International Finance Corporation
Carlos Leiria Pinto, Head, Andean Region
April 2015
A long term partner for the private sector
Table of Contents
2
IFC at a Glance
IFC Investments and Services
IFC in Latin America and the Caribbean
Opportunities in LAC
IFC Cities Initiative in LAC
2
IFC: A MEMBER OF THE WORLD BANK GROUP
3
Conciliation
and
arbitration of
investment
disputes
Guarantees
of foreign
direct
investment’s
non-
commercial
risks
Interest-free
loans and
grants to
governments
of poorest
countries
Loans to
middle-
income and
credit-worthy
low-income
country
governments
Solutions
in
private
sector
development
IBRD
International
Bank for
Reconstructio
n and
Development
IDA
International
Development
Association
IFC
International
Finance
Corporation
MIGA
Multilateral
Investment
and
Guarantee
Agency
ICSID
International
Centre for
Settlement of
Investment
Disputes
THE LARGEST MULTILATERAL FOR THE PRIVATE SECTOR IN DEVELOPING
WORLD
• Owned by 188 member countries.
• IFC is the main driver of private sector development in the World Bank Group.
• Collaborates with other members of the Group to eliminate extreme poverty and increase shared prosperity, including the World Bank
(IBRD and IDA), MIGA, and ICSID.
• Global-Local: Headquartered in Washington, D.C. with over 100 country and regional offices and over 4,000 staff.
• The source of financing for the private sector: IFC is rated AAA with a portfolio of about US$50bn of investments and another US$20bn
mobilized from other partners to support around 2,000 in the developing world.
Main features
4
THE POWER OF PARTNERSHIPS
5
30+ IFIs/DFIs
Host County
Governments
Sovereign
Wealth Funds/
Institutional
Investors
900 Financial
Institution Clients
Civil Society
2,000 Private
Sector Clients
20+ Bilateral Donors/
15+ Private
Foundations
IFC’S GLOBAL
NETWORK FOR
SOLUTIONS
3,000 Employees
in 86 Countries
6
IFC – A Valuable Partner with Global Solutions
Clients especially appreciate IFC’s long-term partnership and its stamp of approval on
project/company quality
• Long-term partnerships, multiple rounds of financing.
• Longer investment horizon (5-7 years): less cyclical.
• In-house syndication: over 200 banks.
• Managing 3rd Party Capital: fund management through AMC.
• Brand enhancement strengthens client reputation.
• Sector expertise: deep industry expertise.
• Broad reach: 2,000 clients in over 100 countries.
• Global benchmarking: international best practice.
• Advice on environmental and social issues.
• Political risk mitigation.
• Preferred creditor status.
Reason why clients choose IFC
IFC Value - Added What makes us different?
75%
54%
41% 40%37%
Long-term partner Stamp of approval Mobilization Global Presence Product offering
IFC’s Reach and Impact
7
Supporting Jobs and
Entrepreneurs
Generating Revenues
Infrastructure
35mn loans for $310bn for micro-,
small- & medium-sized enterprises
2.6mn direct jobs, >30% for women
$34bn in domestic purchases
$38bn in tax payments
1.7mn trade transactions financed for
$264bn
Power generation for 51mn people
Power distribution to 24mn people
Water distribution for 30mn people
Phone connections for 181mn people
Agribusiness and Social
Services
Reaching 27mn patients, 2.9mn farmers,
and 2.5mn students
* Data as of Dec. 31, 2013
Table of Contents
8
IFC at a Glance
IFC Investments and Services
IFC in Latin America and the Caribbean
Opportunities in LAC
IFC Cities Initiative in LAC
Wholly owned
subsidiary of IFC
Private equity fund
manager
Invests third-party
capital alongside IFC
Firm-level advice
PPP transaction
advice
In partnership w/World
Bank, advice on
broader market
development and
enabling environment
for private sector
Loans
Equity
Trade finance
Syndications
Securitized finance
Risk management
Blended finance
9
IFC ASSET
MANAGEMENT
COMPANY
$6.4 bn under mgmt
(FY14)
INVESTMENT
$51.7 bn portfolio
(FY14)
ADVISORY
720 projects valued at
$1.1 bn (FY14)
IFC: INTEGRATED SOLUTIONS FOR INCREASED IMPACT
10
IFC Performance and Results, FY14
IFC (US$bn)
Total commitments: US$ 19.3bn
FY 2014 highlights IFC Commitments by Industry (FY14)
Excellent performance FM and Infrastructure account for almost 75% of total commitments
• Investments: 599 new projects in 98 countries.
