INTER-AMERICAN DEVELOPMENT BANK I D B - O P E R A T I O N S W I T H O U T S O V E R E I G N G U A R A N T E E S Hans Schulz Private Sector Department March

INTER-AMERICAN DEVELOPMENT BANK

I D B - O P E R A T I O N S W I T H O U T S O V E R E I G N G U A R A N T E E S

Hans SchulzPrivate Sector Department

March 2007

PRIVATE SECTOR DEPARTMENTINTER-AMERICAN DEVELOPMENT BANK

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Inter-American Development Bank (IDB)Inter-American Development Bank (IDB)

Private Sector DepartmentPrivate Sector Department

Target Clients

Responsible for non-sovereign guaranteed operations at IDB

Privately controlled entities in all sectors of the economy

Utilities and other infrastructure operators

Banks and other financial market institutions

Corporates with annual sales of US$100 million and above

Regional multilateral institution with 47 member countries dedicated to accelerate economic & social development in Latin America and the Caribbean


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IDB’s Competitive AdvantagesIDB’s Competitive Advantages

Deep Knowledge and Excellent Relations with Latin America and the Caribbean Oldest and largest multilateral lender to Latin America and the Caribbean : US$ 6-7 billion annually Cooperative, long-term relationship with member countries Helps mitigate political risks Exemption from withholding taxes and de facto preferred creditor status

Solid Financial Position AAA/Aaa Rating (S&P, Moody’s) Authorized capital of US$101 billion Ability to extend tenors at market pricing

IDB Value-Added “Umbrella effect” helps to attract B-lenders Catalytic role: IDB financing mobilizes private investment Internationally recognized environmental, social, labor and health standards provide comfort to governments,

communities, lenders and sponsors Flexible risk sharing arrangements


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Recent Strategic ChangesRecent Strategic Changes

US$200 MILLION PER PROJECT*** / 50% OF

PROJECT COST

FINANCING AND GUARANTEES ALSO IN LOCAL CURRENCIES

PRIVATELY OR STATE-OWNED CORPORATE

ENTITIES AND FINANCIAL INSTITUTIONS**

ALL ECONOMIC SECTORS, MORE FLEXIBLE USE OF

PROCEEDS*

IDB participation limited to US$75 Million /

25% of Project Cost

All Transactions in US$

Privately Owned Entities

Infrastructure, Captial Markets Operations, Trade

Finance

2005

Limits

Currency

Eligible Clients

Eligible Sectors

2007

* Exceptions: negative exclusion list** Without Sovereign Guarantee*** Up to US$400 Million in Exceptional Cases

MORE EFFICIENT, FASTER PROCESSES, ADAPTED TO

MARKET NEEDS

Time-consuming internal Approval Processes

Turnover times


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Lending ProductsLending Products

A/B Loans

“A” – IDB Loan Tranche

“B” – Participation of Market Players (international banks and Institutional Investors)

IDB is Lender of Record

Project Finance

Warehousing lines

Revolving credit lines

Refinancing

Senior and subordinated Loans

Tenors: up to 30 years (average: 10-15 years)

Financing in local currencies (depending on market conditions for swaps)


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Guarantee ProductsGuarantee ProductsCharacteristics:

Partial Credit Guarantees (covering all risks – up to 50%; up to 100% within RTFFP) or Political Risk Guarantees

Guarantee amount determined to optimize impact on rating (typically 30%-50% guarantee for improvement in rating of 3 to 4 notches - local scale)

Guarantee amount can vary or stay constant over the tenor (up to 30 years), also amortizing securities

Guarantee capped in US$ - Guarantee payment and reimbursement claim can be in local currency of underlying security

IDB-reimbursement rights can be subordinated to other investors

IDB-Gurantee is unconditional

Transaction types:

Bond Issues

Project Finance

Asset-Backed Securities (ABS), i.e. Mortgage-Backed Securities

Securities backed by Future Flows (i.e. Diversified Payment Rights)

Structured Trade Transactions (Investment funds, Corporate finance)


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Financial Markets: Products and ServicesFinancial Markets: Products and Services

Structured Finance (e.g. securitizations)

Bond issues

Investment funds

Regional Trade Finance Facilitation Program (TFFP)

Trade finance facilities (TFFs)

Structured trade finance

Capital MarketsCapital Markets Trade FinanceTrade Finance Financial Institutions(new mandate)

Financial Institutions(new mandate)

General Purpose: Lending facilities

Subordinated debt (Tier II)

Partial Credit Guarantees


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Trade Finance: Trade Finance Facilitation ProgramTrade Finance: Trade Finance Facilitation Program

Issuing Banks: Private or state-owned banks incorporated in IDB Borrowing Member Countries, track record in trade finance, satisfactory credit worthiness, compliance with IDB standards

