Link to IFC's 2002 Annual Report
Washington, DC, September 25, 2002.- The International Finance Corporation
(IFC), the private sector developing arm of the World Bank Group, will
provide up to US$600 million of trade credit lines to Banco Itau and Unibanco
for on-lending to Brazilian exporters. These loans constitute a rapid
response by IFC to the effects on Brazilian banks and companies of risk
aversion in global markets.
The IFC trade finance packages of up to $300 million each will be provided
to Itau and Unibanco in the form of immediately available $50 million loans
with maturities of up to 2 years, as well as syndicated 1-year credits
of up to $250 million from international commercial lenders.
Unibanco has already completed syndication of an oversubscribed first tranche
of $125 million from its 1-year loan facility among 18 international banks,
and will close this transaction during the week of September 30. Itau
began syndication of its loan package among international banks earlier
this week, and expects to close a $100 million first tranche of its 1-year
loan facility with funding from commercial lenders in mid-October.
“IFC has designed these two loan packages to help Brazil address the current
shortfall in commercial credit offered to the country, and to lengthen
trade finance maturities available to Brazilian exporters. The two
banks’ strong performance indicators, well-diversified business profiles,
as well as nationwide franchises assure that funds provided by the IFC
loans will be made rapidly available to the Brazilian foreign trade sector,”
said Bernard Pasquier, IFC Director for Latin America and the Caribbean.
Suellen Lazarus, Director of IFC’s Syndications Department, also noted:
“The IFC loans are structured to encourage international lenders to keep
credit lines open to Brazilian financial institutions. By benefiting
from IFC’s de facto preferred creditor status through an IFC syndicated
loan, Brazil country exposure concerns of the international banks
are directly addressed.” Mrs. Lazarus added: “These loans also
demonstrate that for the right Brazilian issuers using an appropriate transactional
structure, international funding can be mobilized from commercial lenders,
in spite of unsettled market conditions.”
Two consequences for Brazil of risk aversion in global markets have been
a decline in the rollover rate of maturing trade lines from international
lenders to the country’s banks and corporates, as well as a reduction
in the volumes and tenors of lines that are re-extended to such borrowers.
In response to this situation, the Government and some multilateral
financial institutions have announced several measures to provide temporary
liquidity to trade finance markets. IFC is joining these efforts.
In addition to helping address the current lack of international commercial
credit, IFC’s initiative will also reinforce the continuing improvement
in Brazil’s trade accounts, which should make the country less vulnerable
to external shocks.
Itau is Brazil's second largest private sector bank (fifth, overall) with
assets of BRL87.0 billion, or US$30.8 billion, as of June 30, 2002. Unibanco
is the fourth largest private sector bank in Brazil (seventh, overall)
measured by total assets BRL63.3 billion, or US$22.4 billion, as of June
IFC’s mission (www.ifc.org)
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.
In the fiscal year 2002, Brazil was the largest recipient of IFC’s
financing in Latin America and globally, with a commitment of $619.6 million
in 13 projects.