nuevas tendencias de financiamiento de inversiones en latinoamérica unctad, conferencia de las...
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Nuevas tendencias de financiamiento Nuevas tendencias de financiamiento
de inversiones en Latinoamérica de inversiones en Latinoamérica
UNCTAD, Conferencia de las Naciones UNCTAD, Conferencia de las Naciones Unidas sobre Comercio y DesarrolloUnidas sobre Comercio y Desarrollo
Lima, Peru – Diciembre 04-05, 2003Lima, Peru – Diciembre 04-05, 2003
2 IDB/PRI/CMU/October 2003
Contents
Latin America Overview (2002-2003)Latin America Overview (2002-2003)
Capital Flows to LATAM (1998-2003)Capital Flows to LATAM (1998-2003)
Private Financing in the Region, Overview (2002-2003)Private Financing in the Region, Overview (2002-2003)
IDB and its risk mitigation products:IDB and its risk mitigation products:
Cross-border financing productsCross-border financing products
Local currency financing products (financial guarantees)Local currency financing products (financial guarantees)
Experience in Infrastructure and Financial SectorsExperience in Infrastructure and Financial Sectors
3 IDB/PRI/CMU/October 2003
IDB : LATAM (2002-2003) OverviewIDB : LATAM (2002-2003) Overview
Slow economic growth between 2001 and 2003 (<1%). Expected Slow economic growth between 2001 and 2003 (<1%). Expected improvement in 2004 (3% to 4% estimated average growth). improvement in 2004 (3% to 4% estimated average growth).
Impact of economic reforms throughout the 90’s have had mixed results Impact of economic reforms throughout the 90’s have had mixed results (net poverty reduction). Market-based reform model needs upgrade (net poverty reduction). Market-based reform model needs upgrade (social market-based reform model).(social market-based reform model).
Increase in political demands for policy changes, however, governments Increase in political demands for policy changes, however, governments at large will stick to fiscal prudence and sound macroeconomic at large will stick to fiscal prudence and sound macroeconomic managementmanagement
Decrease in capital flows to the region (2001-02), particularly in the bank Decrease in capital flows to the region (2001-02), particularly in the bank and bond markets (debt)and bond markets (debt)
Deterioration of SovereignDeterioration of Sovereign
credit ratings. credit ratings.
Member Countries
Non-member Countries
4 IDB/PRI/CMU/October 2003
Capital Flows to LATAM (1997-2003)Capital Flows to LATAM (1997-2003)
Tabla 1: Flujos de Capitales hacia Mercados Emergentes, Latino América, (MMUS$)
1997 1998 1999 2000 2001 2002 2003e
External Financing: 101.6 116.9 70.7 51.0 74.8 22.9 37.5
Private Sector: 108.9 98.9 65.4 61.2 51.9 15.0 26.4
(a) Equity Investments 62.7 51.3 66.7 52.3 59.4 33.0 24.2
(b) Creditors (net) 46.2 47.6 (1.3) 8.9 (7.5) (18.0) 2.2
Official Flows (3.2) 18.1 5.4 (10.2) 22.9 7.9 11.1
Fuente: Institute of International Finance (09/ 2003)
5 IDB/PRI/CMU/October 2003
IDB : LATAM (2002-2003) OverviewIDB : LATAM (2002-2003) Overview
LAC Infrastructure investment needs remain high (US$ 70 MM per LAC Infrastructure investment needs remain high (US$ 70 MM per year in order to sustain a 4% growth). At its peak (1996-97) year in order to sustain a 4% growth). At its peak (1996-97) infrastructure finance in LAC reach US$ 25 MM. infrastructure finance in LAC reach US$ 25 MM.
Argentina’s crisis has stopped. Economic contagion was less than Argentina’s crisis has stopped. Economic contagion was less than expected. Strong domestic growth is estimated in 2004. Debt expected. Strong domestic growth is estimated in 2004. Debt renegotiation and stabilization of the utilities and the financial sector renegotiation and stabilization of the utilities and the financial sector remain to be solved. remain to be solved.
During 2003, Chile, Mexico, and selected countries in Central During 2003, Chile, Mexico, and selected countries in Central America are still important receivers of foreign capital flows.America are still important receivers of foreign capital flows.
