’s investments.

For all category A subprojects, CAMIF will need to provide IFC, prior to investing, information relating to CAMIF’s assessment and management of social and environmental risks.

IFC PROJECTS