Category: Bonds

The IDB has closed on the first part of a $65m A/B loan for El Salvador’s Banco Multisectoral de Inversiones (BMI). The multilateral’s first loan for a financial services firm in the country allows the mid-sized lender to make long-term mortgage and small-business loans. The facility is composed of a $50m 10-year A tranche from the IDB and a B tranche that will undergo a small syndication. The syndicated piece is expected to be 5-7 years and reach about $15m in size. BMI is owned by the Salvadorian central bank. IDB officials tell LatinFinance that a similar transaction that adds a subordinated piece to the A tranche is also being prepared for another CentAm financial services institution. The IDB is also readying a loan for Costa Rican state utility ICE featuring an $180m A tranche and $200m B tranche with Citi as lead arranger.

The Mexican economy could be severely impacted should remittances from abroad, currently flat, start to decrease, according to Donald Terry, manager of the multilateral investment fund of the IDB. “After oil, remittances are the No. 2 source of capital going into the country,” Terry tells LatinFinance. Currently 5-6 million families, already on the lower end of the social scale, depend on the money sent from abroad. “You’ll see poverty levels increase in Mexico,” Terry says. A drop in remittances to Brazil is actually a good sign, according to Terry, as more Brazilians stay home or return from abroad because of better economic conditions at home and the appreciation of the BRL. Overall, the panorama for remittances to LatAm remains stable, Terry states. “I don’t think remittances are going down. They are flat. But they are not increasing either,” he says.

The IDB has closed on the first part of a $65m A/B loan for El Salvador’s Banco Multisectoral de Inversiones (BMI). The multilateral’s first loan for a financial services firm in the country allows the mid-sized lender to make long-term mortgage and small-business loans. The facility is composed of a $50m 10-year A tranche from the IDB and a B tranche that will undergo a small syndication. The syndicated piece is expected to be 5-7 years and reach about $15m in size. BMI is owned by the Salvadorian central bank. IDB officials tell LatinFinance that a similar transaction that adds a subordinated piece to the A tranche is also being prepared for another CentAm financial services institution. The IDB is also readying a loan for Costa Rican state utility ICE featuring an $180m A tranche and $200m B tranche with Citi as lead arranger.

A $150m conditional credit line from the IDB signed last week will help develop much needed mortgage and long-term financing in Paraguay, its finance minister Cesar Barreto Otazu tells LatinFinance. “The country needs to finance productive investments,” Barreto Otazu says. “Paraguay’s financial system cannot provide those resources because of the short term of the deposits in it,” he says. The loan will help strengthen long term financing initiatives led by Paraguay’s Development Finance Agency, a second tier financial unit created by the Paraguayan government. The IDB loan also will aid the country’s effort to boost meat exports, education reform and an economic census. Paraguay is planning to return to the international debt markets in 2009, the minister says. But it is currently implementing measures to improve the country’s rating and overall fiscal scenario. Upcoming elections also could help boost financial stability. “Once the political panorama is clearer in Paraguay we will be able to access the markets in better conditions,” Barreto Otazu says.

LatAm is in its best ever fundamental shape to withstand bearish pressure overhanging from wobbly developed world markets. But as IDB annual meetings get underway in Miami, the hostile external environment – how bad it will get and what impact it will have on EM – is top of the agenda. LatAm reserves are at all time highs, debt is rapidly being paid down, there is greater commitment to responsible fiscal and monetary policy and increasing evidence that countries can maintain stability through a whole cycle, rather than just the upswing. And locals remain fairly bullish. But those who assume the global turmoil will not dent LatAm are whistling past the graveyard. “People are concerned, you can feel the anxiety,” says a veteran LatAm debt banker. “Overall it’s going to be a hard year for everyone, there’s no doubt,” he adds. According to Larry Summers, Charles W. Eliot professor at the Harvard University Kennedy School, the US recession is different to the standard inventory recession, making it more likely to be protracted. “It’s appropriate I think to be quite concerned,” Summers tells LatinFinance, referring to the US economy. “We haven’t seen a comparable situation in a long time and I think there’s the possibility that it could get worse,” he adds.

The IDB has approved a $5.4m loan to Uruguay for a foreign trade management program to foster international economic integration. The 25-year term loan has a 54-month grace period, at a variable interest rate and will receive $500,000 in local counterpart financing.

The IDB has approved the first $50m tranche of a $200m credit line for second-tier financing for public service providers in Colombia. The main goals of the program are to facilitate longer maturities for eligible projects of public service providers, improve access to financing, in particular for small projects, and consolidate the role of government agency Findeter.

The IDB has approved a $50m loan to Paraguay to provide medium and long-term financing for business ventures that support the promotion of competitiveness of the productive sector. The 30-year variable-rate loan, the first from a $150m credit line for investment projects, includes a 5.5-year grace period.