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PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
PDF Inter American Development Bank (IDB)
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PDF Inter American Development Bank (IDB)

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  • 1. INTER-AMERICAN DEVELOPMENT BANK T H E I D B F O S T E R I N G T R A D E F I N A N C E I N L A T I N A M E R I C A A N D T H E C A R I B B E A N ( L A C ) S T R U C T U R E D A N D C O R P O R A T E F I N A N C E D E P A R T M E N T March 2008
  • 2. IDB’s 26 Borrowing Member Countries (BMC) Argentina Bahamas Barbados Belize Bolivia Brazil Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Guatemala Guyana Haiti Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru Suriname Trinidad and Tobago Uruguay Venezuela
  • 3. Latin American and Caribbean Risk (S&P Issuer Credit Rating) Chile Bahamas Trinidad & Tobago Barbados Mexico Brazil Colombia El Salvador Peru Costa Rica Guatemala Panama Venezuela Argentina Dominican Republic Suriname Uruguay Belize Jamaica Paraguay Bolivia Ecuador CCC B BB BBB A AA AAA Honduras* Nicaragua* *Rated by Moody’s; converted to S&P
  • 4. Rationale for IDB Support to Trade Finance <ul><li>Trade crucial for development and growth </li></ul><ul><li>Importance in Latin America and the Caribbean (LAC): export-fuelled growth, free-trade agreements, growing intra- regional trade </li></ul><ul><li>One barrier to trade: limited trade finance availability and affordability, especially for smaller banks and companies </li></ul><ul><li>IDB support to increase, stabilize and deepen reach of trade finance for: </li></ul><ul><ul><li>strengthening the LAC region ’ s competitiveness </li></ul></ul><ul><ul><li>helping LAC exporters take advantage of the region ’ s competitive advantages </li></ul></ul><ul><ul><li>helping imports for supply of capital goods (local production), affordable consumer goods (welfare impact) </li></ul></ul>
  • 5. IDB’s Regional Trade Finance Facilitation Program <ul><li>Sept. 2004: Approved by IDB Board of Directors (initially for 5 years), launched in April 2005, first guarantee issuance July 2005 </li></ul><ul><li>November 2006: Permanent status for TFFP, maximum guarantee coverage level raised from 90 to 100 percent </li></ul>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 Participants No joining costs Usually, guarantee fees equivalent to 75% of confirmation fee / spread on the TFFP-guaranteed amount Costs <ul><li>Letters of Credit </li></ul><ul><li>Export and import financing funded by Confirming Banks </li></ul><ul><li>International Guarantees (Bid, Performance, Advance Payment Bonds) and Stand-by Letters of Credit </li></ul>Eligible Transactions Up to 100% per individual transaction Coverage Level Up to 3 years Tenor (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 Applicable Exposure Limits Credit Guarantee (“CG”) in favor of Confirming Banks to cover the risk they take on eligible trade financing instruments issued by LAC Issuing Banks Nature
  • 6. TFFP – Current Status (as of February 2008) <ul><li>US$539 million approved lines with 29 Issuing Banks located in 14 LAC countries </li></ul><ul><ul><li>127 Confirming Banks belonging to 60 International Banking Groups </li></ul></ul><ul><li>- Argentina </li></ul><ul><ul><li>BBVA Banco Franc é s </li></ul></ul><ul><ul><li>Banco Río </li></ul></ul><ul><li>- Brazil </li></ul><ul><ul><li>BicBanco </li></ul></ul><ul><ul><li>Banco Pine </li></ul></ul><ul><ul><li>Banco Industrial do Brasil </li></ul></ul><ul><ul><li>Banco Indusval </li></ul></ul><ul><li>- Bolivia </li></ul><ul><ul><li>Banco de Crédito de Bolivia </li></ul></ul><ul><li>- Colombia </li></ul><ul><ul><li>BBVA Colombia </li></ul></ul><ul><ul><li>Banco de Bogotá </li></ul></ul><ul><ul><li>Banco Davivienda </li></ul></ul><ul><li>- Costa Rica </li></ul><ul><ul><li>Banco Nacional de Costa Rica </li></ul></ul><ul><ul><li>Banco de Costa Rica </li></ul></ul><ul><ul><li>Banco Improsa </li></ul></ul><ul><li>- Dominican Republic </li></ul><ul><ul><li>Banco BHD </li></ul></ul><ul><ul><li>Banco Popular Dominicano </li></ul></ul><ul><li>- Ecuador </li></ul><ul><ul><li>Banco Boliviariano </li></ul></ul><ul><ul><li>Banco Pichincha </li></ul></ul><ul><ul><li>Produbanco </li></ul></ul><ul><ul><li>Banco de Guayaquil </li></ul></ul><ul><ul><li>Banco Internacional </li></ul></ul><ul><li>- Guatemala </li></ul><ul><ul><li>Banco Agromercantil </li></ul></ul><ul><li>- Honduras </li></ul><ul><ul><li>Banco Ficohsa </li></ul></ul><ul><li>- Jamaica </li></ul><ul><ul><li>First Global Bank </li></ul></ul><ul><li>- Nicaragua </li></ul><ul><ul><li>Banco de Crédito Centroamericano - </li></ul></ul><ul><ul><li>Bancentro </li></ul></ul><ul><ul><li>Banco de la Producción - BanPro </li></ul></ul><ul><li>- Panama </li></ul><ul><ul><li>Banco Aliado </li></ul></ul><ul><li>- Paraguay </li></ul><ul><ul><li>Interbanco </li></ul></ul><ul><li>- Peru </li></ul><ul><ul><li>Banco Internacional del Perú - Interbank </li></ul></ul><ul><ul><li>Banco Interamericano de Finanzas - BIF </li></ul></ul>
  • 7. TFFP Developments &amp; Projections (existing resources) * projections TFFP Transactions (non-cumulative) TFFP Issuing Banks <ul><li>Avg. TFFP Issuing Bank line size: US$18.6 million (from US$5 million to US$40 million) </li></ul><ul><li>TFFP Guarantees Issued to date: </li></ul><ul><li>117 credit guarantees for more than US$227 million, supporting 288 individual trade transactions </li></ul><ul><li>Terms: </li></ul><ul><li>average of 194 days (ranging from 38 to 540 days), avg. TFFP guarantee coverage level: 82 percent </li></ul><ul><li>Size of underlying trade transactions: </li></ul><ul><li>US$ 7,866.92 - US$10 million (avg.: US$1.4 million) </li></ul>
  • 8. TFFP’s Value-Added <ul><li>Core Counter-Cyclical Role </li></ul><ul><ul><li>Support external sector through difficult times </li></ul></ul><ul><ul><li>Especially important in LAC - one of the historically most volatile regions of the world </li></ul></ul><ul><ul><li>TFFP bank network built in “good times” - stands ready for increase in volatility </li></ul></ul><ul><ul><li>Uptake in demand for TFFP support – liquidity crunch, volatility and decline in risk-taking capacity already affecting LAC </li></ul></ul><ul><li>TFFP niches </li></ul><ul><ul><li>Have emerged in light of relatively benign global and regional market conditions in recent years </li></ul></ul><ul><ul><li>Intra-regional trade </li></ul></ul><ul><ul><li>Reaching out to smaller players </li></ul></ul>
  • 9. TFFP’s Value-Added: The Clients’ View “ (…) this program has allowed us to broaden our scope of action in the international trade area . (…) it has enabled us to handle transactions directly with markets and institutions we would not have been able to work with otherwise . This has been directly reflected in better conditions for our clients . Therefore, we believe that is program is, and will continue to be, an effective tool for development for the Ecuadorian productive sector , helping it to reach higher competitiveness levels and facilitating its insertion in international trade .” Julio Mackliff E., Executive Vice President - Banco de Guayaquil, Ecuador “ (…) Even if Banco de Crédito de Bolivia S.A. has not yet officially started to work under this program, we can mention that we have already been approached by several banks in order to talk about the program, as well as to undertake some first transactions . (..) We congratulate and applaud this initiative . (…)” Carlos Navarro V. - Banco de Crédito de Bolivia S.A., Bolivia “ Many aspects of the program have led us to sign the TFFP agreement, but the main one could be that the approved credit from the IDB can support the bank in political risks situations and during economic crises , when the lending banks may reduce their lines of credit to the country . A light example could be noticed during the last two to three weeks (in August) when subprime turmoil took place all over. The credit approval from the IDB gives some credit comfort to the lending banks, even if they are not &amp;quot;confirming banks&amp;quot;, and allows the country through its &amp;quot;issuing banks&amp;quot; to continue its trade business , which is of great importance for all the developing countries in Latin America .