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ANNUAL REPORT HIGHLIGHTS IFC’S COUNTERCYCLICAL ROLE IN LATIN AMERICA Changes in investment climate needed to strengthen long-term economic prospects


Adriana Gomez
Phone.: +(202) 458-5204

E-mail:
agomez@ifc.org

For copies of the Annual Report

Please contact: Dana Lane

Phone: +(202) 473 7986

Email:
dlane@ifc.org


Washington, D.C., September 15, 2003—The International Finance Corporation  played a key countercyclical role this year in Latin America, providing much-needed long-term capital and trade financing to the region’s private sector, according to IFC’s 2003 Annual Report released today in Washington.

IFC’s committed financing in Latin America and the Caribbean amounted to $2.18 billion for 54 projects over 16 countries, the highest of any region. This was an increase of $706 million from fiscal year 2002, and the largest amount in recent years. Total financing included $918 million mobilized from banks participating in IFC syndicated loans. IFC’s financing to the region accounted for almost half–—44 percent—of  IFC’s global funding in the fiscal year 2003, which totaled $5.0 billion. IFC is the private sector arm of the World Bank Group, and promotes sustainable development in emerging markets.


Brazil, Colombia, Mexico and Argentina were the region’s largest recipients of IFC financing in the fiscal year 2003.  “Latin America is one of our key priorities,” said Peter Woicke, head of IFC and Managing Director of the World Bank Group. “We have been very active in responding to the needs of the private sector during another challenging year. The retreat of private capital, combined with the global economic slowdown, increased demand for IFC lending and services in the region. IFC is a long-term partner, and we intensified our efforts with innovative transactions and new ways of doing business.”

For the second consecutive year, Brazil was the largest recipient of IFC funds, both in the region and worldwide, with $888.4 million. Amid a liquidity shortage and a rapid decline in credit, IFC helped leading Brazilian banks Unibanco, Itaú, BBA, and Bradesco secure trade finance, which benefited many companies and a broad cross-section of Brazil’s exporters.  


In Colombia, where IFC’s financing reached $218.8 million, IFC’s role in strengthening the domestic capital market, especially the secondary mortgage market continued to be critical, with investments in Banco Davivienda and the Colombian Home Mortgage Corp.

Mexico became the region’s third largest IFC partner with $151 million in funding. Here the Corporation provided a partial bond guarantee to support private sector financing for a water project in the Tlalnepantla municipality, in metropolitan Mexico City. This was the first municipal water financing in Mexico, and the first such transaction for IFC worldwide.

Argentina was the fourth largest recipient of IFC’s funds, with $120 million centered on pre-export financing to agricultural export firms Molinos and Vicentin. These operations continued IFC’s efforts to help Argentina emerge from crisis.  IFC was also very active in helping Argentine companies restructure their debt.

IFC also financed regional projects for an amount of $228 million, as a way of facilitating ‘south-south’ investments that encourage efficient resource mobilization within the region. Examples include financing to Brazilian bus manufacturer Marcopolo, to support its expansion plans in Mexico, and to Red Sanitaria Hospiten to build and operate hospitals in the Dominican Republic and Mexico.


Central American and Caribbean countries received funding for a combined $291.4 million, with projects in Costa Rica, the Dominican Republic, El Salvador, Guatemala, Jamaica, Panama and Trinidad and Tobago. IFC is supporting here the process by which these countries seek to establish economies of scale and increase their competitiveness in the face of accelerating globalization. IFC’s financing to Cuscatlán Group in Central America is a good example of this strategy and of IFC’s role facilitating “south-south” investments.


Non-investment activities are becoming a key part of IFC’s operations in the region. For example, IFC is supporting the Fome Zero (Zero Hunger) project in Brazil by creating a mechanism to encourage contributions from corporations to poor municipalities. Other non-investment activities include IFC’s partnerships with Poema and Instituto Terra in Brazil, and IFC’s support to the HIV/AIDS program that the Brazilian company Odebrecht has established at its operations in Angola.

These activities not only reflect IFC’s role as a leading institution in promoting a sustainable private sector development in Latin America, but also bring added value to IFC clients. By working with IFC, companies not only receive financing and technical assistance, but can also bring the expertise and reputation of working with a partner recognized for its strong social and environmental safeguards. Last year, ten international banks acknowledged IFC’s role in these areas by adopting its safeguards for their project financing in an initiative known as the Equator Principles.

In the Annual Report, Peter Woicke recognized that private sector development in emerging markets “is not just about making investment. Companies, not only in the developed world but also in China, India, Eastern Europe, and Latin America –have recognized that long-term profitability is best enhanced and guaranteed when these investments are made in an sustainable way.”


Bernard Pasquier, IFC’s Director of the Latin America and Caribbean Department said: “IFC is a long-term partner for good and bad times. We will continue providing the financing and services to help companies that share our values to overcome the harsh situation of the last two years. We will encourage the return of the private capital to Latin America. IFC –he said- also seeks changes in the investment climate that will strengthen the region’s long-term prospects.”

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 $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries.  IFC’s committed portfolio at the end of FY03 was $16.8 billion.