JBIC signed a loan agreement (see Note) with Minera San Cristobal S.A. (MSC),

which is wholly owned by Sumitomo Corporation, for the additional expansion

project of the San Cristobal Zinc, Lead and Silver Mine to be carried out by MSC.

In this loan, JBIC bears the political risk and helps reduce the local risk

accompanying strategic overseas business deployment of Japanese companies.

▶ Contributing to the long-term and stable securement of important resources

Zinc is used for corrosion-resistant galvanization parts of automotive and building

materials as well as for ships and bridges due to its strong protection against iron,

while lead is mainly used for automotive batteries. Both are essential metals for

Japanese industry. Japan used 469,000 tons of zinc bullion and 235,000 tons of lead

bullion in 2011, nearly all of which was produced by Japanese domestic smelting

companies, which depend entirely on import for zinc and lead concentrate.

　　The San Cristobal Zinc, Lead and Silver Mine is one of the largest mines in Bolivia,

and is the sixth largest producer of zinc and lead in the world. It is one of the world’s

few valuable large-scale, long-life zinc and lead mines. Sumitomo Corporation

acquired 35% of the concession of this mine in 2006 and acquired the remaining 65%

to make it wholly owned in 2009, after which it started full-scale operation. JBIC

supported the development of this mine twice in the past when Sumitomo Corporation

acquired the rights in 2006 and 2009, and so this is the third time JBIC is providing

fi nancial support. This loan for the additional expansion project contributes to the

long-term and stable securement of important mineral resources for Japan, which

depends entirely on imports for zinc and lead concentrate.

　　“Thanks to the management and operation efforts by Sumitomo Corporation of

MSC starting in 2006, this mine currently enjoys stable management and contributes

greatly not only to the entire Bolivian economy including international trade but also to

the development of local society through secure employment of local residents.

However, Bolivia’s political risk is still high, and the greatest problem with this

additional fi nance was how to control the political risk,” explained Deputy Director

Arita in charge of this loan.

▶ Overcoming two diffi culties in organizing the projectBolivia has abundant natural resources, and its macro economy remains strong.

However, President Morales (incumbent) took offi ce in 2006 and adopted an anti-

American stance, and subsequently nationalized some foreign companies. The

country now poses a high political risk, which is why the project required JBIC’s

coverage. “To assess whether or not Bolivia’s political risk is controllable, especially in

terms of nationalization, we need to directly confi rm the Bolivian government’s

recognition of this project in addition to examining the statistics and analyses of

professional reports. To be specifi c, we need to share the importance of this project

with the Minister of Mining and Metallurgy of the Bolivian government given the

authority over nationalization and mining rights and obtain a letter confi rming the

Bolivian government’s support for this project in the future.”

　　A letter of this type is generally diffi cult to obtain from the government. Arita fl ew

to Bolivia to negotiate and exchanged opinions with major government agencies

including the Ministry of Mining and Metallurgy, the Ministry of Development Planning,

the Ministry of Foreign Affairs and the President’s Offi ce to help the Bolivian

government understand the importance of a confi rmation letter. A direct meeting was

fi nally realized between the Global Head of JBIC’s Energy, Natural Resources and

Environment Finance Group and the Minister of Mining and Metallurgy, and we

successfully obtained a letter from the Bolivian government confi rming its support for

this project.

　　Efforts to build a consensus within JBIC were made concurrently. “It was very

important to evaluate Bolivia’s political risk for this project. Opinions varied widely

because Bolivia is not well known in Japan. We worked hard in numerous negotiations

and consultative discussions with the departments involved in order to make the

optimal risk judgment and deepen the economic analysis of the project and Bolivia’s

political risk. Through these efforts, we reached the conclusion that a confi rmation

letter from the Bolivian government allow us reasonable control of the risks for this

project and, taking into consideration the risk control, JBIC could decide to provide a

fi nancial support.” (Arita, Kikuchi)

▶ Supporting Japanese companies with continuous development

As a result of these efforts in and outside Japan, we reached the conclusion that we

could control Bolivia’s political risk and so we signed the loan agreement. Recalling

the days of heated discussions, Arita said, “This project was a very diffi cult one from

aspects other than fi nancial and technical, and we sometimes seemed to have no

choice but to compromise. However, we made every effort to strengthen the

relationship between Bolivia and Japan in addition to meeting the high expectations

of the companies involved.”

　　Kikuchi added, “There are not many cases where a Japanese trading house

takes the initiative in the entire operation and becomes directly involved in the

management and operation of mines. In this sense, JBIC’s continuous development is

essential for supporting customers planning to branch out into new business fi elds.”

　　In Bolivia, a new development project is being planned for the Uyuni salt fl at that

has the world’s largest lithium reserves, which has drawn the interest of Japanese

companies. In this sense, the relationship between Bolivia and Japan will gain

importance in the future. JBIC will continue supporting Japanese companies in their

efforts to develop and acquire resources.