On a project selective basis, Brazil On a project selective basis, Brazil
Peru and Colombia have also attracted FCFsPeru and Colombia have also attracted FCFs
Member Countries
Non-member Countries
6 IDB/PRI/CMU/October 2003
Infrastructure Needs : LATAM (2005-2010) Infrastructure Needs : LATAM (2005-2010) /1
New Investments Maintenance Total
(000 US$) (000 US$) (000 US$)
Electricity (power) 15,034.00 10,593.00 25,627.00
Basic Telephone 3,276.00 4,175.00 7,451.00
Mobile 15,049.00 10,015.00 25,064.00
Sub-Total 18,325.00 14,190.00 32,515.00
Roads 2,791.00 4,198.00 6,989.00
Railway 0.00 733.00 733.00
Water & Sanitation 1,792.00 3,234.00 5,026.00
Total 37,942.00 32,948.00 70,890.00
Source : World Bank, Working Paper 3102, Fay-Yepes, 2003
Note : /1 Does not include rehabilitation, deferred past maintenance and upgrades
7 IDB/PRI/CMU/October 2003
IDB : Private Financing (2002-2003) - Overview IDB : Private Financing (2002-2003) - Overview
Difficult access to private financing by LATAM firms both in international Difficult access to private financing by LATAM firms both in international and local markets (particularly second-tier corporations)and local markets (particularly second-tier corporations)
Privatized utilities need to have access to long-term local currency Privatized utilities need to have access to long-term local currency financing (mitigation foreign exchange risk exposure). Need to sustain financing (mitigation foreign exchange risk exposure). Need to sustain the level of infrastructure investments. the level of infrastructure investments.
Need to improve financial intermediation through the development of Need to improve financial intermediation through the development of long-term local capital markets (attract local investors as well as long-term local capital markets (attract local investors as well as international investors). Redirect local savings into productive sectors.international investors). Redirect local savings into productive sectors.
Need to improve access of selectedNeed to improve access of selected
issuers and corporations to internationalissuers and corporations to international
markets (i.e., US$ generator and localmarkets (i.e., US$ generator and local
markets with lack of critical massmarkets with lack of critical mass)
Member Countries
Non-member Countries
8 IDB/PRI/CMU/October 2003
Member Countries Non-member Countries
IDB - Overview
Established in December 1959 to help accelerate economic and Established in December 1959 to help accelerate economic and social development in Latin Americasocial development in Latin America
Oldest and largest regional multilateral institutionOldest and largest regional multilateral institution
– authorized capital of US$101 billionauthorized capital of US$101 billion
46 member countries, 26 borrowing member countries46 member countries, 26 borrowing member countries
Largest multilateral lender Largest multilateral lender
to Latin America and the to Latin America and the
Caribbean in 2001Caribbean in 2001
AAA/Aaa RatingAAA/Aaa Rating
9 IDB/PRI/CMU/October 2003
IDB’s Preferred Creditor Status
The Bank’s participation helps mitigate political risks:The Bank’s participation helps mitigate political risks:
Oldest regional MDB. Oldest regional MDB.
Largest multilateral lender to LATAM and the Caribbean: Largest multilateral lender to LATAM and the Caribbean:
US$ 6-7 billion annually of lending programUS$ 6-7 billion annually of lending program
Cooperative, long-term relationship with member countriesCooperative, long-term relationship with member countries
IDB enjoys certain privileges in its member countriesIDB enjoys certain privileges in its member countries
de jure: exemption from withholding taxesde jure: exemption from withholding taxes
de facto: preferred creditor statusde facto: preferred creditor status
IDB has never been included in a general country reschedulingIDB has never been included in a general country rescheduling
10 IDB/PRI/CMU/October 2003
Private Sector Department (PRI)Private Sector Department (PRI)
Responsible for IDB´s support of private sector operations in LATAM and Responsible for IDB´s support of private sector operations in LATAM and CaribbeanCaribbean
First Mandate (1995) : First Mandate (1995) : Support Private Investment in InfrastructureSupport Private Investment in Infrastructure
Eligible infrastructure sectors:Eligible infrastructure sectors:
water / sanitationwater / sanitation
transportation (roads, railroads, pipelines, ports, airports)transportation (roads, railroads, pipelines, ports, airports)
energy (power generation, transmission, distribution)energy (power generation, transmission, distribution)
telecommunicationstelecommunications
Second Mandate (2000) : Second Mandate (2000) : Support development of Capital Markets in the Support development of Capital Markets in the RegionRegion
Eligible capital market transactionsEligible capital market transactions
project bondsproject bonds
corporate bonds corporate bonds
asset backed securities (including mortgage backed securities)asset backed securities (including mortgage backed securities)
future flow s securitizationfuture flow s securitization
Third Mandate (2003) : Third Mandate (2003) : Support reactivation of Trade Finance in the Support reactivation of Trade Finance in the Region Region
11 IDB/PRI/CMU/October 2003
IDB (PRI) Financial Instruments: Overview IDB (PRI) Financial Instruments: Overview
A-Loans (for IDB’s own account) & B-Loans (for market participants)
Up to US$75 million or 25% of total project costs (in small countries can go as high as 40%)
Up to 20 years (typically in 10-15 year range)
Market-based pricing
Private Placement (similar structure as the A/B but placement among 144A institutional investors)
Political Risk Guarantees
sovereign (transfer & convertibility) and selected non-commercial risks (contract frustration) for infrastructure development in the Region (up to 50% of project costs or US$150 million). Streamlined approval process (3 months).
