IDB looks to establish IFC-style private sector arm
August 13, 2013
The entity's role would include mobilizing private capital for PPPs, taking equity stakes in companies and facilitating sovereign wealth investment, the IDB's president says
Development Bank (IDB) is looking to set up a private sector arm that would
mirror the World Bank's International Finance Corporation (IFC) in structure
and function, IDB president Luis Alberto Moreno has said.
The focus of the new entity
would include mobilizing private capital for public private partnerships,
taking equity stakes in companies and projects and facilitating investment in
the region by sovereign wealth funds, Moreno told LatinFinance in an interview.
Moreno said the goal was to "have a private sector arm solely focused on dealing with the private sector on
delivering public goods."
He added: "We're also
entering a phase where it's important to see stronger mid-sized companies grow
and become more international in our region."
It is understood that the
proposal for an IFC-style entity was one possible approach to enhancing the
bank's private sector activities.
But Moreno confirmed the bank
is advancing blueprints for the private-sector arm structure, which aims to
increase the efficiency and effectiveness of its private sector operations, for
an October governors' meeting. Moreno said he hoped consensus could be reached
in time for the bank's annual meeting next March.
The IDB's existing private
sector operations last year approved roughly $2 billion in loans, guarantees
and grants. Moreno would not say how much capital such an entity would need,
nor whether another capital increase could be on the cards if the structure is
"We have run some scenarios
but we need to discuss this with our shareholders first," he said. "The order
of magnitude begins from using better the current capital to put in more
The new structure would
combine the bank's existing private sector operations – its four so-called
windows: the Structured and Corporate Finance Department; the Inter-American
Investment Corporation; the Multilateral Investment Fund; and Opportunities for
the Majority – in order to boost private sector volumes and reduce costs.
The impetus behind the
restructuring came from an audit last year assessing the bank's progress in
fulfilling the commitments of its 2010 capital increase.
"The report said: you have a
set of private sector windows that are not efficient, that are losing synergies
and you must address that," Moreno said. "That is what we're doing."
The bank had originally
announced in March that it would explore proposals to reform its private sector
The IFC model has served a
rapidly expanding group of expanding multinationals. Some of the IFC's more
high-profile equity investments in recent years have aided the expansion of
Banorte and Grupo Sura. This month, it committed $150 million to an oil
pipeline and terminal project in Colombia sponsored by a group that includes
The full interview with IDB President Luis Alberto
Moreno will be published later this month in our 25 Year issue www.latinfinance.com/quartercentury