Category: Bonds

Investors depart IMF annual meetings having seen fear in the eyes of most LatAm finance ministry officials, but there is some relief in the form of multilateral aid. The IDB, CAF, IFC and FLAR Monday unleashed almost $10bn in fresh credit lines, with the aim of safeguarding growth and employment through crisis. “We are coordinating this lending with other multilateral institutions to assure that we have a rapid and agile response,” says IDB president Luis Alberto Moreno. The IDB will provide a $6bn liquidity program, in addition to accelerating specific loans next year as it aims to provide $12bn in total 2009 loans – $18bn if the new facility is fully utilized – versus $10bn in 2008. The loans will be made on a case-by-case basis, most with a tenor of 5 years. CAF has meanwhile made available a $1.5bn liquidity facility to support countries facing difficulty accessing capital markets. It also raised support for financial institutions to $2.0bn from $1.5bn. And FLAR pledged $1.8bn, with up to $2.7bn more possible in coming months via contingency lines. The IFC and World Bank also weighed in with support, the latter offering $500m for microfinance and SMEs. The IDB set an initial limit of $500m per country, which could be adjusted on a case-by-case basis. Moreno did not comment on rates, but says all countries would pay the same. “Given that the crisis started elsewhere and will come to Latin America, we are preparing ahead of time,” says CAF CFO Hugo Sarmiento says of his bank’s contingency facility, which will disburse medium to long-term loans. He adds that so far no countries have requested funds. Multilaterals have beefed up lending to both public and private borrowers in the past year as credit conditions worsened, and they are needed now more than ever. “In this market there is no competition between multilaterals,” Hans Schultz, IDB head of structured and corporate financing, tells LatinFinance. As demand increases, the bank will have to prioritize getting th

The IDB and CAF have signed a letter of intent to help Colombia establish an infrastructure fund worth $500m initially. The idea is for the fund to be rolled out within the next 12 months, an IDB official tells LatinFinance, depending on the severity of the credit markets. The two multilaterals are expected to take a 25% stake in the fund, which will be used to channel pension fund money into infrastructure and take equity to stimulate private sector interest. Some 25% should come from the government and the balance from local pension funds and insurance companies. It will be deployed preferably as equity and prioritize transport and water/waste. The first investment is likely to be financing the Ruta del Sol, says a senior government source. That project may well be integrated into a single venture. Earlier this year Colombia’s finance minister Oscar Ivan Zuluaga said the government wanted a program roughly along the lines of Mexico’s Fonadin, where the public and private sectors could put money together to fund projects. Colombia aims to spend about $38bn for infrastructure between 2007-2010, eyeing some $18bn from private sources.

CAF is ready to reopen debt markets for LatAm borrowers when the markets recover, but it remains liquid following prefunding. The high grade multilateral is typically one of the first to blaze a trail back to credit markets when they shut. “We hope that this time again we will play that role. Of course we don’t intend to go to market this week,” CAF president Enrique Garcia tells LatinFinance. “We have very sound liquidity, but we are opportunistic. We hope that, like we did in previous crises, we will go to market as a signal of confidence and trust to try to reopen it for the region.” Garcia adds that the local currency issuance plan is not dead, and that a Venezuela or Colombia issue could eventually come. “This week we have to concentrate on what the real impact is and how we can respond.”

The IDB has agreed a $43m 20-year loan to the central region of Panama and a four-year grace period, at a rate of 5%. Local counterpart funds will total $9.7m. The central region includes the provinces of Cocle, Herrera, Los Santos and Veraguas. The program will help increase the productivity and income of small agricultural producers through technological innovation and to improve access to efficient water and sanitation services. In addition, the program will provide environmental protection for critical watersheds and coastal areas and strengthen coordination mechanisms and institutional capacities at the local level.

The IDB has signed a $1bn 20-year loan for the BNDES to support a long-term credit program for micro, small and medium-sized enterprises. The new loan is for 20 years, with a 4-year grace period. BNDES will provide another $1bn in counterpart funds. The loan is the third of the same size made from a $3 billion conditional credit line launched in 2004. Some 30,000 businesses may benefit from these resources, through a program involving more than 80 Brazilian banks, says the lender. “Given their capacity to generate jobs and boost competitiveness in supply chains, these businesses are crucial for strengthening exports and the economy as a whole,” says the IDB’s Brazil representative, Jose Luis Lupo.

The IDB has inked a $50m 25-year loan to help restore Jamaica’s roads that were damaged by storms. The financing has a 5-year grace period, at a variable interest rate and will help rehabilitate vital portions of the primary road network, minimize the impact of future flooding on the road system and cut travel costs for road users.

The IDB has approved a loan of up to $400m for the Panama Canal expansion project. An IDB spokesperson would not disclose terms. The Panama Canal Authority plans to raise about $2.3bn in loans to finance the expansion, which has an estimated cost of $5.25bn. The remainder will be covered with cash flow generated by the operation of the canal. In September, the authority said financing offers from multilateral and development banks – including up to $500m from the IFC – exceeded the amount it plans to borrow, giving it the option of bypassing commercial banks at a time when they are largely shut down. Moody’s rates the authority A2.

Jamaica will get $100m-$200m a year over the next 3 years, for a total $600m, from the IDB and could receive up to $1bn from the multilateral over 5 years, according to a local press report quoting finance minister Audley Shaw. “Let me remind you that this is 5% money; not 10%-12% money as it is on the international capital markets which is likely to get worse now because of the fallout that we are having,” says the minister, according to Sunday’s Jamaica Observer. JPMorgan notes that the cost is also significantly less than the 15%-16% alternatives in the domestic market. The shop adds that Jamaica needs to issue $250m in international debt markets to complete external financing needs for the current fiscal year. “Given the difficulty in raising external funds amid the global credit market seizure and steeply higher rates in the local debt market, increased multilateral funding should help alleviate some of the funding pressure on the sovereign,” says JPMorgan. Jamaica is one of the most highly indebted sovereigns in the region – and very vulnerable in the present environment – but it prides itself on not having restructured. The Observer report also suggests that Jamaica is working with the World Bank to obtain additional funds.