Could include selected non-commercial risk [regulatory risks] such as breach of contract by the grantor of the concession (e.g., San Pedro de Macoris, IPP, Republica Dominicana)
1. Cross - Border Financing Products :1. Cross - Border Financing Products :
12 IDB/PRI/CMU/October 2003
IDB (PRI) Financial Instruments: OverviewIDB (PRI) Financial Instruments: Overview
IDB Financial Guarantees (partial credit guarantees)IDB Financial Guarantees (partial credit guarantees):
credit enhancements to improve credit risk profiles of local issuers to enable them to access market financing under better conditions (tenor and pricing). Same limitations as the A/B loans.
Instruments [mechanism] that cover or protect debt service payments to institutional investors (bondholders).
Products can be structured to guarantee an specific layer of credit risk,in order to elevate the risk profile of the overall transaction and thereby attract investors. By guaranteeing an intermediate part of the debt (I.e., guaranteeing to pay a portion of the obligation after the internal cash reserves or sponsor support has been exhausted) the local investor maybe more willing to put its capital at risk for the remaining exposure.
The IDB is willing to adapt its financial guarantee products to whatever forms make sense commercially and developmentally.commercially and developmentally. The risk not guaranteed by IDB can be covered by co-insurersco-insurers or taken by the investors.
2. Local currency Financing Products :2. Local currency Financing Products :
13 IDB/PRI/CMU/October 2003
Local Capital Market Development Local Capital Market Development
Objectives:Objectives:
Financial des-intermediationdes-intermediation is a key component of a sustainable economic development strategy.
Support of good quality credit rating private sector instruments as a way to diversify diversify investors portfolio (e.g., pension fund development in LATAM – increased sovereign risk cases of Argentina, Uruguay, Brazil, Colombia)
Develop local currency funding instruments that could mitigate cross-Develop local currency funding instruments that could mitigate cross-border risk (FX risk). Projects that are typically local currency generators border risk (FX risk). Projects that are typically local currency generators Water & sanitation, toll roads, irrigation, etc. will have a tough time Water & sanitation, toll roads, irrigation, etc. will have a tough time getting finance in the US$ markets (even with the best build-in getting finance in the US$ markets (even with the best build-in contracting clauses for US$ tariff based there is a degree of tolerance to contracting clauses for US$ tariff based there is a degree of tolerance to FX adjustments in a particular economyFX adjustments in a particular economy)
14 IDB/PRI/CMU/October 2003
Development of local currency debt instrumentsDevelopment of local currency debt instruments
Matching of revenue generation (productive assets) and liabilities for private corporations.
Mitigation of economic regulation framework under volatility scenarios (I.e., US$ based tariffs in utilities – public services)
Development of local savings capacities (I.e., diversification from investments in government related securities).