San Cristobal Zinc, Lead and Silver Mine

Interview with Kuniyasu Kikuchi (Advisor, left) and Junsuke Arita (Deputy Director, right) Division 1, Mining and Metals Finance Department Energy, Natural Resources and Environment Finance Group

Mitigating local risk accompanied by overseas business deployment of Japanese companies

SPOTLIGHT

Supporting the expansion of mine development project in Bolivia

June 2014

Press and External Affairs D

ivision, Corporate Planning D

epartment, C

orporate Group, Japan Bank for International C

ooperation

4-1, Ohtem

achi, 1-chome Chiyoda-ku, Tokyo 100-8144, Japan Tel. +

81-3-5218-3100 URL: http://w

ww.jbic.go.jp/en/

Trends in the two countries and JBIC’s activities

SpecialFeature

［Our Global Challenges］

Continue to take on “Courageous Challenge” and establish a subsidiary in China-- Manufacturing automotive driving parts featuring our original forging technology

KOTANI Corp. (Kasai-shi, Hyogo, Japan)

［Spotlight］

Supporting the expansion of mine development project in Bolivia

［News in Depth］

Supporting the development of geothermal power generation in Indonesia through project fi nance

JBICTodayJune 2014

JBIC

Today

(Note) This loan is cofinanced with Sumitomo Mitsui Banking Corporation, and the total amount is 300 million US dollars (JBIC portion: 210 million US dollars).

Brazil andMexico

L

OJBIC Today June 2014 32 JBIC Today June 2014

In March 2013, JBIC signed a loan agreement in project financing for up to 702 million US dollars (JBIC portion) with Cernambi Norte MV26 B .V . (CMV26) o f the Netherlands, with investments from MODEC, Inc., Mitsui & Co., Ltd., Mitsui O.S.K Lines, Ltd., and Marubeni Corporation.This loan is cofinanced with private financial institutions (total amount of 1.17billion US dollars) and is intended for the long-term FPSO system chartering service (lease and operation including service and maintenance) of an FPSO (see Note 2) supporting ultra-deepwater operations (depths between 2,000 and 3,000 m). The system was built by MODEC for Tupi B.V. of the Netherlands, which was established by an international consortium centered on Petróleo Brasileiro S.A. (Petrobras), a Brazilian state-owned oil company developing off shore oil and gas fi elds. 　　“In January 2013 JBIC received a formal request for the project financing. JBIC has previously supported FPSO projects off shore of Brazil, which were participated in by Japanese companies, and this is the sixth request of this kind. Because this was the sixth FPSO which JBIC would finance, the sponsors expected the formulation of project f inancing in a short period,” explained Tomoyuki Miyaguchi, then Deputy Director of the Marine and Aerospace Finance/Financial Products Department who was in charge of this project. 　　Given that the only repayment source is revenue from the project, the certainty of securing long-term and stable revenue was the greatest issue in this project. 　　“The offshore oil and gas field project continually makes progress in search of the most suitable form of business. This project actually has a complicated structure. Although the actual developer of the project is Petrobras, the direct ship charterer is Tupi B.V., the international

Interview with the staff of the Country Credit DepartmentPolitical and economic trends in Brazil in recent years

Brazil is currently receiving considerable attention as the host country of the 2014 FIFA

World Cup and the 2016 Olympic Games. Abundant food and natural resources coupled

with a vast domestic market allow Brazil to attract substantial investments from

companies around the world. About 400 Japanese firms, mostly manufacturers, have

expanded into Brazil, and many Japanese companies plan to increase their direct

investment in Brazil in the medium to long term.

　　Meanwhile, Mexico has been implementing energy reforms to encourage the

participation of private companies and investment in the energy sector since President

Enrique Peña Nieto took post in December 2012. His administration announced the

National Infrastructure Plan (2014-2018) in late April this year, and Japanese companies

are interested in participating in the water and railway fi elds. The automotive industry

is also focusing on Brazil, and many Japanese-affiliated companies including

small and medium-sized enterprises have established facilities in Mexico for supplying

parts to assemblers.

　　This edition introduces recent trends in Brazil and Mexico, two rising countries of

Latin America, and describes JBIC’s activities.

BRAZIL

Brazil in fi guresCapital: BrasíliaArea: 8,512,000 km2

Population: 198 million people（2013）Nominal GDP: 2,243 billion US dollars（2013）Per capita GDP: 11,311 US dollars（2013）Economic growth: 2.3%（2013）Source: IMF World Economic Outlook, April 2014

●Latest activities (1)Supporting Japanese companies in their development of offshore resourcesProject fi nancing for an Ultra-Deep FPSO System Chartering Service

Toshihisa AoyagiDivision 3 (Americas), Country Credit DepartmentCredit, Assessment, and Systems Group

(Note 1)In Brazil, complex and high tax burden, poor infrastructure, and high labor costs have traditionally been considered as the “Brazil cost”, and further improvement of the business environment needs to be pursued.

(Note 2)FPSO: Floating Production Storage and Offl oading System. This is a fl oating vessel for the fi rst stage processing of crude oil produced at the oil well, which separates associated gas and water, and for the storage and offl oading of oil.

Ranking of promising countries and regions

(No. of Companies) (Share: %)

1 Indonesia 219 44.92 India 213 43.63 Thailand 188 38.54 China 183 37.55 Vietnam 148 30.36 Brazil 114 23.47 Mexico 84 17.28 Myanmar 64 13.19 Russia 60 12.310 United States 54 11.1

*Excerpt from a survey on Japanese Foreign Direct Investment

in 2013 conducted by JBIC (Target companies of this survey

were in principle manufacturing companies that have three

or more overseas affiliates including at least one production

base. They were asked to name the countries and regions they

considered to have promising prospects for business operation

over the medium term.)