• US$ 22.0 billion in total investments, including $17.3 billion for
IFC’s own account
• US$ 67.0 billion committed portfolio.
• Record $8.5 billion in financing to the poorest countries, almost
25% of IFC projects overall
• Advisory services: US$ 234mn in program expenditures, with 66%
of funds in the poorest countries.
Trade Finance; 36%
Financial markets; 21%
Infrastructure; 17%
Agribusiness & Forestry; 7%
Manufacturing; 6%
Consumer & Social Services;
5%
Oil, Gas & Mining; 3%
Funds; 3% Telecom & IT; 3%
6,8 8,2
11,0 10,5
12,7 12,2
15,5
18,3 17,3
1,4
3,8 5,0
3,5
5,3 6,5
4,9
6,5 5,1
FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
IFC's own account Mobilization
Table of Contents
11
IFC at a Glance
IFC Investments and Services
IFC in Latin America and the Caribbean
Opportunities in LAC
IFC Cities Initiative in LAC
19% 19% 21% 24% 25%
81% 81% 79% 76%75%
-
2,0
4,0
6,0
8,0
10,0
12,0
FY 10 FY 11 FY 12 FY 13 FY 14
Equity Loans
12
Latin America & Caribbean – IFC’s Largest Market
IFC commitment
destination in LAC
FY10-
FY14%
Brazil $8.5bn 38%
Mexico $3.2bn 14%
Central America $3.2bn 14%
Colombia $1.5bn 7%
Peru $1.2bn 5%
Argentina $1.1bn 5%
Chile $1.0bn 4%
Other South
America
$1.2bn 5%
Caribbean Region $0.8bn 3%
Other countries $0.8bn 4%
Total commitments FY10–FY14
Total commitments: US$ 89.1bn
Commitments by country & industry
13.9 15.6 17.2 20.2 22.2
Trade Finance; 33%
Financial markets; 22%
Infrastructure; 20%
Consumer & Services; 10%
Manufacturing; 5%
Agribusiness & Forestry;
3%
Telecom & IT; 3%
Oil, Gas & Mining; 2%
Funds; 2%
Commitments distribution by industry (FY10-FY14)
Committed equity portfolio - $bn Committed loan portfolio - $bn
1,8 1,9
2,1
2,5
2,8
FY 10 FY 11 FY 12 FY 13 FY 14
7,5
8,0
7,8 7,9
8,3
FY 10 FY 11 FY 12 FY 13 FY 14
Portfolio distribution
9.3 9.9 9.9 10.4 11.1
12%
CAGR
since
FY10
3,4 4,4 4,4 5,4 5,1
10,5
11,2 12,8
14,8 17,1
FY 10 FY 11 FY 12 FY 13 FY 14
LACOther
13
A Diverse Portfolio Across The Region
Mexico
Total portfolio (FY14): USD2,157m
Total commitments (FY10-FY14): USD3,167m
Commitment destination by sector:
i. Health, Education, Retail (35%)
ii. Manufacturing (30%)
iii.Financial Markets (14%)
IDA country
Brazil
Total portfolio (FY14): USD4,107m
Total commitments (FY10-FY14):
USD8,509m
Commitment destination by sector:
i. Trade Finance (43%)
ii. Financial Markets (27%)
iii. Infrastructure (17%)Andean Region: Bolivia, Colombia, Ecuador,
Peru and Venezuela
Total portfolio (FY14): USD2,830m
Total commitments (FY10-FY14): USD2,862m
Commitment destination by sector:
i. Infrastructure (47%)
ii. Financial Markets (22%)
iii.Trade Finance (10%)
Southern Cone: Argentina, Chile, Paraguay &
Uruguay
Total portfolio (FY14): USD2,483m
Total commitments (FY10-FY14): USD2,975m
Commitment destination by sector:
i. Trade Finance (45%)
ii. Infrastructure (19%)
iii.Financial Markets (12%)
Caribbean
Total portfolio (FY14): USD842m
Total commitments (FY10-FY14): USD788m
Commitment destination by sector:
i. Infrastructure (38%)
ii. Financial Markets (24%)
iii.Services (13%)
Central America
Total portfolio (FY14): USD1,745m
Total commitments (FY10-FY14): USD3,166m
Commitment destination by sector:
i. Trade Finance (63%)
ii. Financial Markets (14%)
iii. Infrastructure (11%)
Table of Contents
14
IFC at a Glance
IFC Investments and Services
IFC in Latin America and the Caribbean
Opportunities in LAC
IFC Cities Initiative in LAC
15
LAC: slowing growth, but still strong and stable…
• China slowdown results in declining global commodity prices for the
majority of countries in LAC region.
