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INTER-AMERICAN DEVELOPMENT BANK

INTER-AMERICAN DEVELOPMENT BANK. I D B - O P E R A T I O N S W I T H O U T S O V E R E I G N G U A R A N T E E S. Hans Schulz Private Sector Department March 2007. Inter-American Development Bank (IDB).

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INTER-AMERICAN DEVELOPMENT BANK

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  1. INTER-AMERICAN DEVELOPMENT BANK I D B - O P E R A T I O N S W I T H O U T S O V E R E I G N G U A R A N T E E S Hans Schulz Private Sector Department March 2007

  2. Inter-American Development Bank (IDB) • Regional multilateral institution with 47 member countries dedicated to accelerate economic & social development in Latin America and the Caribbean Private Sector Department • Target Clients • Responsible for non-sovereign guaranteed operations at IDB • Privately controlled entities in all sectors of the economy • Utilities and other infrastructure operators • Banks and other financial market institutions • Corporates with annual sales of US$100 million and above

  3. IDB’s Competitive Advantages • Deep Knowledge and Excellent Relations with Latin America and the Caribbean • Oldest and largest multilateral lender to Latin America and the Caribbean : US$ 6-7 billion annually • Cooperative, long-term relationship with member countries • Helps mitigate political risks • Exemption from withholding taxes and de facto preferred creditor status • Solid Financial Position • AAA/Aaa Rating (S&P, Moody’s) • Authorized capital of US$101 billion • Ability to extend tenors at market pricing • IDB Value-Added • “Umbrella effect” helps to attract B-lenders • Catalytic role: IDB financing mobilizes private investment • Internationally recognized environmental, social, labor and health standards provide comfort to governments, communities, lenders and sponsors • Flexible risk sharing arrangements

  4. Recent Strategic Changes • 2005 • 2007 • Eligible Sectors • Infrastructure, Captial Markets Operations, Trade Finance • ALL ECONOMIC SECTORS, MORE FLEXIBLE USE OF PROCEEDS* • Eligible Clients • Privately Owned Entities • PRIVATELY OR STATE-OWNED CORPORATE ENTITIES AND FINANCIAL INSTITUTIONS** • Currency • All Transactions in US$ • FINANCING AND GUARANTEES ALSO IN LOCAL CURRENCIES • Limits • IDB participation limited to US$75 Million / 25% of Project Cost • US$200 MILLION PER PROJECT*** / 50% OF PROJECT COST • Turnover times • Time-consuming internal Approval Processes • MORE EFFICIENT, FASTER PROCESSES, ADAPTED TO MARKET NEEDS * Exceptions: negative exclusion list ** Without Sovereign Guarantee *** Up to US$400 Million in Exceptional Cases

  5. Lending Products • A/B Loans • “A” – IDB Loan Tranche • “B” – Participation of Market Players (international banks and Institutional Investors) • IDB is Lender of Record • Project Finance • Warehousing lines • Revolving credit lines • Refinancing • Senior and subordinated Loans • Tenors: up to 30 years (average: 10-15 years) • Financing in local currencies (depending on market conditions forswaps)

  6. Guarantee Products Characteristics: • Partial Credit Guarantees (covering all risks – up to 50%; up to 100% within RTFFP) or Political Risk Guarantees • Guarantee amount determined to optimize impact on rating (typically 30%-50% guarantee for improvement in rating of 3 to 4 notches - local scale) • Guarantee amount can vary or stay constant over the tenor (up to 30 years), also amortizing securities • Guarantee capped in US$ - Guarantee payment and reimbursement claim can be in local currency of underlying security • IDB-reimbursement rights can be subordinated to other investors • IDB-Gurantee is unconditional Transaction types: • Bond Issues • Project Finance • Asset-Backed Securities (ABS), i.e. Mortgage-Backed Securities • Securities backed by Future Flows (i.e. Diversified Payment Rights) • Structured Trade Transactions (Investment funds, Corporate finance)