Trends in the two countries and JBIC’s activities

【Special Feature】

Brazil has the largest economy in Central and South America, and its GDP (2.2 trillion US dollars) ranks seventh in the world. The country recorded an average growth rate of 3.5% per year in the decade after 2003, but it has recently suffered from slower growth rate: 2.7% in 2011, 1.0% in 2012, and 2.3% in 2013.　　Despite some deterioration in the economy, the country is relatively stable from the standpoint of sovereign risk. The current account defi cit to GDP has remained around 3% for the past several years. Although the deficit increased a little in 2013, it was mostly fi nanced by foreign direct investment (FDI) and portfolio infl ows. The country’s foreign reserve is equivalent to 14-15 months of imports. 　　Brazil is regarded as an attractive destination for investment. FDI into Brazil has been growing and the United Nations Conference on Trade and Development (UNCTAD) reports that Brazil is the world’s fourth largest recipient of FDI. According to the results of an annual survey conducted by JBIC on Overseas Business Operations by Japanese Manufacturing Companies last year, Brazil became sixth in the “Rankings of Promising Countries/Regions” in the medium-term and is regarded as the most promising investment destination outside Asia. About 90% of the companies that highly evaluated Brazil gave credit to the growth potential of the local market. Japanese companies are fi nding business opportunities mainly in the infrastructure, agribusiness and natural resource industries.　　Presidential election is scheduled in October this year, drawing attention to the government’s eff orts to reduce the “Brazil Cost (see Note 1).”

Brazil andMexico

4 JBIC Today June 2014 JBIC Today June 2014 5

●Latest activities(2)Supporting Securing of Mineral Resources and Related Infrastructure DevelopmentMOU with Vale S.A. in Brazil on Business Collaboration

●Latest activities (3)Strengthening the economic relationship between the two countriesParticipation in political dialogue of the “the Wise-men Group on the Japan-Brazil Strategic Economic Partnership”

In July 2013, JBIC signed a memorandum of understanding (MOU) with Vale S.A. (VALE), one of the world leading Resources Majors, for collaboration for the realization of the project that contributes to securing stable supply of mineral resources to Japan.

* Project for the charter of an FPSO ship for ultra-deepwater operations (Image)

BRAZIL

1 ■ Future growth potential of local market 100companies 88.5%

2 ● Current size of local market 35companies 31.0%

3 ▲ Supply base for assemblers 18companies 15.9%

4 ×× Inexpensive source of labor 14companies 12.4%

5 ★ Concentration of industry 11companies 9.7%

* Excerpt from the survey report conducted by JBIC on Overseas Business Operations by Japanese Manufacturing Companies in 2013.

consortium in which Petrobras and oil majors have invested, and CMV26 off ers ship chartering with the new joint company established mainly by MODEC's subsidiary in Brazil. In addition, the details of the project have changed at the requests of the companies involved while the project was being organized, and we made every eff ort to thoroughly investigate the infl uence on the modifi cations of the contract.” (Deputy Director Miyaguchi) 　　After 2 months of hard work, the loan agreement was signed on March 29th, Deputy Director Miyaguchi foresees the future of ocean resource development, saying, “Amid the efforts of the Japanese government to commercialize methane hydrate and submarine hydrothermal polymetallic ore, we think that JBIC’s continuing support of the charter service is very important as it contributes to improving Japanese technology and expertise in FPSO operation in ultra-deepwater mining. Utilizing this experience, we aim to he lp ma in ta in and s t rengthen the in terna t i ona l competitiveness of Japanese companies.”

JBIC carries out various activities to strengthen the economic relationship between Japan and Brazil, and one of them is participation in the “the Wise-men Group on the Japan-Brazil Strategic Economic Partnership.”　　Businesspersons from the two countries comprise the members of the Group, which was established in 2007 to revitalize the strategic economic partnership between Japan and Brazil through the selection of priority economic issues and submission of proposals to the leaders of the two countries. The fourth meeting was held in Rio de Janeiro in August 2013. Five immediate priority issues were selected: (1) Oil and gas (ocean field), (2) Renewable energy and automobiles, (3) Infrastructure and logistics, (4) Technological innovation and (5) Human resources development. The Group also confirmed the emphasis on cooperation with third countries and the importance of concluding a bilateral free trade agreement (FTA) between the two countries, and submitted proposals to the leader of each country.

