The World Bank's (WB) International Finance Corporation (IFC) will fund a number of relatively small infrastructure and water projects in municipalities and provinces in Peru, Colombia, Brazil, Uruguay and Guatemala, IFC subnational finance director Vincent Gouarne told BNamericas.
Resources will be provided through loans issued under a new business line developed jointly by IFC and WB which provides financing without sovereign guarantees to well-run local governments and public companies carrying out essential infrastructure investments.
Gouarne said this new business line fills the funding gap for well-run public companies that may not be eligible for WB financing, but whose operational model is closer to that of the private sector.
"The novelty of this business line is that, until recently, we would only look at private companies. Now we can work with the public sector too," he said.
These companies may apply for this type of financing as long as they do not obtain sovereign guarantees, in which case they should go to WB or traditional sovereign lenders.
ACP LOAN
The Panama Canal Authority (ACP) received a 20-year, US$300mn loan under this new model from IFC on November 13.
"ACP is a very good example of this. Its credit is very solid and it does not need the guarantee from the republic," Gouarne said.
"This financing line works very well in countries where the government does not want to give such guarantees or the companies do not need them," he added.
CLIENT SEGMENTS
"We have several client segments, such as municipalities or regions. For example, we recently extended a loan to Colombian capital Bogotá," he said.
Gouarne added this business line enables IFC to guarantee a loan that a local bank makes to a city or a province, as it is currently doing in Peru. The entity can also lend to national or municipal companies, such as water utilities, as long as they are efficient and have viable credit.
GLOBAL FINANCIAL CRISIS
The role multilateral financing entities such as IFC can play in the current volatile economic scenario is to increase activity in the infrastructure sector by helping good projects advance.
"What happens now is that good loan tenors for infrastructure projects are very difficult to obtain from commercial banks. The bond market is pretty much closed, securitizations do not exist and syndicating something for long tenors is extremely difficult if a project is not of good quality," Gouarne said.
"We cannot do everything. We have liquidity but the demand is enormous with all the projects that are being started. Therefore, we have to choose the best-designed projects."
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