(...)” Paulo Celso del Ciampo, Executive Director International Division - BicBanco, Brazil “ We think that the program adds a lot of value especially to small and medium-sized issuing banks in the region, as it gives them access to alternative funding sources which better fit their needs , as well as allows them to broaden and diversify their correspondent bank network . As to Confirming Banks , the program gives them the opportunity to establish new relationships with banks they don’t usually work with due to lack of commercial relationship or country risk restrictions . (..) we see great potential in the “south-south” operations , which is why we have included 9 Latin American subsidiaries as Confirming, and 2 as Issuing Banks in the program, and we are working with IDB on the inclusion of more.(..)” Gema Sacristan, Director, Export&amp;Agency Finance-The Americas, Global Trade Finance – BBVA
  • 10. TFFP: Reaching Out to Smaller Players <ul><li>Still a bundant liquidity for bigger players in strong LAC economies </li></ul><ul><li>TFFP value-added especially for: </li></ul><ul><ul><li>Lower-tier banks in larger economies (i.e. Brazil, Peru) </li></ul></ul><ul><ul><li>Smaller countries (NI, HO, GU, BO, JA, EC, etc.) </li></ul></ul><ul><li>TFFP Effect: deepening availability of trade finance </li></ul><ul><ul><li>Lower-tier banks are able to expand trade operations by accessing more sources of trade finance through TFFP network of Confirming Banks </li></ul></ul><ul><ul><li>Micro, Small and Medium-Sized Enterprises (MSMEs) natural clients of smaller banks </li></ul></ul><ul><ul><li>More trade financing for MSMEs </li></ul></ul><ul><ul><ul><li>Helps them grow through trade  employment and social impact </li></ul></ul></ul><ul><ul><ul><li>Strengthens their competitiveness </li></ul></ul></ul><ul><ul><ul><li>Enables them to take advantage of trade opportunities (also fuelled by LAC free-trade agreements, such as DR-CAFTA) </li></ul></ul></ul><ul><ul><ul><li>Closes market gaps in access to trade finance for MSMEs - fostering “financial democracy” </li></ul></ul></ul>
  • 11. Example of TFFP End-Beneficiaries <ul><li>Hamilton Rios Indústria Comércio e Exportação Ltda. </li></ul><ul><li>Brazilian medium-sized company </li></ul><ul><li>Extracts sisal from agave plant leaves, processes and exports sisal fiber for textile industry </li></ul><ul><li>Small local sisal fiber suppliers (cultivation in ‘minifúndios’) </li></ul><ul><li>Sisal cultivation essential source of work to thousands of people in this Northeast region of Brazil (semi-arid climate, low and irregular precipitations, few agricultural options for the population) </li></ul><ul><li>More than 600,000 people depending directly or indirectly on sisal cultivation, without any alternative source of income </li></ul><ul><li>Environmentally friendly, no use of chemicals </li></ul><ul><li>Through TFFP Issuing Bank BicBanco, Hamilton Rios has to date benefited of TFFP guarantees for 6 export transactions amounting to US$2.6 million </li></ul>
  • 12. Boosting TFFP’s Impact <ul><li>IDB committed to counter-cyclical and market-deepening role of TFFP </li></ul><ul><li>TFFP ideal vehicle for helping trade finance to increasingly reach Micro, Small and Medium-Sized Enterprises (MSMEs) </li></ul><ul><li>Goals: </li></ul><ul><ul><li>Fulfill counter-cyclical role in case of crisis </li></ul></ul><ul><ul><li>Integrate smaller banks and banks from smaller LAC countries </li></ul></ul><ul><ul><li>Increase local trade finance capacity, with focus on MSMEs </li></ul></ul><ul><li>Bottlenecks: </li></ul><ul><ul><li>Constrained human and financial resources (low fee income from smaller transactions vs. high initial and ongoing operational costs) </li></ul></ul><ul><ul><li>Limits to risk-taking capacity </li></ul></ul>
