Plans to seek additional capital for the Inter-American Development Bank’s private sector arm IDB Invest – that could see a scaled-up entity nearly rival its public sector counterpart in financial heft – are progressing rapidly and need only “fine-tuning” before being put to the board for vote as early as next March, IDB Group president Ilan Goldfajn told LatinFinance on Monday.
The proposed capital increase for IDB Invest and its sister entity, IDB Lab, which invests in regional entrepreneurial innovation, has gained momentum since the bank announced in June last year that it had received a commitment from US President Joe Biden’s administration to support the plan.
“We already have a mandate to start talking about it and it is very important that this phase is concentrated in the private sector,” he said in an exclusive interview on the sidelines of the Finance in Common Summit (FiCS), a conference of public investment banks being held in Cartagena, Colombia.
Goldfajn left the door open to future capital increases for the public sector lender, noting that IDB Invest would be “getting closer” in size to its larger counterpart “if the IDB does not get its own capitalization in the future.”
The IDB’s last capital increase – the largest in its history – took place in July 2010, providing $70 billion in additional ordinary capital and $479 million for special operations.
Goldfajn, who took over as president of the Washington, DC-based lender in January, said the bank was actively engaging shareholders to adjust the details of the capitalization, including final amounts, which he said have yet to be defined ahead of the bank’s next annual meeting, expected to be held next March in the Dominican Republic.
IDB Invest CEO James Scriven told LatinFinance in April that a capital increase could allow the super-sized entity, known as IDB Invest 2.0, to deploy an additional $15 billion to $17 billion in financing in the region from “resources mobilized from investors and third-party resources.” The additional resources would allow IDB Invest to expand equity investments, provide more financing in local currency and offer advisory services for the private sector in Latin America and the Caribbean, Scriven said at the time.
Goldfajn said that there are some sticking points to the capital increase plan, including the need to clearly link additional resources to projects. He said that discussions centered on risk frameworks and the need to attract more private capital.
The capitalization process “means that we are very serious about investment from the private sector because we realize that only with the public sector is not enough,” Goldfajn said.
If the capital increase is approved, it would put IDB Invest on near equal footing in terms of financial size with the bank itself, he added.
SCALING UP FINANCING
Speaking on a panel earlier Monday, Goldfajn said it was necessary to scale up partnerships to meet the region’s needs.
“Our banks have the resources. We need to go from millions to trillions and we need to partner. FICS is crucial because we are partnering with important allies such as public development banks,” he said.
The IDB last week signed a historic partnership with the World Bank to deepen their cooperation on development initiatives across the region, including preserving the Amazon rainforest, Caribbean disaster resilience and digital access.
The FiCS was launched in 2020 and brings together more than 500 public development banks, including the IDB. It is the first time the meeting is being held in Latin America and the Caribbean.
Goldfajn told LatinFinance that Latin America and the Caribbean needed to seize the moment to mobilize resources.
“I believe that there is an opportunity here, both short and long term. Latin America has opportunities,” he said, mentioning the region’s capacity for clean energy, minerals production and the environment. “We need to decide if we are going to take advantage of these opportunities now.”