• Metal and mineral exports to China account for about 20% of Peru’s
and Chile’s exports.
• Oil prices (WTI) at ~$50/brl, one half the amount in July, negatively
affecting oil exporters; Petrocaribe beneficiary nations under threat
(see analysis next slide). But prices likely to increase later this year.
• Falling oil prices (for oil exporters) and US monetary tightening
signals leading to local currency depreciations (2013-14: Arg -24%,
Co -23%, Mx -13%, Br -12%), which in turn is increasing inflation ìn
most countries.
• Fiscal deficits expected to limit growth in Br, Mx & Co; Chile & Peru
can support fiscal expansion (bottom chart to the right)
• Growth performance to stay strong, with Peru, Colombia, and
Mexico performing above average, Brazil below average.
• Most countries benefit from high reserves & strong macro policies,
resulting in strong domestic sources of growth.
• Important exceptions: Argentina and especially Venezuela.
Source: Economist Intelligence Unit (top), Capital
Economics (bottom)
LAC GDP growth (select economies, 2013 – 2018F)Current overview
The end of the commodities super-cycle…and the oil plunge
However, analysts expect
Expecting continued strong growth performance at corporate level, with good investment opportunities
1,4 1,4
3,7 4,0
2,9 3,5
4,9
(1,5)
-8
-6
-4
-2
0
2
4
6
8
Argentina Brazil Chile Colombia LAC avg Mexico Peru Venezuelay-o
-y %
2013 2014 2015 2016 2017 2018 2015-18 avg
2015-18 average rates displayed
Likely effects of oil plunge on affected countries
Latin America Economic Outlook Q12015, Capital Economics (top), Economist (bottom)
Analysis
Winners and losers (for losers, outside Venezuela, it’s not terribly bad! For
winners, not tremendously great!)
• Venezuela: Sharp, negative effects across the board, including
growth (-7.5% in 2015), inflation (~120% in 2015), & FX (70%
devaluation in 2015); could spell trouble for unpopular GoV
• Ecuador: Fiscal deficit likely to rise to record 6% in 2015, current
account to be in deficit in 2015, and greater financing needs to
elevate debt levels. Growth (EIU) should still avg. 3.3% in 2015-16.
• Colombia: Growth to fall from 4.9% in 2014 to 2.5% in 2015. At
$60/b, oil export revenues to fall by ~$17bn and gov’t receipts by
2.5%/GDP. But 4% avg. growth in 2015-18 from rising investment &
incomes.
• Mexico: Oil prices may damper interest in oil, but round 1 auctions to
start this year. Gov’t has one of the largest sovereign oil-hedging
programs worldwide, limiting losses to 0.4%/.5% of GDP (vs. original
budget assumption of US$81/bl).
• Oil-importers-Lat Am: Oil prices easing inflation & reducing import
bills, but currency depreciations limiting consumer benefit. Lower
prices could render Brazilian pre-salt production less attractive.
• Caribbean—no boon: Despite recent GoV vows stating otherwise,
concessional financing under PetroCaribe under threat for a region
where 40% of energy needs are met by Venezuela (incl. 12 members
of Caricom). Program at least 4% of GDP for Jamaica, Haiti &
Guyana.
Exporter/Importer
X
X
X
X
M
M
17
Longer-term, a growing middle class driving consumption
• By 2030, the middle income class will represent 42% of the region’s
population (compared to 29% in 2009).
• Latin America will become the 2nd largest middle class region
worldwide,
• Rising incomes mean changing consumption patterns:
• In most countries, consumption in transport, education, ICT and health
will expand rapidly.