Incorporation of local debt holders as stake holders in infrastructure projects (mitigate regulatory risk)
Introduce market performance benchmarks to improve risk & return remuneration for local savings (domestic investment)
15 IDB/PRI/CMU/October 2003
Transaction Experience in the Transaction Experience in the Infrastructure and Financial Infrastructure and Financial SectorsSectors
16 IDB/PRI/CMU/October 2003
Infrastructure : Energy Sector
Energy generation, transmission & distribution, and gas transportation Energy generation, transmission & distribution, and gas transportation projectsprojects
Transaction examples:Transaction examples:
– Edenor, electricity distribution in Argentina (A/B Loan)Edenor, electricity distribution in Argentina (A/B Loan)
– Redesur, electricity transmission in Peru (A/B Loan)Redesur, electricity transmission in Peru (A/B Loan)
– Monterrey III, power generation plant in Mexico (A/B Loan)Monterrey III, power generation plant in Mexico (A/B Loan)
– TGS, gas transportation in Argentina (A/B Loan)TGS, gas transportation in Argentina (A/B Loan)
– Hermosillo, power generation in Mexico (A/B Loan)Hermosillo, power generation in Mexico (A/B Loan)
– Edesur/Edenorte, power generation plant in Dominican Republic Edesur/Edenorte, power generation plant in Dominican Republic (A/B Loan)(A/B Loan)
– LIGHT Expansion of Electricity Distribution Network in Brazil LIGHT Expansion of Electricity Distribution Network in Brazil (Political Risk Guarantee)(Political Risk Guarantee)
17 IDB/PRI/CMU/October 2003
Infrastructure : Transport Sector
Greenfield B.O.T. projects, rehabilitation and expansion projectsGreenfield B.O.T. projects, rehabilitation and expansion projects
Transaction examples:Transaction examples:
– Ecovias, in Brazil (A/B Loan)Ecovias, in Brazil (A/B Loan)
– Yellow Line toll road, in Brazil (A/B Loan)Yellow Line toll road, in Brazil (A/B Loan)
– Anhangüera - Bandeirantes Highway System, in Brazil Anhangüera - Bandeirantes Highway System, in Brazil (A/B Loan)(A/B Loan)
– Santiago-Valparaíso-Viña del Mar, in Chile (Financial Santiago-Valparaíso-Viña del Mar, in Chile (Financial Guarantee)Guarantee)
18 IDB/PRI/CMU/October 2003
Example: Santiago-Valparaíso, Financial Guarantee
Concession awarded to a consortium led by ACS and SACYR Group (Spain) in 1998 in Santiago de Chile, Chile.
The toll-road concession consists in the expansion and refurbishing of 110 km linking Santiago-Valparaíso and Viña del Mar
Investment program of US$ 450 million to be partly financed through a local currency bond issue for the equivalent of US$ 300 million.
IDB provided a credit guarantee to enhance the bond´s rating to a level acceptable to local institutional investors. The IDB is Guarantor of Record for up to US$75 million with the remaining amount provided by private insurers. FSA (USA based private insurer) acted as co-guarantor of the transaction.
The issue before the IDB/FSA credit enhancement has been rated Baa2 by Moody’s, which is the highest investment grade rating ever given to a toll road project in Chile. This is also the largest infrastructure bond sold primarily to Chilean pension funds and insurance companies, paying a coupon of 6.02 percent (Unidad de Fomento), with a maturity of 23 years.
The issue was rated AAA by local rating agencies after the IDB/FSA enhancement. It was successfully placed in April 9, 2002
19 IDB/PRI/CMU/October 2003
Infrastructure : Water and Sanitation Sector
Water and sanitation projects, privatizations, B.O.T.sWater and sanitation projects, privatizations, B.O.T.s
Transaction examples:Transaction examples:
– Aguas Argentinas, in Argentina (A/B Loan)Aguas Argentinas, in Argentina (A/B Loan)
– Aguas Provinciales de Santa Fe, in Argentina (A/B Aguas Provinciales de Santa Fe, in Argentina (A/B Loan)Loan)
– Aguas del Illimani, in Bolivia (A/B Loan)Aguas del Illimani, in Bolivia (A/B Loan)
– Rio Bogotá, in Colombia (Private Placement)Rio Bogotá, in Colombia (Private Placement)
20 IDB/PRI/CMU/October 2003
Financial Sector
Asset Backed SecuritiesAsset Backed Securities
Colombia, Colpatria: Mortgage backed-security. Securitization of the future payments flows from mortgage loans. Use of a partial credit guarantee as an external credit enhancement to the structure.
Peru: Grana & Montero, Asset backed security. Securitization of the future payment flows from concession contracts and construction contracts. Use of a partial credit guarantee as an external credit enhancement to the structure.
Trade Finance FacilitiesTrade Finance Facilities
Brazil: Bradesco, Trade finance Facility. Short term credit facility via an A/B loan structure to fund the origination of trade finance assets for a major Brazilian bank.