　　The Wise-men Group includes fi ve members from each of the two countries. The experts from Japan are: Akio Mimura (Chairman; Advisor and Honorary Chairman of Nippon Steel & Sumitomo Metal Corporation, Ltd.) , Katsuaki Watanabe (Senior Advisor of Toyota Motor Corporation), Masami Iijima (President and CEO of Mitsui & Co., Ltd and Chairman of the Japan-Brazil Economic Committee of Japan Business Federation), Kazuaki Kama (President and CEO of IHI Corporation) and Koichi Yajima (Executive Managing Director of JBIC). Yajima looks forward to significant development of the economic relationship between Japan and Brazil: “The public sector and private sector of the two countries work together to vitalize the economy of the two countries in addition to cooperating in third countries.”　　In addition, JBIC held the annual meeting on policy dialogue with the government of Brazil, which has been held since 1997 to promote the participation of Japanese companies in business development in Brazil. Responding to the changing business environment for Japanese companies due to Brazil’s economic growth, Japan concluded a memorandum on the policy dialogue with the Ministry of Planning, Budget and Management of Brazil in 2011. 　　The policy dialogue for 2013 was held at JBIC’s head offi ce when Miriam Belchior, Minister of Planning, Budget and Management, visited Japan in November 2013. In the dialogue, the Minister’ s opinion was expressed as “We greatly anticipate the participation of Japanese companies in

100％

90％

80％

70％

30％

20％

10％

200995 companies

2010126 companies

2011138 companies

2012132 companies

2013113 companies

0％

Concept diagram of FPSO

Source: MODEC

To the crude oil carrier

Stream of crude oil and gas

POL tank

Residential area and heliport

Production facilities

Mooring cable

Riser

AnchorAnchor

Mooring facilities

FPSO

　　VALE is one of the world leading suppliers of high quality iron ore and mineral resources, and it has maintained good business relationships with Japanese companies for many years. JBIC has provided multiple loans to date, and has been exchanging opinions and discussions periodically with them. 　　Demand for long-term financing is growing because investment projects of iron ore and coking coal mining and related infrastructure development are becoming larger.　　Since Japanese companies are expected to expand and diversify their activities in these projects, JBIC contributes to securing a stable supply of mineral resources through closer collaboration with VALE.

Brazil and Mexico Trends in the two countries and JBIC’s activities

Koichi Yajima

Executive Managing Director, COOJapan Bank for International Cooperation

Reasons for Brazil as Promising(Respondents: 113 companies)

Changes over past 5 years

Mooring cable

large investment opportunities in the large consumption market and improvement of infrastructure in Brazil. In particular, investment from Japan, which has sophisticated techno log ies and g loba l companies , i s cruc ia l to strengthening the competitiveness of Brazilian industry.”　　In response, JBIC stated, “We can see the legal system improving gradually in Brazil. However, its stable operation is important. In addition, because a presidential election is scheduled for next year, it is crucial to maintain substantive, predictable policies to continue attracting direct investment from foreign countries including Japan, even if the system is modifi ed.”

JBIC Today June 2014 76 JBIC Today June 2014

MEXICO

●Latest activities (2)Diverse activities in collaboration with the Mexican government

Unexpectedly, Mexico’s economic growth gradually slowed down (1.1%) after the presidential election in December 2012 which was the fi rst time in the last 12 years. As refl ected the weak manufacturing industry which plunged by nearly half in 2013 from its growth in 2012, primarily due to declining demand because of the stagnant economy in the United States, which is Mexico’s largest (about 80%) export destination. The delay of public investment during the administration’s transition period is also a factor of Mexico’s decelerated growth. 　　On the other hand, the new government is actively carrying out structural reforms in various fi elds including energy, labor market and taxation. In particular, an energy reform bill that includes constitutional amendment was approved by Congress for the fi rst time in the past 75 years, and oil fi eld development and power business were opened to the private sector. Direct investment in these fi elds is expected to grow in the near future. The rating agencies raised Mexico’s sovereign rating in 2013 respectively assessing the passage of a landmark energy reform. Furthermore, Moody’s raised to category A which is second to Chile in Latin America. We expect Mexico’s GDP growth increase by 3-4% in 2014, and President Peña Nieto must show his political competence over the passage of reform-related bills for this year.

In December 2013, JBIC signed a loan agreement with Molitec Steel Mexico, S.A. de C.V. (MSM), a Mexican subsidiary of MOLITEC STEEL CO., LTD. (MOLITEC), for up to 6.31 million US dollars (JBIC portion). This loan is cofi nanced with The Bank of Tokyo-Mitsubishi UFJ, Ltd., which brings the overall cofi nancing amounts to approximately 1 billion yen. This loan is intended to fi nance the manufacturing and sales of automobile parts such as continuously variable transmissions in Mexico. 　　With the expansion of automobile manufacturing in Mexico,

Interview with staff of the Country Credit DepartmentRecent political and economic trends in Mexico

●Latest activities (1)Supporting overseas deployment of Japanese automobile-related industries

1 ■ Future growth potential of local market 49 companies 60.5%

2 ● Supply base for assemblers 37companies 45.7%

3 ▲ Current size of local market 24companies 29.6%

3 ×× Concentration of industry 24companies 29.6%

5 ★ Inexpensive source of labor 23companies 28.4%

Reasons for Mexico as Promising(Respondents: 81 companies)

Trends in the past 5 years

* Excerpt from the survey report conducted by JBIC on Overseas Business Operations by Japanese Manufacturing Companies in 2013.

Mexico in fi guresCapital: Mexico CityArea: 1,960,000 km2

Population: 118 million（2013）Nominal GDP: 1,259 billion US dollars（2013）Per capita GDP: 15,563 US dollars（2013）Economic growth: 1.1%（2013）Source: IMF World Economic Outlook, April 2014

Prospects of the two countries Expectations for JBIC in Latin America

JBIC carries out diverse activities together with the Mexican government to strengthen the economic relationship between the two countries and help Japanese companies do business in Mexico.