• Household spending on water, energy and food, on the other hand, will
grow more slowly.Source: IFC
Emerging business opportunities in the domestic consumer markets
Significant M&A activities with firms trying to position themselves in the region
Based on household surveys + economic and demographic trends
Projected annual growth rate of household spending by sector
Secto r / C o untry B razil M exico C o lo mbia P eru Guatemala H o nduras
Transport 4.2% 4.3% 5.4% 9.4% 4.5% 3.7%
ICT 3.4% 3.7% 5.0% 6.1% 4.4% 3.5%
Housing 3.6% 3.4% 4.6% 6.0% 3.8% 3.1%
Water 2.1% 2.8% 4.1% 5.2% 3.8% NA
Education 4.4% 3.9% 4.9% 5.0% 4.5% NA
Clothing and Footwear 3.0% 3.4% 5.1% 4.8% 3.2% 3.1%
Health 3.5% 4.2% 4.8% 4.7% 3.7% 3.7%
Energy 2.2% 2.6% 3.5% 4.6% 3.0% NA
Food and Beverages 2.7% 2.7% 3.8% 3.8% 2.8% 2.5%
A vg. gro wth rate 2010-2020 3.6% 3.4% 4.6% 6.2% 3.5% 3.1%
Comments
Current overview
18
Pacific Alliance Leads the Pack
Economic Alliance between Chile, Colombia, Peru and Mexico formed
in 2011
• Members represent 36% of population, 45% of GDP and about
50% of trade in the region
• Agreement on Feb. 14, 2014 to eliminate tariffs on 92% of
products
• Costa Rica, Guatemala and Panama are considering to join
Source: IIF
US$11.6bn in intra-regional M&A deals with firms
expanding market reach
Deals across all sectors, including retail and
consumer goods, financial services, pharmaceuticals
and energy
0
0,5
1
1,5
2
2,5
3
3,5
2012 2013 2014f 2015f
Pacific Alliance Brazil Arg, Ecu, Ven
0
2
4
6
8
10
12
0
1
2
3
4
5
6
7
8
9
2006 2007 2008 2009 2010 2011 2012
%
US
$b Intra-Pacific Alliance FDI (left) Share of total FDI inflows (right)
Intra-Pacific Alliance FDI
… with substantial investment activityThe most dynamic economies…
Contributions to regional GDP growth
Economic alliance between Chile, Peru, Mexico and Colombia
19
Infrastructure – The Region’s Achilles’ Heel
Source: World Economic Forum
• Financial and fiscal crises led to steady decline in infrastructure
investments in the region.
• Only 2% of GDP invested in infrastructure annually (compared to
13% p.a. in China).
• Investments of 4% of GDP needed to sustain a 4.5% growth rate in
the region or US$500bn each year.
• Up to US$135bn in private infrastructure investments planned in
2014 alone.
• Ambitious PPP programs in a number of countries:
- Brazil: US$150bn in infrastructure auctions planned in roads,
rail, ports and airports
- Mexico: US$50bn over the next 6 years in transportation
infrastructure alone
- Colombia: US$24bn toll road program launched (4G Program)
• IFC involved across the Region participating in infrastructure
investments ($1.2bn committed in FY14).
Chile
Mexico
PeruBrazil
Colombia
Argentina
0
20
40
60
80
100
120
140
2006 2007 2008 2009 2010 2011 2012 2013
Ranking of Quality of Infrastructure
(1=best, 144=worst performer)
Systematic Under-investment in the Region
Table of Contents
20
IFC at a Glance
IFC Investments and Services
IFC in Latin America and the Caribbean
Opportunities in LAC
IFC Cities Initiative in LAC
IFC LAC Cities Program
The Cities Initiative in Latin America and the Caribbean aims at increasing the efficiency and sustainability of a city through work with the municipality at all levels, from regulatory reforms to private sector capacity building and financing to private firms.
The LAC Cities Initiative is one of IFC’s transformational projects at a global level. IFC, in coordination with the World Bank, offers a combination of investment and advisory services across six key areas to support city sustainability and innovation:
Energy
Water management
Green building
Waste management and waste to energy
Telecom
Transport.
Why Cities in LAC?
LAC is the most urbanized developing region in the world. Nearly 80% of its population lives in urban areas; proportion that will increase up to 90% by 2025 (UNDESA, 2012)
Cities in LAC contribute over 60% of the regional GDP (Mckinsey Global Institute). Half of this output is produced within the ten largest cities.
Although significant improvements (less than 10% of urban poor people in LAC were extremely); still, by head count, the majority of extreme poor in LAC live in urban areas. (WBG, 2013)
Cities are responsible for 70% of global greenhouse gas (GHG) emissions and lack the regulation and expertise to address the issue.
Overall: Cities in LAC are critical for sustainable economic growth and poverty reduction; hence, they are directly interlinked to the WBG twin goals.
Cities in LAC generate a significant proportion of the economic activity; therefore, theirinfrastructure defines key parameters for productivity, jobs creation, citizens wellbeing,and environmental and climate change impacts
Competitiveness and sustainability of cities increasingly determines the wealth andpoverty of nations, regions and the world. Hence, what makes cities successful must beone of the most important questions of 21st-century political economy.
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