After a merger, a hiring spree and a year of soul-searching,
the new Inter-American Investment Corporation is set for an
even busier year ahead. It plans to increase lending by 25%, to
around $3 billion, roll out a range of new investment
activities, and invert its Washington-heavy footprint, chief
executive James Scriven says.
"Even though we had a very good year in business last year,
this year it’s going to be amazing," he tells
LatinFinance. "The uncertainties that are happening
for different reasons in the region are calling upon our
institution in a catalytic role, in a counter-cyclical role. If
you had thought in the past we would have had time to
transition over a few years, now we don’t have
that luxury. Our transition was last year, we’re
up and running and we’re ready for business,
because our clients need us."
The institution has dramatically reshaped over the past
year, as the Inter-American Development Bank merged its four
private-sector operations into a single unit. Human talent and
looking after clients were two of the main focus areas during
the transition, says Scriven.
"When I joined the institution, we were bringing together
two different cultures that had suffered from the merger
process. By suffered, I mean the uncertainty of job security.
So bringing those two cultures together — that was the
former private sector of the IDB called the [structured and
corporate finance department] plus the IIC — in
addition to the new people coming in.
"There was a big effort there including what we called a
'knowledge week', where we brought the whole group, over 400
people, together in October. There were a lot of mini-town
When it comes to looking after the client base, Scriven says
the first priority was to make sure the 330-plus clients did
not feel worse-off during the transition. But it also involved
a new strategy, which is to be executed this year, of
rebalancing the location of staff. Historically, around 90% of
staff were based in Washington DC. That is set to change.
"We’re going to have a presence in all our 26
member countries. We’re going to concentrate
support staff in four hubs: Port of Spain, Panama,
Bogotá and Buenos Aires. In addition to that,
we’re going to expand significantly two offices:
one in Mexico and one in Brazil. And in Brazil, the
IDB’s office was in Brasília and
we’re opening an office in São Paulo.
That’s going to be launched in May."
Expanding the product base
In the months ahead, the IIC plans to expand the pool of
financing options it offers to clients.
"We want to be a solutions bank to our clients," says
Scriven. "It’s difficult to say
you’re a solutions bank if the solutions to all
your problems are a dollar loan. When we have a wider range of
products to offer, that interaction with clients is
For a start, it’s increasing its range of local
currency disbursements. The IIC has lent money in Brazilian
reais, and Mexican and Colombian pesos in the past. This year,
it hopes to add Paraguayan Guaraníes and Dominican pesos
to the list.
"We plan to launch a bond in Gauraníes during the
annual meetings, to be able to on-lend to clients that are
requesting local currency. Shortly after that, the Dominican
Republic is coming in the pipeline. And we’re also
exploring other countries in which we can do that.
"We don’t issue just to create a yield curve,
we issue because we on-lend. The investor base has to match
with the pipeline generated."
At the same time, it is looking beyond pure loans, to
consider equity and hybrid capital solutions.
"This has been a traditional product that we have not
developed. Our experience has been small compared to other
institutions. We’ve hired a group of people and
consultants who can help us develop this. So we have this
product available, but our capacity is going to grow with our
knowledge of that sector."
Hybrid and convertible instruments are on the table not just
for financial institutions in Latin America, but also for
corporate clients, he says.
"Many companies approach us or are interested in longer term
capital at risk, and not only loans. They ask us to be part of
their shareholding structure, or to be on their board of
directors. And that’s where we interact much more
with the client on a longer term basis. Before we did not have
that available and now we do."
Scriven also has new industries in his sights. Of the
disbursements in the year just gone, 45% went to infrastructure
projects. That’s more than twice the typical
proportion. And where transport and energy have been the
mainstays of the IIC’s infrastructure lending in
the past, now it will also focus on social infrastructure
— in health and education — and water and
"We’ve done a few deals last year, one in
Ecuador for example, in Guayaquil, in the water sector. But
this is going to be much more present than before."
Additionally, tourism, technology, media and telecoms are on
the agenda for funds this year. That expands the
IIC’s traditional focus on manufacturing and
agribusiness specialties for corporate lending.
"Tourism is going to be critical for our engagement and
interaction in the Caribbean and Central America. And TMT is
where we’re seeing new disruptive investments that
would help us in our impact." LF
James Scriven on…
"While we were growing our balance sheet, prudent growth and
financial sustainability is a fourth axis of our strategy for
the year. There, we’re happy to see an upgrade
that we got of our Moody’s rating and also
recently Fitch reaffirmed our triple-A rating. But what
we’re most proud in the document is it says that
our risk management group is excellent. I’ve never
seen that in writing — not even at the best
banks in the world."
"Historically, the IDB group internally has seen that it
wasn’t as effective in the private sector as it
was in the public sector. So a lot of the thinking is: what is
our strategy? How do we want to interact and have an impact on
the region? And as part of that, we created a tool called
DELTA, which is an ex-ante development tracking system.
Basically, what we do is rate the development of the work we
plan to do. That has been a very rewarding tool to view the
trade-offs between risk and development. "
"When we look at an investment, there are three things that
we look at. One is the impact of the work we do. We go for
highly developmental investments. Things that can be done by
others, we don’t do. We don’t crowd
out the private sector. We opt for things that the private
sector is not willing or able to do. And we don’t
subsidize. We price at market rates. The deals we leave off the
table don’t go through those three things."