▶Annual meeting for policy dialogueThe fi rst of our activities is holding an annual meeting for policy dialogue. The meeting is based on the framework signed in February 2011 with the Ministry of Finance and Public Credit of the United Mexican States (SHCP) and ProMéxico. The third conference was held in December 2013, which was the fi rst conference with the new President Peña Nieto beginning in December 2012.　　The two countries have high expectations for this conference. Members from JBIC included Hiroshi Watanabe (then CEO, Executive Managing Director), Tadashi Maeda (Global Head of Infrastructure Finance Group) and Yasuo Ota (Executive Offi cer for the Americas). Members from Mexico’s new government totaled up to 25 related individuals including Mr. Luis Videgaray Caso (Minister of SHCP), Mr. Francisco N. González Díaz (Director General of ProMéxico), and offi cials from the Ministry of Communication and Transportation (SCT) and from the Ministry of Energy (SENER). They discussed about the infrastructure sector, which the new government regards as a key issue: they mainly discussed about the water and railways fi elds, which are of great interest to Japanese companies.　　Hisashi Kanamori, Advisor of Power and Water Finance Department who organized the conference showed his eagerness to achieve results, saying, “The new government plans to enhance the investments by the private sector to improve infrastructure. JBIC proposed the best practice based on past PPP projects and the system it has built that allows Japanese companies to participate while sharing the risks and responsibilities appropriately between the public and private sectors. The National Infrastructure Program and list of projects will be made public shortly. (It was released at the end of April 2014.) We will support projects in which Japanese companies are interested.”

▶Partial acquisition of yen-denominated foreign bondsThe second of our activities is support for the issuance of yen-denominated foreign bonds (Samurai bonds). Based on the “Guarantee and Acquisition toward Tokyo market Enhancement (GATE),” JBIC

acquired a part of the Samurai bonds issued by the Mexican government in August 2013. JBIC provided guarantees for a total of 300 billion yen in 2009 and 2010, and made a partial acquisition of the total 80 billion yen Samurai bonds issued in 2012. This time, we supported the issuance through the partial acquisition of Samurai bonds that include stocks with a longer payment period, taking into consideration the Tokyo market’s increased recognition of the Mexican government thanks to the issuance of these Samurai bonds.　　Nagayoshi Motokawa, Director of Division 4, Power and Water Finance Department, recalled this project, “This partial acquisition shows JBIC’s new interest in this area. This facilitates bond issuance by showing the outside world that JBIC is ready for partial acquisition, though it does not provide guarantees. The US moves to reduce the monetary easing measures before the issuance and so expectations for money from developing countries rapidly decreased. However, thanks to the eff ect of JBIC’s announcement, we eventually succeeded in issuing bonds at a higher value than the previous time.”

▶Contributing to the reduction of greenhouse gas emissionsThe third of our activities is helping the reduction of greenhouse gas emissions. JBIC signed the agreement as an LP investor in a private equity fund intended for renewable energy and energy-effi ciency projects in Mexico operated jointly by American and Spanish fi rms. 　　　This fund is an investment project under GREEN operations (see Note 3). The Mexico National Infrastructure Fund participated through investment, and the Inter-American Development Bank (IDB) provides fi nancing.　　The Mexican government is keen to address climate change, leading the creation of an agreement among participating countries as the Chair and externally declaring a policy to reduce greenhouse gas emissions at COP16 in December 2010. In response, JBIC, National Bank of Public Works and Services (BANOBRAS) and IDB signed a memorandum

of understanding on business cooperation for GREEN in Mexico in December of the same year.　　“The agreement was signed two and a half years later. Usually, fund managers in the private sector invite for investment. However, given that track records in this sector are not accumulated, the three institutions started from the selection of the fund manager and became directly involved in organizing the fund. This is the characteristic of this project” (Director Motokawa)

(Note 3) GREEN: Support through loan investment and guarantee functions, was improved while utilizing private funds for the project to assist global environmental protection in developing countries on March 31, 2010.

‘The 2010s should be considered as the decade of Latin

America and the Caribbean (LAC)’, said Luis Alberto Moreno,

President of Inter-American Development Bank (IDB) in 2012,

having seen recent high economic growth of the region. ‘LAC

is a growth center comparable to Asia.’ He pointed out the

increase in productivi ty through structural reform,

improvement of infrastructure, and overcoming income

disparity and inequality as key factors for future development.

It is now an urgent task to address these problems by

mobilizing the private sector.

In this connection, the IDB is considering to streamline

its private sector fi nancing arm, which is currently divided in

four institutions within IDB Group. It is scheduled to be

decided at the next year’s annual meeting of the Group in

Busan, Korea. Traditionally, multinational development banks

have had their main focus on sovereign fi nancing, but it is

now expected that they shift their focus toward private sector.