  • 13. Opportunities to explore through the TFFP (1) <ul><li>Bottlenecks to overcome: i) financial and human resource constraints to integration of smaller Issuing Banks into TFFP ii) limits on risk-taking capacity </li></ul><ul><li>Smaller Issuing Banks for TFFP – Funding Needs: </li></ul><ul><ul><li>credit analysis, integration of smaller Issuing Banks </li></ul></ul><ul><ul><li>Monitoring credit quality of these banks, line renewals </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Transactions processing, coaching these banks in use of TFFP </li></ul></ul><ul><li>Donor Risk Sharing Funds for: </li></ul><ul><ul><li>Countries experiencing volatility </li></ul></ul><ul><ul><li>Banks in smaller/lower-income countries and regions </li></ul></ul><ul><ul><li>Countries and/or banks reaching TFFP exposure limits </li></ul></ul>
  • 14. Opportunities to explore through the TFFP (2) <ul><li>To improve LAC trade finance capacity to improve trade finance skills </li></ul><ul><li>Funding Needs for: </li></ul><ul><ul><li>Provision of trade finance training courses for Issuing Banks </li></ul></ul><ul><ul><li>Organization and coordination of the trade finance training courses </li></ul></ul>
  • 15. Other potential areas for Co-Financing/Cooperation <ul><li>Financing to Trade Funds Dedicated to Investing in Trade Finance Receivables from LAC SME Exporters </li></ul><ul><li>Financing Infrastructure Projects to Foster Trade </li></ul><ul><li>Financing LAC Local Banks in Smaller Economies, Strengthening their Capacity to provide Multi-Purpose Longer-Term Financing (i.e. Ecuador, Honduras) </li></ul><ul><li>Fostering Housing Finance within the LAC Region </li></ul>
  • 16. Facilitating Trade Finance through A/B Loan Structure for Trade Funds Project: Crecera – Trade Finance Credit Facility Transaction: A/B Loan Facility Amount: US$ 130 million (IDB A-Loan $ 25m + FMO $ 15m + B-Loan $ 90m) Tenor: 5-y A portion and 3-y B portion renewable up to 5-y Borrower: Latin America Export Finance Fund, Ltd (LAEFF) Manager: Crecera Finance Company – San Francisco Lenders: Inter-American Development Bank, FMO, WestLB, Caja Madrid, Bayerische LB, Caixa Geral, Mizuho Objective: Finance a portfolio of 60+ medium and small exporters located in Argentina, Brazil, Peru, and Uruguay <ul><li>A-Loans from IDB (total US$ 25 million, in two stages) and FMO (US$ 15 million). Through B-Loan </li></ul><ul><li>Syndication, facility was increased by a total of US$ 90 million </li></ul><ul><li>A-Loan supported start-up stage of LAEFF, structure allowed to add B-Loan along with the growth of </li></ul><ul><li>the fund operation and gradual increase of leverage </li></ul><ul><li>New way by IDB to mobilize financing from the commercial and private investor market into trade </li></ul><ul><li>finance in the region, through demonstration effect and leverage effect in the investment fund structure </li></ul>
  • 17. Project: TECON – SANTA CATARINA – BRAZIL Cost: About US$ 140.1 million IDB Participation: IDB A-loan up to US$ 35 million IDB B-loan up to US$ 50 million Project company: Itapoá Terminais Portuários S.A. Sponsors: Aliança Navegação e Logística Ltda Hamburg Süd Group Portinvest Participações S.A. Remarks: The project consists of the construction and operation of a fully-private, public-use, greenfield container port with the infrastructure and superstructure for container berths, warehousing and logistics facilities and an access road that traverses the Project area Improving Infrastructure capacity to foster Trade
  • 18. Improving capacity for Long Term Financing in Smaller Economies <ul><ul><li>Other projects currently being analyzed within IDB’s SCF/FMK Division: </li></ul></ul><ul><ul><ul><li>5-year financing to 3 financial institutions (two in Ecuador, one in Honduras). </li></ul></ul></ul><ul><ul><ul><li>A/B Loan structure </li></ul></ul></ul><ul><ul><ul><li>Multi-purpose use, will benefit mainly SME clients of these three banks </li></ul></ul></ul>
  • 19. Contact Information Daniela Carrera Division Chief Tel: +1 202 623 1088 E-mail: [email_address] Joao Vianei da Silva Senior Trade Finance Officer Tel: +1 202 623 3298 E-mail: [email_address] Financial Markets Division Structured and Corporate Finance Department Inter-American Development Bank 1300 New York Avenue, N.W. Washington, DC 20577 – USA

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