  7. Structured Finance (e.g. securitizations) Bond issues Investment funds Regional Trade Finance Facilitation Program (TFFP) Trade finance facilities (TFFs) Structured trade finance Financial Markets: Products and Services Capital Markets Trade Finance Financial Institutions (new mandate) • General Purpose: Lending facilities • Subordinated debt (Tier II) • Partial Credit Guarantees

  8. Nature • Credit Guarantee (“CG”) in favor of Confirming Banks to cover the risk they take on eligible trade financing instruments issued by LAC Issuing Banks • Participants • Issuing Banks: Private or state-owned banks incorporated in IDB Borrowing Member Countries, track record in trade finance, satisfactory credit worthiness, compliance with IDB standards • Confirming Banks:Any international/regional bank with recognized track record in international trade financing • Applicable Exposure Limits • (i) Max. Total Program exposure at any time: US$400 million • (ii) Up to US$40 million credit line per Issuing Bank; • (iii) Up to US$120 million exposure per IDB Borrowing Member Country • Tenor • Up to 3 years • Coverage Level • Up to 100% per individual transaction • Eligible Transactions • Letters of Credit • Export and import financing funded by Confirming Banks • International Guarantees (Bid, Performance, Advance Payment Bonds) and Stand-by Letters of Credit • Costs • No joining costs • Usually, guarantee fees equivalent to 75% of confirmation fee / spread on the TFFP-guaranteed amount Trade Finance: Trade Finance Facilitation Program Program Characteristics

  9. Operational Guidelines

  10. Portfolio – Approved Projects(in US$ million)

  11. Portfolio – Projects by Sectors(as of March 2007) • A-Loans • B-Loans • Guarantees • US$ 3,219.5m • US$ 3,699.2m • US$ 1,810.3m

  12. Financial Markets - Transactions • Brazil • Brazilian Infrastructure Investment Fund (BIIF) • Brazilian Infrastructure Securities Warehousing Facility • Chile • Securitizadora Security: revolving Mortgage-Backed Loan Facility • Costanera Norte Highway System Infrastructure Bond • Santiago-Valparaiso-Vina Toll Road • Colombia • Colpatria Mortgage Bond • Mexico • Su Casita MBS Guarantee Facility • Metrofinanciera Mortgage Warehouse and MBS Guarantee Facility • Peru • BBVA Banco Continental: Senior A/B-, and Subordinated loan • BBVA Banco Continental: MBS Guarantee Facility • Graña y Montero Asset-Backed Bond • Regional • Central American Mezzanine Infrastructure Fund • Crecera Trade Finance Facility • Darby Fund • IIG Trade Finance Facility

  13. Infrastructure: Award-winning Deals • Energy • ATE II - 937 Km Power Transmission Line in Brazil • Campos Novos - 880 MW hydro-power plant in Brazil • Novatrans - 1,278 kilometer power transmission line in Brazil • TermoPernambuco - 520 MW thermal power plant in Brazil • Termobahia - 190 MW thermal power in Brazil • Bajio Energy - 600 MW combined cycle plant in Mexico • Light Energy Services - CAPEX program for a power distribution company in Brazil • Termoelectrica del Golfo - 230 MW thermal power plant in Mexico • Aguaytia - 240 MW integrated power project in Peru • Transportation • Quito Airport - Upgrade of International Airport in Ecuador • Camisea - Natural gas and liquids pipeline in Peru • Costanera Norte Highway - Urban highway system in Chile • Rutas del Paciíico - 109.6 kilometer toll road in Chile • Yucatán Gas Pipeline - 694 Km. Gas pipeline in Mexico • Water & Sanitation • Antofagasta - Seawater desalination plant in Chile • Rio Bogotá - Water treatment facility in Colombia

  14. Contact Information Hans Schulz Head of Financial Markets Private Sector Department Inter-American Development Bank 1300 New York Avenue, N.W. Washington, DC 20577 – USA Tel: (1) 202.623.3702 Fax: (1) 202.623.3319 http://www.iadb.org/pri/

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