In looking at the development of LAC, the contribution of

Japanese companies have been remarkable, having actively

transferred their technology to help develop the manufacturing

industries in the region. Also, the contribution of Japanese

immigrants should not be forgotten, building trust in LAC

The ‘Decade of LAC’ and private sector development

Legend of Japanese companies and immigrants and JBIC’s role

200920 companies

201025 companies

201129 companies

201270 companies

201381 companies

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Japanese automobile and parts manufacturers are actively expanding into Mexico. In line with this trend, MOLITEC established MSM in March 2013, and it is strengthening its manufacturing and sales system for Japanese-affi liated manufacturers in Mexico.

Brazil and Mexico Trends in the two countries and JBIC’s activities

Ayako MiyaharaDivision 3 (Americas), Country Credit Department Credit, Assessment, and Systems Group

Toru ShikibuRepresentative in AsiaInter-American Development Bank (IDB)

nations through many decades of hard work and honesty.

I think JBIC can play a big role. It is important to get

involved in a project in its initial stage. A project may start

from stimulating local demand and finding an optimal

solution. JBIC is expected to provide the expertise required

for developing projects in addition to its fi nancing.

Since its inception as non-regional member of IDB in

1976, Japan has been its biggest partner. IDB and JBIC have

cofinanced more than 5 billlion US dollars to nearly 30

projects, including the expansion of Panama Canal in 2008,

‘RODOANEL’ São Paulo Beltway project of Brazil in 2009, and

joint participation of Balam Fund in Mexico for investing in

renewable energy and energy effi ciency projects in 2013.

IDB has high expectations for JBIC. We have built up

mutual trust through regular policy dialogues including at the

senior management level. I believe we can overcome

whatever challenges we may face and jointly achieve results

in the development of LAC.

Ou

r Glo

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es

【Company Profi le】

Name KOTANI CORPORATIONInauguration 1970Establishment June 1974Capital 300 million yenPresident Masahiro KotaniBusiness lines Manufacture of forged vehicle transmission gears

and bearingsHeadquarters 1665 Nakano-cho,Kasai-shi, Hyogo 675-2102, Japan Factories in Japan Main factory (No. 1 - No. 5 factories),

Kasai Minami Factory, Kasai Minami No. 2 Factory

KOTANI CORPORATION　Masahiro Kotani President

JBIC Today June2014 98 JBIC Today June 2014

“We will be celebrating our 50th anniversary in 2020. As the next-

generation growth strategy, we want to see the Chinese base achieve

sales of 5 billion yen in about five years and we plan to achieve

worldwide sales of 30 billion yen by developing customers and

markets abroad.”

　　President Kotani intends to realize the third growth phase by

establishing the Chinese subsidiary. “Since the start of the company,

we have worked to expand business with leading bearing

manufacturers in Japan, and we grew by developing new business

with automobile parts manufacturers in Japan. Our next target is to

expand business with foreign automobile manufacturers and become

globally recognized. In the future, we wish to construct an overseas

manufacturing system and improve our overseas bases, while

developing new technologies with Japan as the mother manufacturing

plant. We appreciate that we were able to take the first step to

overcome the fi rst challenge with JBIC’s support.” Leading the 400

employees, President Kotani continues his “Courageous Challenge.”

Continue to take on “Courageous Challenge” and establish a subsidiary in China-- Manufacturing automotive driving parts by featuring our original forging technology --

Established in 1970, KOTANI CORPORATION (KOTANI) is one of the leading forging companies in Japan. Using its original

technology in which heated metal materials are molded by the pressure of the die, KOTANI manufactures the fundamental parts

for transmitting power from the engine to the tires such as the transmission and suspension systems. Given their high reliability,

KOTANI’s products are used not only by Japanese automakers but also by European automakers including Volkswagen, Porsche,

and Audi. KOTANI established an overseas subsidiary in Zhangjiagang, Jiangsu Province, China in January 2014, and

implemented a new growth strategy looking toward the company’s 50th anniversary in 2020.

Our Global ChallengesKOTANI CORPORATION

(Kasai City, Hyogo Prefecture)

“As KOTANI enters the stage of tackling further growth from

overcoming the hardships of product development, we realize that having

the courage to take on these challenges has helped us get to where we

are today.”

　　President Masahiro Kotani speaks with deep emotion. Forty-four

years ago, he started a small factory run only by family members and

built it into a company staffed by 400 employees with 18.9 billion yen in

annual sales.

　　KOTANI’s history reflects the corporate slogan “Courageous

Challenge.” The business began in 1970 as a process manufacturer of

wheel bearing parts for axles, but it faced many hardships in product

development to obtain recognition in the forging industry where the

competition had a history of more than 100 years. “We had to do

something different from other companies if we wanted our business to

grow. We constantly worked hard to develop products with a view to

acquiring patents. In 1983, we successfully developed a new

manufacturing method that merged existing technologies and fully

automated the forging press. In addition, we obtained our fi rst patent for a

manufacturing process, which allowed us to nearly monopolize the

domestic market, and we achieved remarkable progress, with sales

exceeding 5 billion yen.”

　　However, considering the risks of depending on only one patent,

President Kotani decided to enter the automobile parts business. “Since

1994, we have been expanding in the power train field, which is the

central part of the automobile, with new products and manufacturing

methods. As a latecomer to the auto parts business, we compensated by

obtaining three patents for manufacturing processes in five years and

increased our presence in the market through our exclusive

manufacturing methods.

