The new head of the International Finance Corporation, the World Bank’s private sector arm, has pledged to redouble the institution’s focus on infrastructure financing – including by bringing sovereign wealth funds directly into transactions – to help combat what he sees as an acute shortage of bankable deals in Latin America and other emerging markets.
Jin-Yong Cai, who took over as CEO in October, told LatinFinance in an interview that the multilateral was in advanced talks with sovereign wealth funds (SWFs) to co-invest in infrastructure and other projects – a development that would advance existing cooperation between the IFC and the state investors.
Cai said the IFC was looking to develop new approaches to helping SWFs from Asia, Europe and the Gulf take stakes in projects. “We can play a unique role in helping sovereign funds co-invest in projects,” he said, without elaborating on projects or entities under consideration. “[SWFs] typically have a longer term horizon and we can create vehicles to help them diversify their investments.”
The IFC has already raised $500 million for its Global Infrastructure Fund, including $100 million from its own balance sheet and $150 million from Azerbaijan’s SWF, as well as significant contributions from other sovereign wealth and pension funds.
Cai, a former partner at Goldman Sachs, said he would prioritize the multilateral’s role as a catalyst for private sector investment in infrastructure to tap a chunk of the “trillion dollars sitting in investors’ hands waiting to be deployed” in Latin America.
The IFC should act more like an investment bank in “bringing solutions to our clients,” Cai said. “We’ve always been more innovative than other international financial institutions, but we were more like a commercial bank than an investment bank. We want to be both,” he said.
“Of all the things I feel the most important thing is [for the IFC] to become more client-focused, to be in the middle to create transactions for allocating the resources for development.”
“We want to play a much bigger role in providing financing,” Cai said. “We have a sizeable balance sheet and we want to use our knowledge and our network to be a true catalyst and dealmaker. We want to be the de-risk factor in transactions.”
Cai said such a function would be especially important in markets including Brazil’s, where “bankability of transactions is very difficult” and has perpetuated infrastructure bottlenecks. “In Brazil, we need to have clear regulations in terms of large transactions,” he said. “Investors need certainty.”
Cai, the first Chinese national to head a multilateral, also emphasized the corporation’s role in developing local capital markets. Since last July, it has issued a record $500 million in local currency bonds, including a 390 million peso ($10 million) so-called “Taino” bond in the Dominican Republic – the first domestic placement by an international triple-A rated issuer.
Over that same period the IFC invested $2.7 billion in core infrastructure sectors such as power, transport, and water, including nearly $1.3 billion mobilized from other investors.