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IDB Invest, the private sector institution of the IDB Group, has been sharpening its focus on Brazil and Argentina as well as Central America and the Caribbean. BNamericas asked the development bank's CEO, James Scriven, about this and other topics such as risk. As of November 2017, IDB Invest is the trade name of the Inter-American Investment Corporation.
BNamericas: James,last year you were upbeat on Brazil in terms of volume of operations. What's the outlook for this year?
Scriven: IDB Invest delivered on our promises to Brazil in 2017. It was the country where we did the greatest volume of business in 2017. This highlighted both our counter-cyclical role to go into markets when other investors prefer to wait on the sidelines and our renewed approach to a client-centered experience. By "client-centered experience" I mean one that tailors products to client needs. In Brazil, we currently have three mandates for our local currency guarantees to infrastructure debentures. These guarantees allow us to lengthen the tenors of the debentures, lower their costs as well as mobilize new pots of liquidity. We will soon close [an agreement for] the largest gas-to-power plant to be built in Latin America. We are also providing a long-term loan in Brazilian reais that anchors the issuance of an international bond denominated in BRL with a guarantee from an AAA-rated export credit agency. In 2017, we approved US$761mn for 10 projects in addition to US$209mn for 28 trade finance transactions. We disbursed US$335mn for 11 projects, in addition to US$169mn for 11 trade finance transactions.
For 2018, our Brazil strategy follows our organizational one which seeks a sectoral shift toward the real sector, meaning more transactions in transport, energy, water and sanitation, social infrastructure (health and education) and telecommunications. We aim to work on our existing investments and continue to disburse the pipeline of transactions approved in 2017. We will do approximately US$500mn more in 2018. We are also strengthening our field presence in Brazil. In 2017, we opened an IDB Group São Paulo office to be closer to our clients and attend to the increased demand for our business. We now have six IDB Invest colleagues in the São Paulo office.
BNamericas: What about risks? This year is an important one for elections in Latin America, including Brazil. Is there a chance the likes of infrastructure investors could enter stand-by mode until the elections in these countries are over and the results are in?
Scriven: In certain countries where PPP [public-private partnership] frameworks are more advanced and consolidated, like Chile, we see governments continue to move forward with PPP plans. We would like to see the rest of the region move toward consensus on PPP laws and regulatory frameworks so that they are not susceptible to political changes. Plus the more stability there is, the more bankable the projects will be.
BNamericas: You told us last year that you were working to do more in the Caribbean and Central America. Can you tell which countries you are focusing on and why?
Scriven: Our infrastructure and energy, corporate and financial institution strategies all include explicit efforts to increase our support for Caribbean and Central American countries. We increased the amount we disbursed for non-trade transactions to C&D countries in 2017 by 18% to US$422mn, which included 58 projects. We did an additional 40 trade finance transactions. In these smaller countries, our goals are more aligned with the relative development impact of our projects than deal size.
In Central America, we are optimistic about our pipeline in El Salvador, Guatemala, Honduras and Panama. We are leveraging our increased synergies with the public sector and developed the Small and Island Countries Action Plan, which is beginning to show results. Approvals in these nine countries grew 30% in 2017 and we expect similar growth in 2018. We also are increasing our presence of investment officers in these countries. For example, we have staff in Jamaica, Barbados, the Bahamas and Haiti, as well as an infrastructure investment officer to arrive in Trinidad & Tobago soon with promising deals across the Caribbean.
BNamericas: There has been a shift to the right in Latin American politics. Argentina has Macri and Chile has Píñera, while Brazil has, for now, Temer. Does having a center-right administration in place create a more favorable environment for potential investors?
Scriven: The recent opening up of Argentina is emblematic of the types of interventions we can achieve throughout the region. In March of 2016, Argentina was coming out of a period of slow growth, scarce private investment and low market confidence. That was when the IDB Group received a call from the undersecretary of renewable energy with a request to make renewable energy investment attractive to international investors. Working together, our public and private sectors reviewed concession agreements, consulted lawyers and provided inputs into what we now call RenovAR. We observed that Argentina took seriously its commitment to clean energy. They approached this energy shift with the right regulatory frameworks and public policies. So much so, that we at IDB Invest published an indicative term sheet that signaled to the market our willingness to invest in Argentina's renewable energy program, and the terms by which we would do so.
We were impressed by the caliber of projects that we financed too. Five projects have been signed that will generate over 400MW of renewable energy, and three more will close in the near future for another 385MW. Now we are working in similar ways with the country's transportation and water ministries. And with other countries from El Salvador to Uruguay. In all those cases, our specialists study the investment landscape, provide input and then demonstrate our confidence by financing projects. We crowd in financing by attracting commercial banks and private investors and then replicate the structures that work. We look forward to collaborating with all our borrowing member governments regardless of administrations.
About James P. Scriven
James Scriven is the CEO of IDB Invest, the private sector institution of the Inter-American Development Bank (IDB) Group with an US$11.2bn portfolio of 370 projects across 23 countries. IDB Invest is a multilateral development bank that seeks to be the leader in client-service and development impact in Latin America and the Caribbean. A dual Argentine/British citizen, Scriven was previously VP of Corporate Risk and Sustainability at the International Finance Corporation (IFC) in addition to other leadership positions. Before joining the IFC, Scriven was CFO of Banco Hipotecario in Argentina. During the past two decades, he has concentrated his efforts on the promotion of the private sector in development. Scriven holds a master´s degree in finance from Universidad del Centro de Estudios Macroeconómicos de Argentina, and a degree in business administration from Universidad Católica de Argentina. To learn more, follow @JamesPScriven and linkedin.com/in/james-p-scriven.