Inevitably, however, KOTANI struggled to grow further and suffered

from the bursting of the economic bubble. Sales temporarily fell to 3

billion yen and the company became crushed by debt. Despite the

dwindling business, President Kotani allocated most of the profi ts to new

product development. The decision and efforts paid off, and sales in 2005

exceeded 10 billion yen. The company grew rapidly and built a new plant

in Poland in 2007.

　　Nevertheless, the hardships continued. KOTANI’s business

remained stagnant during the global recession caused by the financial

crisis in 2008, and the company experienced its second excess of debts.

However, along with the change in environment surrounding the

Japanese automobile industry, KOTANI’s self-developed, highly precise,

resource-saving, energy-saving and low-cost forging technologies

gradually became highly evaluated in the market. As a result, KOTANI’s

business recovered quite rapidly and sales grew close to 20 billion yen

in 2012.

　　In January this year, KOTANI took on another challenge: it

launched its fi rst overseas subsidiary, Kotani (Zhangjiagang) Co., Ltd., in

Zhangjiagang, Jiangsu Province, China. Operations are scheduled to start

in January 2016, and products will be distributed mainly to Japanese auto

parts manufacturers operating in China.

44 Years of “Courageous Challenge”

Overcoming hardships for further growth Becoming a Globally Recognized Company

In March 2014, JBIC sined a loan agreement with KOTANI CORPORATION

totaling up to 9.03 million US dollars (JBIC portion) cofinanced with the

Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo Mitsui Banking Corporation

and Mizuho Bank, Ltd. (Total amount is 12.9 million US dollars.) The loan

is intended to finance the establishment of Kotani (Zhangjiagang) Co., Ltd.

fo r the manufac ture and sa les o f fo rged produc ts fo r au tomobi les

(transmission parts) in the People’s Republic of China.

Relationship with JBIC

Jiangsu Province, China

②

② ①

①

③

■Products and their roles① Differential gear: A large gear in the differential

mechanism that allows an automobile to smoothly negotiate a curve. (The photo shows the differential gear before and after turning.)

② CVT pulley: The pulley used for the power transmission. (One pair of pulleys is composed of the two kinds of pulleys in the photo.)

③ Railroad bearing (bearings for train cars): A fundamental part supporting the axle that transmits power to the rails.

Ne

ws

in D

ep

th

■ Correlation of amount of geothermal resources and number of active volcanoes

JBIC Today June2014 1110 JBIC Today June 2014

　　 Power demand has been growing along with the economic development in IndonesiaPower demand in Indonesia is estimated to grow at 8 .5% annually over the next ten years, which means that the power generation capacity must be increased by approximately 3,000 MW annually. Thus, the Indonesian government is pursuing the optimal energy mix by using every possible energy source, with particular focus on geothermal power generation among renewable energies because it is a stable power supply, whereas the output of photovoltaic and wind generation is affected by weather conditions. Meanwhile, the Indonesian government is emphasizing measures against global warming and plans to reduce greenhouse gas emissions to 26% below the 2005 level by 2020 , so renewable energy is an important priority.　　According to JBIC’s independent estimate, geothermal power generation in Sarulla can reduce carbon dioxide emissions by 1.84 million tons annually.

　　 This i s JB IC’s f i rs t pro ject f inance for geothermal power generation. In addition to being JBIC’s first project finance for a new geothermal power plant project, it is the fi rst project fi nance in the world for such a large-scale geothermal power plant.

　　 Project finance, where by the repayment depends on the project's cash fl ow, requires a highly sophisticated risk analysis. What kinds of risks are involved in this geothermal power generation project? The greatest risk is the geothermal resources. Geothermal power plants make use of steam and hot water in the underground reservoir, and the greatest risk is the depletion of steam in the reservoir or unstable steam output. To determine the conditions underground, we utilized state-of-the-art technology including building a model of the geothermal reservoir with the help of data obtained from land surface gravity measurement and test wells after identifying the underground fault situation through satellite photos. Based on the analysis of data obtained by such technology, we judged that the risk was controllable.　　However, confi rming the existence of geothermal resources does not guarantee sustainabil i ty of geothermal power generation for 30 years. The technology for maintaining geothermal resources is equally important. Unlike oil and gas that only involves extracting finite reserves, geothermal power generation requires delicate operation considering the process by which the resource is renewed through permeation of re-injected water and natural underground water into the

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The geothermal power plant project in the Sarulla region of North Sumatra Province, Indonesia, for which JBIC signed the loan agreement in March this year, has its signifi cance in the following aspects :

• Supporting the development of geothermal power generation, which is the most stable of all environment-friendly renewable energies, to meet Indonesia’s growing power demand.• One of the world’s largest new geothermal power generation projects and JBIC’s fi rst project fi nance loan for geothermal power generation.• Financial supports Japanese companies for participating in an overseas infrastructure project.

With this background, we interviewed Deputy Director Yuichiro Yoi of Division 2, Power and Water Finance Department, about the stories behind the news.