Confirming Banks: Any international/regional bank with recognized track record in international trade financing

Participants

No joining costs

Usually, guarantee fees equivalent to 75% of confirmation fee / spread on the TFFP-guaranteed amount

Costs

(i) Letters of Credit(ii) Export and import financing funded by Confirming Banks(iii) International Guarantees (Bid, Performance, Advance Payment Bonds) and Stand-by

Letters of Credit

Eligible Transactions

Up to 100% per individual transactionCoverage Level

Up to 3 yearsTenor

(i) Max. Total Program exposure at any time: US$400 million

(ii) Up to US$40 million credit line per Issuing Bank;

(iii) Up to US$120 million exposure per IDB Borrowing Member Country

Applicable Exposure Limits

Credit Guarantee (“CG”) in favor of Confirming Banks to cover the risk they take on eligible trade financing instruments issued by LAC Issuing Banks

Nature

Program Characteristics


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Operational GuidelinesOperational Guidelines

Project CostsDefined as securities issuance, funding program or total capital investments over relevant period

Security Requirement

Similar to commercial lenders

IDB Participation Up to 50% of project costs with a cap of US$200mn

Currency USD, Euro, Yen, local currency subject to market conditions

Maturity Up to 30 years

Pricing Market-based

Fees Applied as appropriate to each project

Expenses Due diligence


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225

346.8311.2

174

273.9

573

605.2

458

282.5

919.8

316.4 333.9

683

456.5

2002 2003 2004 2005 2006

Infrastructure (A-Loans plus Guarantees)

Financial Markets (A-Loans plus Guarantees)

Total (A-Loans plus Guarantees)

Portfolio – Approved ProjectsPortfolio – Approved Projects (in US$ million)(in US$ million)


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Portfolio – Projects by SectorsPortfolio – Projects by Sectors (as of March 2007)(as of March 2007)

US$ 1,810.3m

GuaranteesB-LoansA-Loans

US$ 3,699.2mUS$ 3,219.5m

Water3.2%

Investment Funds3.8%

Capital Markets8.2%

Transportation9.6%

Trade Finance22%

Communications3.2%

Financial Institutions

2.4%

Energy47.5%


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Financial Markets - TransactionsFinancial Markets - Transactions

Brazil Brazilian Infrastructure Investment

Fund (BIIF) Brazilian Infrastructure Securities

Warehousing Facility

Chile Securitizadora Security: revolving

Mortgage-Backed Loan Facility Costanera Norte Highway System

Infrastructure Bond Santiago-Valparaiso-Vina Toll Road

Colombia Colpatria Mortgage Bond

Mexico Su Casita MBS Guarantee Facility Metrofinanciera Mortgage Warehouse

and MBS Guarantee Facility

Peru BBVA Banco Continental: Senior A/B-,

and Subordinated loan BBVA Banco Continental: MBS

Guarantee Facility Graña y Montero Asset-Backed Bond

Regional Central American Mezzanine

Infrastructure Fund Crecera Trade Finance Facility Darby Fund IIG Trade Finance Facility


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Infrastructure: Award-winning DealsInfrastructure: Award-winning Deals

Energy ATE II - 937 Km Power Transmission

Line in Brazil Campos Novos - 880 MW hydro-

power plant in Brazil Novatrans - 1,278 kilometer power

transmission line in Brazil TermoPernambuco - 520 MW thermal

power plant in Brazil Termobahia - 190 MW thermal power

in Brazil Bajio Energy - 600 MW combined

cycle plant in Mexico Light Energy Services - CAPEX

program for a power distribution company in Brazil

Termoelectrica del Golfo - 230 MW thermal power plant in Mexico

Aguaytia - 240 MW integrated power project in Peru

Transportation Quito Airport - Upgrade of International

Airport in Ecuador Camisea - Natural gas and liquids

pipeline in Peru Costanera Norte Highway - Urban

highway system in Chile Rutas del Paciíico - 109.6 kilometer toll

road in Chile Yucatán Gas Pipeline - 694 Km. Gas

pipeline in Mexico

Water & Sanitation Antofagasta - Seawater desalination plant

in Chile Rio Bogotá - Water treatment facility in

Colombia

Contact Information

Hans Schulz

Head of Financial Markets

Private Sector Department

Inter-American Development Bank

1300 New York Avenue, N.W.

Washington, DC 20577 – USA

Tel: (1) 202.623.3702

Fax: (1) 202.623.3319

http://www.iadb.org/pri/

Documents

INTER-AMERICAN DEVELOPMENT BANK I D B - O P E R A T I O N S W I T H O U T S O V E R E I G N G U A R A N T E E S Hans Schulz Private Sector Department March