Supporting the development of geothermal power generation in Indonesia through project finance

【News in Depth】

Source: NEF Source: Compiled by Hirofumi Muraoka, National Institute of Advanced Industrial Science and Technology (2009)

■ Geothermal power generation in Indonesia (After 2012)

20 40 60 80 100 120 140 160 180

Number of active volcanoes

5,000

0

10,000

15,000

20,000

25,000

30,000

35,000

Italy

New Zealand

Iceland

MexicoPhilippines

Japan

United States

Indonesia

Amount of geotherm

al resources(MW

)

1,000

2011 2012 2013

Year

2014 2015

1,500

500

0

2,000

2,500

3,000

3,500

4,0003,516

1,719

1,3441,3411,226

37 115 3375

1,797

Cumulative equipm

ent capacity（M

W）

Annual installation capacity（M

W）

Cumulative equipment capacity（MW）Annual installation capacity（MW）

geothermal layer. The management of these processes requires very sophisticated know-how, and West Japan Engineering Consultants, Inc., a subsidiary of Kyushu Electric Power Co., Inc. offers the required technology.　　Another important characteristic of this project is “binary cycle generation.” Steam precipitates into hot water in the process of generating power, and the hot water is used to boil a chemical (pentane) with a low boiling point, thereby running a turbine for secondary generation. Thus, the collected steam is used twice for power generation, increasing the effi ciency.　　 Will more geothermal power plant projects follow in Indonesia?Indonesia has the largest potential for geothermal power generation in the world. A presidential decree set a target for geothermal power generation in 2006, with plans to increase the generation capacity from 857 MW in 2005 to 5,000 MW in 2016 and to 9,500 MW in 2025. Indonesia has 1,300 MW at present, and development is behind the schedule. However, with the start of this project, geothermal power development is expected to grow in full swing.

　　 Geothermal power generation projects give Japanese companies the opportunity to expand their business overseas, and JBIC is expected to provide continuous support.This project has a strong Japanese flavor because in addition to ITOCHU Corporation and Kyushu Electric Power Co., Inc. as participating sponsors, NAES Corporation (a subsidiary of ITOCHU Corporation) will handle operation and maintenance of the power plant, and West Japan Engineering Consultants, Inc. is providing technical support for reservoir management. This project is highly rewarding for me as a persons in charge of supporting overseas infrastructure projects of Japanese companies.

*Press release of JBIC, March 31, 2014

Yuichiro YoiDeputy DirectorDivision 2, Power and WaterFinance DepartmentInfrastructure Finance Group*Preeeess rss rsssss rr ss ss rs releaeleaeleeelealeaeleaaaeaeleaae ease ose ose oseee of JBJBf JBBIC,ICCC,C,C, MMMMMMarcMMMMMM h h 3313131333111, 2, 20 22020, 2, 1414

Project Financing and Political Risk Guarantee for Sarulla Geothermal Power Plant Project in IndonesiaThe J a p a n B a n k f o r I n t e r n a t i o n a l

Cooperation (JBIC; Governor: Hiroshi

Watanabe) signed on March 28 a loan

agreement totaling up to USD492 million

(JBIC portion) with Sarulla Operations LTD

(SOL), a Cayman Islands company, in

which ITOCHU Corporation and Kyushu

Electric Power Co., Inc. as well as other

investors have equity stakes to fund the

Sarulla Geothermal Power Plant Project in

the Republ ic of Indonesia. The loan,

p r o v i ded i n p r o j ec t f i n anc i ng , * 1 i s

cofi nanced with Asian Development Bank,

and a group of private fi nancial institutions

comprising Mizuho Bank, Ltd., The Bank of

Tokyo-Mitsubishi UFJ, Ltd., Sumitomo

M i t su i Bank i ng Co rpo ra t i on , Tokyo

branches of Société Générale Bank, ING

Bank N.V., and National Australia Bank

Limited. The overall cofinancing amount

reaches approximately USD1,170 million.

JBIC also provides political risk guarantee

for the port ion cofinanced by pr ivate

fi nancial institutions.

　In this Project , SOL wi l l bui ld and

operate a 320.8 MW geothermal power

plant (3 generating units) in Sarulla region,

No r t h Suma t r a P r o v i n c e , a n d s e l l

electricity generated by this plant to PT.

PLN (Persero), a state-owned power utility

in Indonesia, for 30 years.

　Indonesia's power demand is projected

to grow at an annual average rate of 8.5

percent over the next decade. Japanese

companies participate in this geothermal

power plant project not only as investors

b u t a l s o , b y u t i l i z i n g J a p a n e s e

technologies, to conduct operation and

maintenance of the power plant over a long

period of time. This is the first project

f i n a n c i n g JB IC h a s p r o v i d e d t o a

geothermal power plant project. This loan

s u p p o r t s J a p a n e s e c ompan i e s f o r

participating in an overseas infrastructure

p r o j ec t and t he r eby con t r i bu t es t o

maintaining and improving the international

competitiveness of Japanese industries.

　In addition, as this is currently one of the

world's largest geothermal power plant

projects, it is significantly effective as a

measure against global warming and

consistent with the "Actions for Cool

Earth", the proactive diplomatic strategy

for countering global warming, made public

by the Government of Japan on November

15, 2013.

*1 Project finance is a financing scheme in which repayments are made solely from cash fl ows generated by the project and secured only on the project assets.

An article related to this project was published in the morning edition of The Nikkei on March 28, 2014.